Profit booking drags Nifty lower

Indian benchmark -- Nifty -- finished the session in negative territory on Friday, as traders opted to book profit after yesterday’s huge rally. Market traded cautiously throughout the session near its neutral line as anxiety among investors increased with a private report indicating that some of investment banks have started to cut exposure to Indian equities citing expensive valuations. The global investment banks acknowledged India to be a bright spot among emerging market peers, but the valuation looks expensive. If earnings fail to bounce back, chances of a steep correction will increase. It was last leg of trade where market participants offloaded risky bets shrugging off Minister of State for Finance Arjun Ram Meghwal’s statement that the new indirect tax regime is a major tool for improving ease of doing business and has also said that the government will be able to implement Goods and Services Tax (GST) from April 1, next year. Finally, Nifty ended the session with a cut of around half a percent, breaching its crucial 8,850 level.

On the global front, European stocks moved decisively lower on Friday, pulling back from the prior day’s rally after the latest round of economic data painted a mixed picture of the region’s recovery. Asian markets ended mostly higher, while Japan stock market ended in red as losses in the Finance & Investment, Warehousing and Transportation Equipment sectors led shares lower.

The top gainers from the F&O segment were SRF, Bharat Financial Inclusion and NIIT Technologies. On the other hand, the top losers were Axis Bank, NHPC and ACC. In the index options segment, maximum OI was being seen in the 8800-9000 calls and 8500-8900 puts.

The India Volatility Index (VIX), a gauge for market's short term expectation of volatility contraction by 0.69% and reached 13.24. The 50-share Nifty was down by 35.90 points or 0.40% to settle at 8,831.55

Nifty September 2016 futures closed at 8843.65 on Friday at a premium of 12.10 points over spot closing of 8,831.55, while Nifty October 2016 futures ended at 8887.40 at a premium of 55.85 points over spot closing. Nifty September futures saw contraction of 0.88 million (mn) units, taking the total outstanding open interest (OI) to 31.34 million (mn) units. The near month derivatives contract will expire on September 29, 2016.

From the most active contracts, ICICI Bank September 2016 futures traded at a premium of 0.80 points at 271.95 compared with spot closing of 271.15. The numbers of contracts traded were 12,433.

DLF September 2016 futures traded at a premium of 0.80 points at 156.30 compared with spot closing of 155.50. The numbers of contracts traded were 14,626.

Axis Bank September 2016 futures traded at a premium of 2.75 points at 559.20 compared with spot closing of 556.45. The numbers of contracts traded were 40,423.

HDFC Bank September 2016 futures traded at a premium of 3.85 points at 1315.85 compared with spot closing of 1,312.00. The numbers of contracts traded were 13,582.   

Reliance Industries September 2016 futures traded at a premium of 1.20 points at 1102.80 compared with spot closing of 1,101.60. The numbers of contracts traded were 22,093.    Among Nifty calls, 8900 SP from the September month expiry was the most active call with a contraction of 0.06 million open interests. Among Nifty puts, 8800 SP from the September month expiry was the most active put with an contraction of 0.52 million open interests. The maximum OI outstanding for Calls was at 9000 SP (6.66 mn) and that for Puts was at 8500 SP (6.14 mn). The respective Support and Resistance levels of Nifty are: Resistance 8871.07--- Pivot Point 8845.68--- Support --- 8806.17.             

The Nifty Put Call Ratio (PCR) finally stood at 1.36 for September month contract. The top five scrips with highest PCR on OI were MRF (4.50), EICHERMOT (2.83), MARUTI (1.65), CEATLTD (1.23) and CENTURYTEX (1.12).   

Among most active underlying Axis Bank witnessed an addition of 0.42 million of Open Interest in the September month futures contract, followed Bharat Financial Inclusion witnessing an contraction of 0.76 million of Open Interest in the September month contract, Reliance Industries witnessed a contraction  of 1.44 million of Open Interest in the September month contract, DLF witnessed an contraction  of 0.64 million of Open Interest in the September month contract and Reliance Capital witnessed an addition  of 1.08 million units of Open Interest in the September month's future contract.