Nifty stage a smart recovery; ends above 7,850 mark

Strong economic fundamentals, value buying and attractive valuations boosted investor sentiments in the Indian equity market - leading the local benchmark, Nifty to close with gains of 71 points or 0.92 percent. Sentiments got a boost after the government said it was considering reconvening parliament to make another attempt to pass the goods and services tax (GST). Besides, recovery in rupee, which sharply appreciated by 76 paise to 65.89 intraday against the dollar also supported the upside. On the global front, Asian markets closed mostly in green on Tuesday, while China stocks ended sharply lower extending a selloff that has unnerved investors around the globe. European markets made a good start on report of German business confidence unexpectedly rebounding in August as companies brushed off concerns that China’s slowing economy will drag on global growth.

Back home, the benchmark got off to a positive start in the morning trade as investors opted to buy beaten down but fundamentally strong stocks. Some support also came with Finance Minister’s statement that the economy is in a revival phase and hint that it will clock a growth rate in excess of 8 per cent in 2015-16, after the total indirect tax collections during the first four months of the fiscal rose by 37 per cent. However, the index drifted into the negative zone in mid morning trades and slipped to intraday lows in late morning session amid weak global cues after shares in China continued their slide amid fears of a economic growth slowdown. Besides, traders remained concerned that foreign investors could pull out funds from emerging markets as China’s markets fell further. Foreign institutional investors were net sellers in equities to the tune of Rs 5,275 crore on August 25, 2015. The frontline index kept losing steam thereafter and even drifted to the lowest point in the session in noon trade. But the index managed to pare most of the losses in afternoon trades on getting some supportive leads from European share markets. Further, improving the sentiment in domestic markets, a glimmer of hope has emerged on the Goods and Services Tax Bill. According to the Union Minister, M Venkaiah Naidu, the government may convene second part of the Monsoon Session to pass key legislations after talking to all the political parties. He also added that government is going to Parliament with an open mind and amendments in GST Bill, if any, can be approved on the floor of the House. Traders were seen piling position in Realty, Metal and Oil & Gas stocks while selling was witnessed in IT sector stocks. Eventually, Nifty ended the session with a gain of over 71 points reclaiming its crucial 7,850 mark.

The top gainers from the F&O segment were Indiabulls Real Estate, DLF and Amara Raja Batteries. On the other hand, the top losers were Tata Power Company, Just Dial and MindTree. In the index options segment, maximum OI was being seen in the 8300-8600 calls and 7600-7900 puts. In today's session, while the traders preferred to exit 8300 put, heavy buildup was seen in the 7600 put. On the other hand, traders exited from 8300 Call, while 8000 call witnessed considerable OI addition.

The India Volatility Index (VIX), a gauge for market's short term expectation of volatility declined by 4.55% and reached 26.84. The 50-share CNX Nifty was up by 71.70 points or 0.92% to settle at 7,880.70. Nifty August 2015 futures closed at 7896.20 on Tuesday at a premium of 15.50 points over spot closing of 7,880.70, while Nifty September 2015 futures ended at 7925.80 at a premium of 45.10 points over spot closing. Nifty August futures saw contraction of 2.75 million (mn) units, taking the total outstanding open interest (OI) to 13.43 million (mn) units. The near month derivatives contract will expire on August 27, 2015. 

From the most active contracts, SBI August 2015 futures traded at discount of 1.20 points at 253.00 compared with spot closing of 254.20. The number of contracts traded were 54,714.

ICICI Bank August 2015 futures traded at a discount of 0.65 points at 283.35 compared with spot closing of 284.00. The number of contracts traded were 39,527.

Tata Motors August 2015 futures traded at a discount of 1.15 points at 328.35 compared with spot closing of 329.50. The number of contracts traded were 50,861.

Reliance August 2015 futures traded at a discount of 7.25 points at 851.05 compared with spot closing of 858.30. The number of contracts traded were 55,527.

Axis Bank August 2015 futures traded at a discount of 1.55 points at 504.25 compared with spot closing of 505.80. The number of contracts traded were 44,844.

Among Nifty calls, 8000 SP from the August month expiry was the most active call with an addition of 0.67 million open interests.  Among Nifty puts, 7700 SP from the August month expiry was the most active put with an addition of 0.96 million open interests. The maximum OI outstanding for Calls was at 8600 SP (4.14 mn) and that for Puts was at 7800 SP (3.26 mn).  The respective Support and Resistance levels of Nifty are: Resistance 7981.65 --- Pivot Point 7824.45 --- Support --- 7723.50.

The Nifty Put Call Ratio (PCR) finally stood at 0.68 for August month contract.  The top five scrips with highest PCR on OI were Bosch (3.50), Oracle Financial Services Software (3), Dr. Reddys Laboratories (1.20), Tech Mahindra (1.07) and Indiabulls Housing Finance (1.06). 

Among most active underlying, State Bank of India witnessed a contraction of 8.05 million of Open Interest in the August month futures contract, followed by Infosys witnessing a contraction of 0.95 million of Open Interest in the August month contract; Reliance Industries witnessed a contraction of 2.81 million of Open Interest in the August month contract, Maruti Suzuki India witnessed a contraction of 0.20 million of Open Interest in the August month contract and Ashok Leyland witnessed a contraction of 0.24 million units of Open Interest in the August month's future contract.