Sell off in second half drags market lower; Nifty breaches 5600 mark

The fifty stock index -- Nifty -- ended the choppy day of trade below its crucial 5,600 mark with a cut of about 50 points. However, the index traded in the positive terrain in the first half tracking strong global cues but, it erased all the morning gains and turned red in the second half as selling witnessed in most of the key heavyweights. Earlier, the Indian equity markets made gap up start tracking firm cues from global indices but the local index started paring its initial gains as IT major Wipro and Crompton Greaves reported lower than expected Q1 result. On consolidated basis, GAIL’s net profit registered a gain of 1.24% at Rs 1334.90 crore for the quarter under review as compared to Rs 1318.60 crore for the same quarter last year while, Crompton Greaves’ net profit for the first quarter declined by 9.25% at Rs 129.02 crore as compared to Rs 142.17 crore for the corresponding quarter previous year. Afterwards, market traded range-bound till late morning trade as firm opening in European counterparts tried to support the sentiments but, market drifted lower after index heavyweight Reliance Industries suffered a kneejerk reaction and suddenly took a sharp plunge in the early noon trade. Meanwhile, Rainfall continued to be a concern, after monsoon rains dropped 3% below average in the first week of July while, expectation over further 25 bps hikes in key lending rates by RBI to tame inflation too dampened the sentiments. The benchmark continued to trade in the negative territory and snapped the day’s trade near its intraday low with a cut of over 0.80 percentage point on the back of selling witnessed in key heavyweights like ICICI Bank, RIL, HDFC Bank, Wipro etc. Meanwhile, PSU oil marketing companies viz. BPCL, HPCL and IOC all snapped the trade with a cut of about a percent as international crude oil prices made a good bounce back on Tuesday and rose above $96 a barrel.

On the global front, the US markets closed higher on Tuesday on back of strong corporate earnings and reports of jump in housing construction, which marked the closing of market as the best day of the year while, all the Asian equity indices barring shanghai composite finished the day’s trade in the positive territory on Wednesday. Moreover, all the European counterparts were trading mostly in the red where major indices like CAC and FTSE were trading with a gain of over a percent at this point of time. Back home, most of the sectoral indices on the NSE settled in the negative territory with CNX Pharma losing the most, ending with a cut of over one and a half percent followed by Bank Nifty, down by 1.32% and CNX Infra down by 1.28% while, CNX Realty up 0.41% and CNX FMCG up by 0.28% remained the only gainers on NSE sectoral space. The India Volatility Index (VIX), a gauge for market’s short term expectation of volatility, declined 0.72% and reached 19.11, while S&P Nifty dropped by 46.50 points or 0.83% to close at 5,567.05.

The India VIX witnessed a decline of 0.73% at 19.11 on Wednesday as compared to its previous close of at 19.25 on Tuesday.

The 50-share S&P CNX Nifty declined 46.50 points or 0.83% and settled at 5,567.05.

Nifty July 2011 futures closed at 5,565.90, at a discount of 1.15 point over spot closing of 5,567.05, while Nifty August 2011 futures were at 5,588.00 at a premium of 20.95 points over spot closing. The near month July 2011 derivatives contract expires on Thursday, 28 July, 2011. Nifty July futures saw an addition of 9.67% or 2.03 million (mn) units, taking the total outstanding open interest (OI) to 23.02 mn units.

From the most active contract by contract value, Crompton Greaves July 2011 futures closed at a premium of 0.85 points at 177.00 compared with spot closing of 176.15. The number of contracts traded was 42,590.

LIC HSG Finance July 2011 futures were at a premium of 0.70 point at 215.85 compared with spot closing of 215.15. The number of contracts traded was 34,391.

SBI’s July 2011 futures were at a premium of 3.90 at 2467.00 compared with spot closing of 2463.10. The number of contracts traded was 20,300.

DLF July 2011 futures were at a discount of 1.80 at 241.20 compared with spot closing of 243.00. The number of contracts traded was 17,142.

RIL July 2011 futures were at a premium of 0.10 at 874.90 compared with spot closing of 874.80. The number of contracts traded was 18,568.

Among Nifty calls, 5600 SP from the July month expiry was the most active call with decline of 1.97 million or 27.63%.

 Among Nifty puts, 5600 SP from the July month expiry was the most active put with decline of 0.49 million or 6.56%.

The maximum Call OI outstanding for Calls was at 5600 SP (9.09 mn) and that for Puts was at 5500 SP (7.06 mn).

The respective Support and Resistance levels are: Resistance 5623.26 -- Pivot Point 5589.18 -- Support 5532.96.

The Nifty Put Call Ratio (PCR) OI wise stood at 1.04 for July month contract.

The top five scrips with highest PCR on OI were Sun Pharma 2.67, Punjab National Bank 2.50, Jain Irrigation System 1.67, Sun TV 1.46 and Bata India 1.38.

SBI followed by LIC Housing Finance, Crompton Greaves, Reliance and lastly DLF were the active underlying for the July month futures contract.