Subdued global cues drag Nifty below 7,850 mark

Domestic index Nifty, extending its previous session’s losses, ended the day below its crucial 7,850 mark with a cut of over one tenth of a percent. After a gap down opening, market started magnifying its losses and slipped below its crucial 7,850 mark in morning trade as the International Monetary Fund (IMF) cut its outlook for global growth in 2015 and warned about the risks of rising geopolitical tensions and a financial-market correction as stocks reach ‘frothy’ levels. However, some pull back was seen in early afternoon trade which pushed nifty above the neutral line as traders found support from World Bank’s twice-a-year South Asia Economic Focus report, which has stated that Indian economy, which accounts for 80 percent of South Asia's output, is set to grow by 6.4 percent in 2015-16 as against 5.6 percent in 2014-15. Market, for rest of the session, see-saw around the neutral line as investors remained on sidelines ahead of the second quarter earnings with Infosys to kick-start the September quarter earnings season on Friday.

Banking shares were in demand after Finance Secretary declared the government's intention to allow Public Sector banks to tap markets to procure funds required for the additional capital under Basel III. On the other hand, Pharma stocks were under pressure after 14 generic drug manufacturers were asked to submit detailed information related to price hikes in the US. Finally, Nifty ended the volatile day of trade with a cut of over one tenth of a percent.  

The market is likely to correct in near term as FII's selling continues even as investors look forward to the earnings season. The global cues remain weak and indices appear in no mood to stage a smart bounce back soon. Besides, Germany's weak data heightened worries about the strength of global growth as the country's industrial output in August slid 4 per cent, a fall not witnessed since 2009.

The top gainers from the F&O segment were IOC, Hindustan Petroleum Corporation and DLF. On the other hand, the top losers were Hexaware, Tech Mahindra and Infosys. In the index option segment, maximum OI continues to be seen in the 8200-8100 calls and 7800-7700 puts indicating this is the trading range expectation.

The India Volatility Index (VIX), a gauge for market's short term expectation of volatility decreased by 2.42% and reached 14.11. The 50-share CNX Nifty declined by 9.70 points or 0.12% to settle at 7,815.75. Nifty October 2014 futures closed at 7895.50 on Wednesday at a premium of 52.80 points over spot closing of 7842.70, while Nifty November 2014 futures ended at 7944.50 at a premium of 101.80 points over spot closing. Nifty October futures saw addition of 0.05 million (mn) units, taking the total outstanding open interest (OI) to 16.32 mn units. The near month derivatives contract will expire on October 30, 2014.

From the most active contracts, Reliance Industries October 2014 futures traded at a premium of 8.25 points at 944.15 compared with spot closing of 935.90. The number of contracts traded were 17,267.

Tata Steel October 2014 futures traded at a premium of 2.50 points at 459.50 compared with spot closing of 457.00. The number of contracts traded were 17,689.

ICICI Bank October 2014 futures traded at a premium of 10.50 points at 1459.80 compared with spot closing of 1449.30. The number of contracts traded were 14,852.

Larsen & Toubro October 2014 futures traded at a premium of 10.00 points at 1457.95 compared with spot closing of 1447.95. The number of contracts traded were 12,976.

Hindustan Petroleum Corporation October 2014 futures traded at a premium of 3.40 points at 515.50 compared with spot closing of 512.10. The number of contracts traded were 11,603.

Among Nifty calls, 8000 SP from the October month expiry was the most active call with an addition of 0.71 million open interests. Among Nifty puts, 7,800 SP from the October month expiry was the most active put with a contraction of 0.52 million open interests. The maximum OI outstanding for Calls was at 8100 SP (6.06 mn) and that for Puts was at 7,800 SP (5.86 mn).  The respective Support and Resistance levels of Nifty are: Resistance 7869.82 --- Pivot Point 7842.78--- Support --- 7815.67.

The Nifty Put Call Ratio (PCR) finally stood at 0.99 for October month contract. The top five scrips with highest PCR on OI were Bajaj-Auto (1.20), Kotak Bank (0.85), Auro Pharma (0.81), Hindzinc (0.81) and BPCL (0.81). 

Among most active underlying, Infosys witnessed an addition of 0.41 million of Open Interest in the October month futures contract, followed by State Bank of India witnessing an addition of 0.04 million of Open Interest in the October  month contract; while Tata Steel witnessed a contraction of 0.18 million of Open Interest, Tata Consultancy Services witnessed with a contraction of 0.08 million of Open Interest in the October month contract and Reliance Industries witnessed an addition of 0.21 million of Open Interest in the October month's future contract.