Nifty extends gains; closes above 8600 level

The fifty stock index -- Nifty -- continued its northward journey for second consecutive day on Tuesday and finished the session with a gain of 61 points or 0.72%, on hopes that Delhi election defeat may prompt faster reforms by the Modi government especially in the budget. Traders also expect Finance Minister Arun Jaitley to boost capital spending and offer tax breaks to an under-performing manufacturing sector in the federal budget on February 28, 2015.

After gap up opening, nifty showed some strength in early morning trade as sentiments were on optimistic note with law minister Sadananda Gowda’s statement that India plans to amend its arbitration law, setting time limits for courts and easing judicial rules to decide corporate disputes, as it seeks to attract more foreign investment. Some support also came with global credit rating agency Moody's Investors Service statement that the lower oil prices are expected to alleviate India's high inflation and spur economic growth. According to Moody's, lower oil prices are expected to sustain and would in principle provide a significant boost to global growth. However, investors are concerned about economists saying that the new methodology pushing up the GDP forecast to 7.4 percent for the current fiscal is not in sync with key parameters such as tax collections and credit growth. Based on the new series, the Central Statistics Office has projected an economic growth rate of 7.4 percent for 2014-15, up from 6.9 percent a year ago. Thereafter, the index kept oscillating in a narrow range throughout the session. However, hefty short covering in the late hours helped the index to bounce to higher levels but mild resistance around the 8,650 levels pushed the key gauge back to some extent by the end of trade. Eventually, Nifty ended the session above its crucial 8,600 mark with a gain of over sixty-one points.

Most of the sectoral indices on the NSE settled in the positive territory with CNX Metal Bank gaining the most, ending with a gain of over one and half percent followed Bank Nifty up by 1% and CNX Pharma up by 0.96%, while CNX Media down 0.41% was sole loser on NSE sectoral space.

The top gainers from the F&O segment were Syndicate Bank, GMR Infrastructure and Aurobindo Pharma. On the other hand, the top losers were HDIL, ONGC and Bata India. In the index options segment for February series, maximum OI continues to be seen in the 9000-8900 calls and 8500-8600 puts indicating the expected trading range.  Meanwhile, India VIX - the gauge of underlying volatility in the market - has declined in today's session, which indicates that traders have slowdown buying options contracts. 

The India Volatility Index (VIX), a gauge for market's short term expectation of volatility decreased by 3.26% and reached 20.50. The 50-share CNX Nifty was up by 61.85 points or 0.72% to settle at 8,627.40.  Nifty February 2015 futures closed at 8670.90 on Wednesday at a premium of 43.50 points over spot closing of 8627.40, while Nifty March 2015 futures ended at 8728.70 at a premium of 101.30 points over spot closing. Nifty February futures saw contraction of 0.13 million (mn) units, taking the total outstanding open interest (OI) to 24.80 million (mn) units. The near month derivatives contract will expire on February 26, 2015.

From the most active contracts, ICICI Bank February 2015 futures traded at a premium of 1.80 points at 336.80 compared with spot closing of 335.00. The number of contracts traded were 20,879.

State Bank of India February 2015 futures traded at a premium of 1.55 points at 287.75 compared with spot closing of 286.20. The number of contracts traded were 28,443.

Reliance Industries February 2015 futures traded at a premium of 4.55 points at 906.05 compared with spot closing of 901.50. The number of contracts traded were 16,813.

Jindal Steel & Power February 2015 futures traded at a premium of 0.25 points at 152.20 compared with spot closing of 151.95. The number of contracts traded were 18,357.

Axis Bank February 2015 futures traded at a premium of 2.95 points at 572.45 compared with spot closing of 569.50. The number of contracts traded were 25,839.

Among Nifty calls, 8800 SP from the February month expiry was the most active call with a contraction of 0.20 million open interests. Among Nifty puts, 8500 SP from the February month expiry was the most active put with an addition of 0.18 million open interests. The maximum OI outstanding for Calls was at 9000 SP (6.17 mn) and that for Puts was at 8,600 SP (3.28 mn).  The respective Support and Resistance levels of Nifty are: Resistance 8596.72--- Pivot Point 8624.33--- Support --- 8596.72.

The Nifty Put Call Ratio (PCR) finally stood at 0.87 for February month contract. The top five scrips with highest PCR on OI were HDIL (1.16), HCL Tech (1.11), Infosys (1.11), Syndicate Bank (1.09) and SUN TV (0.96). 

Among most active underlying, State Bank of India witnessed an addition of 2.52 million of Open Interest in the February month futures contract, followed by Wockhardt witnessing a correction of 0.07 million of Open Interest in the February month contract; ICICI Bank witnessed a correction of 1.05 million of Open Interest in the February month contract, Larsen & Toubro witnessed an addition of 0.04 million of Open Interest in the February month contract and Axis Bank witnessed an addition of 0.76 million of Open Interest in the February month's future contract.