Nifty skids lower for second day in a row; ends below 8400 level

The fifty stock index -- Nifty -- continued its southward journey for second consecutive day on Wednesday and finished the choppy day of trade with a cut of over half a percent as funds and retail investors indulged in profit-booking amid weak global cues. Investors took note of the Organisation for Economic Cooperation and Development (OECD) report, which stated that India’s economy will accelerate in 2015/16 but will fail to attain the heady growth rates of the past decade without sweeping structural reforms. Traders were seen piling positions in Information Technology (IT) and Healthcare sector while selling was witnessed in Metal, Power and PSU sector stocks.

Market traded near its neutral line in the first half however witnessed bloodbath in second half and ended below its crucial 8,400 level as European counterparts seen selling pressure during the trade. The market declined amid concern the rally that drove the benchmark index to a record has exceeded the outlook for earnings. Investors’ sentiments were further dented on report that foreign portfolio investors (FPIs) sold shares worth a net Rs 101.98 crore on November 18, 2014. Besides, some investors took money off the table as there were no immediate triggers for the markets However, losses remained capped with global rating agency Fitch Ratings’ statement that India's economic growth is expected to pick up to 5.6 percent in the current fiscal on account of structural reforms being rolled-out by the government. Meanwhile, Reserve Bank of India (RBI) governor Raghuram Rajan has said that India will focus on sustainable economic growth and developed economies should do the same.

The market is likely to remain range bound in the near term as there is not much trigger on the domestic front and traders will keep an eye on Reserve Bank of India's next monetary policy review on December 2, 2014. Although the market has already rallied over 33% so far in the year 2014 to hit record levels above 8400, some traders still believe that there is plenty of room for a sustained bull run on the back of improving fundamentals and a focused new government at hand that is intent on formulation of pro-economic growth policies.

Coming to F&O market internals, in the index options segment, maximum OI continues to be seen in the 8400-8500 calls and 8300-8200 puts indicating the expected trading range.  The top gainers from the F&O segment were Apollo Hospitals Enterprise, Eicher Motors and MindTree. On the other hand, the top losers were Petronet LNG, Reliance Communications and Ranbaxy Laboratories.

The India Volatility Index (VIX), a gauge for market's short term expectation of volatility increased by 1.99% and reached 14.34. The 50-share CNX Nifty decreased by 43.60 points or 0.52% to settle at 8,382.30. Nifty November 2014 futures closed at 8409.55 on Wednesday at a premium of 27.25 points over spot closing of 8,382.30, while Nifty December 2014 futures ended at 8456.55 at a premium of 74.25 points over spot closing. Nifty November futures saw contraction of 0.62 million (mn) units, taking the total outstanding open interest (OI) to 21.99 mn units. The near month derivatives contract will expire on November 27, 2014.

From the most active contracts, HDFC Bank November 2014 futures traded at a premium of 5.80 points at 930.85 compared with spot closing of 925.05. The number of contracts traded were 20,834.

Tata Steel November 2014 futures traded at a premium of 1.30 points at 472.40 compared with spot closing of 471.10. The number of contracts traded were 27,609.

Tata Motors November 2014 futures traded at a premium of 0.65 points at 531.10 compared with spot closing of 530.45. The number of contracts traded were 17,367.

Reliance Capital November 2014 futures traded at a premium of 1.60 points at 510.90 compared with spot closing of 509.30. The number of contracts traded were 32,992.

Sun Pharmaceutical Industries November 2014 futures traded at a premium of 3.40 points at 854.45 compared with spot closing of 851.05. The number of contracts traded were 20,714.

Among Nifty calls, 8500 SP from the October month expiry was the most active call with an addition of 0.12 million open interests. Among Nifty puts, 8,400 SP from the November month expiry was the most active put with a contraction of 0.42 million open interests. The maximum OI outstanding for Calls was at 8500 SP (5.84 mn) and that for Puts was at 8,300 SP (6.09 mn).  The respective Support and Resistance levels of Nifty are: Resistance 8438.47 --- Pivot Point 8399.48 --- Support --- 8343.32.

The Nifty Put Call Ratio (PCR) finally stood at 1.40 for November month contract. The top five scrips with highest PCR on OI were Dr. Reddy's Laboratories (1.76), Eicher Motors (1.74), DLF (1.47), Bank of Baroda (1.25) and ZEEL (1.18). 

Among most active underlying, State Bank of India witnessed a contraction of 0.02 million of Open Interest in the November month futures contract, followed by ICICI Bank witnessing a contraction of 0.55 million of Open Interest in the November  month contract; while Tata Steel witnessed an addition of 0.18 million of Open Interest, Larsen & Toubro witnessed a contraction of 0.30 million of Open Interest in the November month contract and Reliance Capital witnessed an addition of 0.77 million of Open Interest in the November month's future contract.