Nifty recovers after RBI's 50 Bps Rate Cut

CNX Nifty ended in green, erasing some of the previous session's losses, on expectations that higher-than-expected rate cut by the Reserve Bank of India would boost growth. With the latest interest revision, the RBI has cut repo rate by a total of 125 basis points this year to a four-year lowest level since May 2011. Some support also came with Finance Minister Arun Jaitley’s statement that he is confident of maintaining fiscal deficit at 3.9 per cent in the current financial year and extremely keen to better the 7.3 per cent growth of fiscal year 2014-15.  On the global front, Asian markets closed mostly in red on Tuesday, after weak Chinese data rekindled worries about its fragile economy and led to sharp losses on Wall Street.  Further, European shares partially recouped early losses but most major indexes remained near 2015 lows.

Back home, the benchmark got off to a somber opening, extending the downtrend for the second straight session as pessimistic sentiments prevailed across Asian markets. The key index remained choppy through the morning trades but saw a sudden spurt in buying in early afternoon trades post Reserve Bank of India's surprise move to cut rates by 50 basis points. RBI reduced the policy repo rate under the liquidity adjustment facility (LAF) from 7.25 per cent to 6.75 per cent.  But, weak opening in European counterparts extended nervousness in the market and the index once again slipped into the red from green. Sentiments remained down-beat on reports that foreign portfolio investors (FPIs) sold shares worth a net Rs 650.01 crore on September 28, 2015. However the frontline index slowly but steadily started gathering steam and surged by around one percent by late afternoon trades as strong buying witnessed in rate sensitive stocks. Sentiment got boost with RBI’s statement that its stance will continue to be accommodative, though the focus of monetary action for the near term will shift to working with the government to ensure that impediments to banks passing on the bulk of the cumulative 125 basis points cut in the policy rate are removed. However towards the end, once again profit taking emerged on the street and the rate cut rally seemed fizzling down, as the metal pack that were trading weak since mornings suffered sell-off on disappointing economic data out of China, which once again raised concerns about commodity demand and health of the global economy. Finally, Nifty ended the session above its crucial 7,800 mark with a gain of over half percentage.

The top gainers from the F&O segment were Housing Development and Infrastructure, LIC Housing Finance and Bajaj Finance. On the other hand, the top losers were Vedanta, Bharti Infratel and Bosch. In the index options segment, maximum OI was being seen in the 8000-8400 calls and 7400-7600 puts.

The India Volatility Index (VIX), a gauge for market's short term expectation of volatility decreased by 0.45% and reached 21.57. The 50-share CNX Nifty was up by 47.60 points or 0.61% to settle at 7,843.30. Nifty October 2015 futures closed at 7875.85 on Tuesday at a premium of 32.55 points over spot closing of 7,843.30, while Nifty November 2015 futures ended at 7914.00 at a premium of 70.70 points over spot closing. Nifty October futures saw addition of 0.22 million (mn) units, taking the total outstanding open interest (OI) to 18.82 million (mn) units. The near month derivatives contract will expire on October 29, 2015.  

From the most active contracts, ICICI Bank October 2015 futures traded at premium of 1.80 points at 270.65 compared with spot closing of 268.85. The number of contracts traded were 45,028.

SBI October 2015 futures traded at a premium of 1.85 points at 243.45 compared with spot closing of 241.60. The number of contracts traded were 51,031.

Tata Motors October 2015 futures traded at a premium of 2.45 points at 290.50 compared with spot closing of 288.05. The number of contracts traded were 36,775.

Tata Steel October 2015 futures traded at a discount of 0.60 points at 201.95 compared with spot closing of 202.55. The number of contracts traded were 21,898. 

DLF October 2015 futures traded at a premium of 0.55 points at 134.80 compared with spot closing of 134.25. The number of contracts traded were 27,645.

Among Nifty calls, 8000 SP from the September month expiry was the most active call with an addition of 0.82 million open interests.  Among Nifty puts, 7500 SP from the September month expiry was the most active put with an addition of 0.41 million open interests. The maximum OI outstanding for Calls was at 8200 SP (3.73 mn) and that for Puts was at 7800 SP (3.64 mn).  The respective Support and Resistance levels of Nifty are: Resistance 7949.50 --- Pivot Point 7820.35 --- Support --- 7714.15.

The Nifty Put Call Ratio (PCR) finally stood at 1.08 for September month contract.  The top five scrips with highest PCR on OI were Indraprastha Gas (4.56), Bata India (1.39), ACC (1.23), JSW Steel (1.16) and Colgate-Palmolive (India) (1.13).   

Among most active underlying, State Bank of India witnessed an addition of 0.64 million of Open Interest in the September month futures contract, followed by Axis Bank India witnessing an addition of 3.51 million of Open Interest in the September month contract; Maruti Suzuki India witnessed a contraction of 0.03 million of Open Interest in the September month contract, ICICI Bank witnessed an addition of 4.73 million of Open Interest in the September month contract and DLF witnessed an addition of 5.19 million units of Open Interest in the September month's future contract.