Nifty skyrockets ahead of Diwali; ends just short of 8000 level

The Samvat year 2070 ended on a cheerful note with benchmark Nifty surging over 68 points or 0.86% on renewed optimism after the Modi government announced a slew of economic reforms and hopes of the ongoing festive season giving boost to corporate earnings. After a gap up opening, nifty showed some strength in early morning trades however, it failed to breach the narrow 37-point range for most part of the day, ending the session tad below its crucial 8,000 mark with a gain of over eight tenths of a percent.

Sentiment was upbeat this week after the government introduced several reforms such as lifting price controls on diesel and setting the stage for liberalisation of the coal industry. Hopes for further steps gained ground after Prime Minister Narendra Modi's party won two state elections. Besides, Global rating agency Moody's statement that the decision to deregulate the diesel prices and hike the natural gas prices are credit positive for India also buoyed the investors’ sentiments. Market-men also cheered the Finance Minister Arun Jaitley’s statement that the constitution amendment bill to implement the long pending Goods and Services Tax (GST) would be introduced in the forthcoming winter session of parliament.

On the sectoral front, Festive buying has led to a surge in Auto and Consumer Durables counters, while Chinese data and reform measures have boosted the Metal counters. Furthermore, Banking shares were higher after the Reserve Bank of India (RBI) allowed banks some operational flexibility in implementing the central bank’s framework for revitalizing distressed assets. However, it did not change the 31 March deadline after which all fresh restructured assets would be treated as bad loans.

Nifty is likely to remain volatile in the near future as traders roll over positions in the futures & options (F&O) segment from this month's series to November series ahead of the F&O expiry next week. The top gainers from the F&O segment were Jindal Steel & Power, Jubilant Foodworks and Kotak Mahindra Bank. On the flip side, the top losers were Havells, PTC and Mahindra & Mahindra Financial Services. In the index option segment, maximum OI continues to be seen in the 8200-8100 calls and 7900-7800 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 2.25% and reached 13.03. The 50-share CNX Nifty increased by 68.15 points or 0.86% to settle at 7,995.90. Nifty October 2014 futures closed at 8013.80 on Wednesday at a premium of 17.90 points over spot closing of 7995.90, while Nifty November 2014 futures ended at 8057.40 at a premium of 61.50 points over spot closing. Nifty October futures saw an addition of 0.32 million (mn) units, taking the total outstanding open interest (OI) to 17.10 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 2.50 points at 949.65 compared with spot closing of 947.15. The number of contracts traded were 30,789.

Jindal Steel & Power October 2014 futures traded at a premium of 1.35 points at 160.15 compared with spot closing of 162.50. The number of contracts traded were 22,347.

SBI October 2014 futures traded at a premium of 8.30 points at 2585.10 compared with spot closing of 2576.80. The number of contracts traded were 20,239.

DLF October 2014 futures traded at a premium of 0.15 points at 120.40 compared with spot closing of 120.25. The number of contracts traded were 17,023.

L&T October 2014 futures traded at a discount  of 3.05 points at 1554.95 compared with spot closing of 1558.00. The number of contracts traded were 14,147.

Among Nifty calls, 8000 SP from the October month expiry was the most active call with a contraction of 1.61 million open interests. Among Nifty puts, 8,000 SP from the October month expiry was the most active put with an addition of 2.21 million open interests. The maximum OI outstanding for Calls was at 8100 SP (6.56 mn) and that for Puts was at 7,900 SP (6.50 mn).  The respective Support and Resistance levels of Nifty are: Resistance 8009.08--- Pivot Point 7991.82--- Support --- 7978.63.

The Nifty Put Call Ratio (PCR) finally stood at 1.04 for October month contract. The top five scrips with highest PCR on OI were BHEL (1.47), Bajaj-Auto (1.39), SAIL (1.35), PFC (1.34) and AXIS Bank (1.24). 

Among most active underlying, Reliance Industries witnessed a contraction of 1.27 million of Open Interest in the October month futures contract, followed by State Bank of India witnessing a contraction of 0.09 million of Open Interest in the October  month contract; while Infosys witnessed a contraction of 0.18 million of Open Interest, Tata Motors witnessed an addition of 0.13 million of Open Interest in the October month contract and Larsen & Toubro witnessed a contraction of 0.36 million of Open Interest in the October month's future contract.