Nifty witness smart recovery; recaptures 7,650 mark

A rally in European markets, a better-than-expected 9.8% growth in October industrial output and a negative November WPI reading helped the domestic equity benchmark Nifty register a smart rebound on Monday despite fears of a Fed liftoff in the two-day rate-setting meeting that begins on Tuesday. Investor remained cautious on declining value of rupee, which was trading over 2-year low of 67.06 against the US as greenback strengthened on prospects of a US Federal Reserve hike. On the global front, Asian markets ended mostly in red as investors remained worried about the sharp fall in the price of oil and other commodities is a sign of weakness in the global economy, especially China, and that will cut into profits at big energy companies and suppliers of raw materials as well as other companies. However, European equities were higher in early trade as investors looked ahead to the U.S. Federal Reserve's meeting this week.

Back home, after getting a gap down start, Indian benchmark Nifty showed some strength in morning trades, but the sentiments turned pessimistic in afternoon trades and index start drifting lower; however the market regained its momentum in the final hour of trade and finished the day gaining over quarter of a percent on the index. Sentiments remained up-beat with the report that India's Index of Industrial Production (IIP) growth surged to 60-months high of 9.8% in October 2015 over a year ago compared with the revised growth of 3.8% in September 2015. Meanwhile, healthy buying was observed in sugar companies after the government plans to increase the cess on sugar by almost Rs 100 per quintal to fund its ambitious programme of paying Rs 4.50 per quintal directly into the bank accounts of growers. Some buying also witnessed Cement makers after the Competition Appellate Tribunal (CAT) quashed a Competition Commission of India (CCI) order that had imposed a penalty of Rs.6,316.59 crore on the cement makers for alleged cartelisation. Further, steel companies closed higher after the government imposed import duties for five years on some stainless steel imports from China, the European Union and the United States. On the other hand, selling pressure was seen in automobile companies on the report that the National Green Tribunal (NGT) has ordered immediate ban on registration of diesel-run cars in the national capital. Furthermore, shares of oil exploration companies too witnessed selling on the back of slipping crude oil prices.

The top gainers from the F&O segment were Reliance Communications, JSW Steel and Adani Ports and Special Economic Zone. On the other hand, the top losers were Strides Arcolab, Dish TV India and Indraprastha Gas. In the index options segment, maximum OI was being seen in the 7900-8300 calls and 7200-7500 puts. In today's session, while the traders preferred to exit 7900 put, heavy buildup was seen in the 7500 put. On the other hand, traders exited from 8200 Call, while 7900 call witnessed considerable OI addition.

The India Volatility Index (VIX), a gauge for market's short term expectation of volatility increased by 3.58% and reached 17.79. The 50-share Nifty was down by 39.60 points or 0.52% to settle at 7,650.05. 

Nifty December 2015 futures closed at 7668.00 on Monday at a premium of 17.95 points over spot closing of 7,650.05, while Nifty January 2016 futures ended at 7702.05 at a premium of 52.00 points over spot closing. Nifty December futures saw addition of 0.38 million (mn) units, taking the total outstanding open interest (OI) to 19.83 million (mn) units. The near month derivatives contract will expire on December 31, 2015.           

From the most active contracts, SBI December 2015 futures traded at a premium of 1.30 points at 226.90 compared with spot closing of 225.60. The number of contracts traded were 10,597.      

ICICI Bank December 2015 futures traded at a premium of 1.95 points at 249.95 compared with spot closing of 248.00. The number of contracts traded were 11,710.            

Axis Bank December 2015 futures traded at a premium of 2.35 points at 433.60 compared with spot closing of 431.25. The number of contracts traded were 15,025.           

Tata Motors Industries December 2015 futures traded at a premium of 1.55 points at 373.55 compared with spot closing of 372.00. The number of contracts traded were 14,503.          

Tata Steel December 2015 futures traded at a premium of 0.70 points at 245.85 compared with spot closing of 245.15. The number of contracts traded were 15,194.             Among Nifty calls, 7800 SP from the December month expiry was the most active call with an addition of 0.46 million open interests. Among Nifty puts, 7500 SP from the December month expiry was the most active put with a contraction of 1.96 million open interests. The maximum OI outstanding for Calls was at 8000 SP (7.12 mn) and that for Puts was at 7500 SP (7.93 mn).  The respective Support and Resistance levels of Nifty are: Resistance 7692.32--- Pivot Point 7621.68--- Support --- 7579.42.

The Nifty Put Call Ratio (PCR) finally stood at 0.85 for December month contract.  The top five scrips with highest PCR on OI were BEML (1.60), Lupin (1.16), UCO Bank (1.03), ACC (1) and JSW Steel (0.98).   

Among most active underlying, Tata Motors witnessed an addition of 0.52 million of Open Interest in the December month futures contract, followed by Tata Steel witnessing a contraction of 0.12 million of Open Interest in the December month contract; Maruti Suzuki India witnessed a contraction of 0.02 million of Open Interest in the December month contract, Axis Bank witnessed a contraction of 0.81 million of Open Interest in the December month contract and Reliance Communications witnessed a contraction of 2.19 million units of Open Interest in the December month's future contract.