Carnage witness ahead of February F&O expiry; Nifty breaches 5,550 mark

The fifty stock index -- Nifty -- snapped its two days winning streak on Wednesday and ended in deep red ahead of February F&O series expiry as investors booked profits across stocks after sharp gains recently. Though, the index traded near its neutral line most part of the day’s trade but, blood bath in final hour dragged market near its crucial 5,500 mark and it ended the choppy trade with a cut of over 100 points. On the global front, European counters remained weak for a second day after the country’s services and manufacturing output unexpectedly shrank. A gauge of euro-area services and manufacturing output dropped to 49.7. Earlier preliminary survey of China's industrial activity, showed the overall manufacturing sector contracting for a four-straight month although the HSBC flash PMI rose in February to 49.7 from 48.8 in January.

The Indian equity market made a flat start amid global uncertainty as global cues not gave any clear indication. Afterwards, benchmark capitulated to the selling pressure and breached its crucial 5,600 mark as investor’s reluctance post previous session’s rally minced the sentiment in early deals.  Investors seem to be in fringe as relief over Greece’s latest bailout has turned to doubts that the debt-stricken country can keep to its austerity programme. After that, market traded in the tight band but in red below its crucial 5,600 level. However, the index regained its strength in mid noon trade and recaptured its crucial 5,600 mark supported by some positive development. C Rangarajan, economic advisor to the Prime Minister, head of the PMEAC said that country’s rate of growth in financial year 11-12 is estimated at 7.1%, which is shade higher than advance GDP estimates of the CSO. Though he admitted that manufacturing has not been doing well, but the FY12 farm growth is seen higher at 3%, while the economic growth for the coming year is seen at 7.5%-8%. But it was the final hour of trade where market completely lost its control witnessing sharp cut of about 100 points and Nifty breached its crucial 5,550 and 5,500 in a row following weakness in European counters. Finally, Nifty ended the sluggish day of trade with a cut of about two percentage point but, managed to close over its crucial 5,500 mark.

On the global front, the US markets pared early gains and made a mixed closing overnight while, Asian stock markets snapped Wednesday’s trading session on a mixed note with the Chinese markets surging around a percent after reports showed that China manufacturing activity improved from 48.8 in January to 49.7 in February. Moreover, all the European counterparts were trading in the red at this point of time. Back home, most of the sectoral indices on the NSE settled in the negative territory with CNX PSU Bank losing the most, ending with a cut of 7 percent followed by CNX Realty down by 6.99% and CNX Metal down by 4.42% while, CNX FMCG up 0.22% remained the lone gainer on NSE sectoral space. The India Volatility Index (VIX), a gauge for market’s short term expectation of volatility, rose 2.09% and reached 26.80.

The India VIX witnessed an addition of 2.10% at 26.80 as compared to its previous close of at 26.25 on Tuesday.

The 50-share S&P CNX Nifty declined by 101.80 points or 1.82% to settle at 5,505.35.

Nifty February 2012 futures closed at 5,518.10 at a premium of 12.75 points over spot closing of 5,505.35, while Nifty March 2012 futures were at 5,562.65 at a premium of 57.30 points over spot closing. The near month February 2012 derivatives contract expires on Thursday, February 23, 2012. Nifty February futures saw contraction of 0.58 million (mn) units taking the total outstanding open interest (OI) to 15.84 mn units.

From the most active contract, Tata Motors February 2012 futures were at a discount of 1.15 points at 268.30 as compared with spot closing of 269.45. The number of contracts traded was 20,639.

Reliance Industries February 2012 futures were at a premium of 10.35 point at 844.35 compared with spot closing of 834.00. The number of contracts traded was 20,838.

DLF February 2012 futures were at a discount of 1.55 point at 238.75 compared with spot closing of 240.30. The number of contracts traded was 21,189.

ICICI Bank February 2012 futures were at a premium of 4.60 point at 966.20 compared with spot closing of 961.60. The number of contracts traded was 18,926.

Tata Steel February 2012 futures were at a discount of 0.40 point at 471.30 compared with spot closing of 471.70. The number of contracts traded was 20,427.

Among Nifty calls, 5600 SP from the February month expiry was the most active call with an addition of 1.07 million open interest. 

Among Nifty puts, 5400 SP from the February month expiry was the most active put with a contraction of 0.30 million open interest.

The maximum OI outstanding for Calls was at 5600 SP (6.18mn) and that for Puts was at 5400 SP (6.80 mn).

The respective Support and Resistance levels are: Resistance 5593.08-- Pivot Point 5542.21-- Support 5454.48

The Nifty Put Call Ratio (PCR) OI wise stood at 2.12 for February -month contract.

The top five scrips with highest PCR on OI were Areva T&D 33.00, Oriental bank 18.00, Canara Bank 10.60, Patel Engineering 10.25 and Ruchi Soya 10.00.

Among most active underlying, Unitech witnessed a contraction of 1.47 million of Open Interest in the February month futures contract followed by Tata Motors witnessed a contraction of 0.57 million of Open Interest in the near month contract. Meanwhile Reliance Communication witnessed a contraction of 1.40 million in the February month futures. Further, DLF witnessed a contraction of 4.11 million in Open Interest in the February month contract. Finally, Bharti Airtel witnessed a contraction of 4.83 million of Open Interest in the near month futures contract.