Nifty gains for fourth straight day

Indian equity benchmark—Nifty— rallied for fourth straight day and settled 38.50 points up on Friday, ahead of the Union Budget due on February 1. Sentiments remained upbeat after Finance Minister Arun Jaitley put up a spirited defence of demonetisation, saying the drive 'shook' the financial system for a short while, but will integrate the shadow economy with the formal in the long run and ensure better tax compliance. Some support also came with private report that money in circulation is rising again in India post-demonetisation period and at the current rate, currency-to-GDP ratio will reach about 9 per cent by March -- sufficient to stabilise economic activity. However, gains remained capped with Reserve Bank of India’s (RBI) statement that business sentiments of the Indian manufacturing sector deteriorated in the third quarter of the current financial year and are likely to decline in the fourth quarter.

Traders were seen piling up positions in PSU, Financial Services and Banking stocks, while selling was witnessed in FMCG, Realty and Media stocks. On futures and options (F&O) front, against all the odds Nifty ended the January series on a strong note gaining nearly 6.2%. The market-wide rollovers stood at 77% as compared to average rollovers of 78% in the last three series. Nifty futures rollover came in at 73% which is higher than the average rollovers of 68% in the last three series. The top gainers from the F&O segment were Adani Enterprises, IFCI and Ashok Leyland. On the other hand, the top losers were IDFC Bank, Kaveri Seed Company and Jindal Steel & Power. In the index option segment, maximum OI continues to be seen in the 8500-9000 calls and 8000-8500 puts indicating this is the trading range expectation.

The India Volatility Index (VIX), a gauge for market’s short term expectation of volatility inceased by 5.50% and reached 16.00. The 50-share Nifty was up by 38.50 points or 0.45% to settle at 8,641.25.

Nifty February 2017 futures closed at 8671.10 on Friday at a premium of 29.85 points over spot closing of 8,641.25, while Nifty March 2017 futures ended at 8700.10, at a premium of 58.85 points over spot closing. Nifty February futures saw an addition of 1.22 million (mn) units, taking the total outstanding open interest (OI) to 19.38 million (mn) units. The near month derivatives contract will expire on February 23, 2017.

From the most active contracts ICICI Bank February 2017 futures traded at a premium of 1.85 points at 273.65 compared with spot closing of 271.80. The numbers of contracts traded were 37,782.

Infosys February 2017 futures traded at a premium of 2.30 points at 944.95 compared with spot closing 942.65. The numbers of contracts traded were 20,380.

State Bank of India February 2017 futures traded at a discount of 0.45 points at 266.05 compared with spot closing of 266.50. The numbers of contracts traded were 17,777.

ITC February 2017 futures traded at a premium of 1.65 points at 259.15 compared with spot closing of 257.50. The numbers of contracts traded were 14,773.

Reliance Industries February 2017 futures traded at a premium of 2.10 points at 1030.25 compared with spot closing of 1,028.15. The numbers of contracts traded were 14,541.

Among Nifty calls, 8800 SP from the February month expiry was the most active call with a contraction of 0.10 million open interests. Among Nifty puts, 8600 SP from the February month expiry was the most active put with an addition of 0.83 million open interests. The maximum OI outstanding for Calls was at 8700 SP (3.00 mn) and that for Puts was at 8400 SP (3.67 mn). The respective Support and Resistance levels of Nifty are: Resistance 8673.67--- Pivot Point 8640.28--- Support --- 8607.87.

The Nifty Put Call Ratio (PCR) finally stood at 1.00 for February month contract. The top five scrips with highest PCR on OI were Cadila Healthcare (3.75), Torrent Pharmaceuticals (3.00), KPIT Technologies (1.78), Godrej Industries (1.56) and Britannia Industries (1.29).

Among most active underlying, ICICI Bank witnessed an addition of 9.80 million units of Open Interest in the February month futures contract, followed by State Bank of India witnessing an addition of 1.53 million units  of Open Interest in the February month contract, Yes Bank witnessed an addition of 0.15 million units of Open Interest in the February month contract, Tata Steel witnessed an addition of 0.26 million units of Open Interest in the February month future contract and ITC witnessed an addition of 2.17 million units of Open Interest in the February month future contract.