Strong Europe, repo rate cut pulls market higher; Nifty shy 5,300 mark

Sentiments turned bullish and Nifty rallied more than a percent on Tuesday, reacting to the surprised repo rate cut of 50 basis points by the Reserve Bank of India (RBI) and positive European markets ahead of Spain auction treasury bills. Globally, most of the Asian counters ended in the red with mainland Chinese and Hong Kong stocks edged lower in the trade after foreign direct investment (FDI) in China fell in March for the fifth consecutive month. However, European counters were exhibiting firm trade on Tuesday. Back home, the domestic market’s rally was majorly led by metals, PSUs, capital goods, FMCG, telecom and power stocks, but not wholly by banks.

After making a decent start, Indian benchmark turned flat ahead of RBI’s policy meet and traded near its neutral line till mid morning trade. But, once the RBI announcement came, market shot up about 80 points and crossed sub 5,300 mark as RBI slashed repo rate by 50 basis points to 8 percent, bolder than what market expected while, it kept the cash reserve ratio (CRR), the portion of deposits which banks are required to keep with the central bank, unchanged at 4.75 percent. Shares of rate-sensitive sectors such as banking, real estate and automobiles gained in trades, post the announcement by the RBI. But the warning of limited scope for further cut in policy rates due to persistent upside risks to inflation wiped out gains completely and market once again turned flat in early noon trade. However, the market regained its momentum in the second half of trade due to strong opening in European markets. Afterwards, market continued its jubilant run till end led by Anil Dhirubhai Ambani Group (ADAG) stocks. Reliance Infra, Reliance Communications and Reliance Power all edged higher by 3-6 percent. Finally, Nifty snapped the day’s trade near its day’s high with a gain of over a percentage point.

Meanwhile, all the sectoral indices on the NSE settled in the positive territory with CNX Realty gaining the most, up 2.45% followed by CNX PSE up by 2.44% and CNX Metal up by 1.95% in the trade. The India Volatility Index (VIX), a gauge for market’s short term expectation of volatility, tumbled 8.63% and reached 20.31.

The India VIX witnessed contraction of 8.63% at 20.31 as compared to its previous close of at 22.23 on Monday.

The 50-share S&P CNX Nifty gain 63.50 points or 1.22% to settle at 5289.70.

Nifty April 2012 futures closed at 5,319.60 at a premium of 29.90 points over spot closing of 5,289.70, while Nifty May 2012 futures were at 5,351.50 at a premium of 61.80 points over spot closing. The near month April 2012 derivatives contract will expire on Thursday i.e. April 26, 2012. Nifty April futures saw an addition of 0.73 million (mn) units taking the total outstanding open interest (OI) to 17.76 mn units.

From the most active contract, Tata Motors April 2012 futures were at a premium of 1.65 point at 302.30 compared with spot closing of 300.65. The number of contracts traded was 15,302.

HDIL April 2012 futures were at a premium of 0.25 point at 90.70 compared with spot closing of 90.45. The number of contracts traded was 21,521.

DLF April 2012 futures were at a premium of 1.35 points at 206.35 compared with spot closing of 205.00. The number of contracts traded was 13,315.

Tata Steel April 2012 futures were at a premium of 0.90 point at 463.15 compared with spot closing of 462.25. The number of contracts traded was 12,894.

Reliance Industries April 2012 futures were at a premium of 4.40 point at 751.10 compared with spot closing of 746.70. The number of contracts traded was 14,050. 

Among Nifty calls, 5400 SP from the April month expiry was the most active call with contraction of 0.22 million open interest.

Among Nifty puts, 5200 SP from the April month expiry was the most active put with an addition of 0.88 million open interest.

The maximum OI outstanding for Calls was at 5400 SP (7.24mn) and that for Puts was at 5200 SP (7.23mn).

The respective Support and Resistance levels are: Resistance 5322.48-- Pivot Point 5265.41 -- Support 5232.63.

The Nifty Put Call Ratio (PCR) OI wise stood at 1.16 for April -month contract.

The top five scrips with highest PCR on OI were ABG Ship 3.59, Patni 2.07, ITC 2.06, Hindustan Zinc 2.00, and Tata Chem 2.00.

Among most active underlying, AlokText witnessed contraction of 15.29 million of Open Interest in the April month futures contract followed by IFCI which witnessed  contraction of 0.14 million of Open Interest in the near month contract. Meanwhile, RCOM witnessed an addition of 0.96 million in the April month futures. Also, JP Associates Infra witnessed an addition of 2.03 million in Open Interest in the April month contract. Finally, witnessed Tata Motors witnessed contraction of 1.12 million of Open Interest in the near month futures contract.