Nifty resumes northward journey on rate cut hopes

Bulls back in action after a day of halt and the local benchmark Nifty, after a soft start, snapped the day’s trade on a euphoric note, garnering gains of over a percentage point on expectations of monetary easing by the Reserve Bank of India (RBI) after a flat industrial output in April. However, global cues remained mixed as all the Asian markets barring Straits Times ended the day’s trade in the red on Tuesday as investors booked their profit amid fears over Europe’s debt crisis resurfaced after the yield on Spain’s 10-year bond rose to 6.48 percent on Monday, higher than Friday’s close, after Fitch downgraded Spain’s two largest banks. Though, European indices were trading with traction at this point of time.

Initially, the local benchmark got off with a gap-down start with Nifty breaching 5,050 level amid weakening trend in global markets. Market lost some more ground after India’s annual industrial output showed a negligible growth of 0.1% for the month of April 2012 versus a contraction of (-) 3.5% in March and remained way below the street expectation of 1.8%. But, it proved to be the blessing for rate sensitives like banking and realty stocks, as it is likely that RBI will cut 50 basis points in repo rate or 50-100 basis points in cash reserve ratio in its mid-quarter policy review on June 18. Even the pressure has been mounting on the RBI for rate cut after the warning of investment downgrade by rating agency Standard & Poor’s and sluggish GDP growth for the fourth quarter of FY12. Market regained its green terrain recapturing 5,050 mark as auto stocks too participated in the rally on rate cut hopes after lowest growth in car sales for May in the last eight months due to high interest rates and petrol prices. Meanwhile, PSU oil marketing companies i.e. BPCL, HPCL and IOC edged higher as crude oil prices got pounded by over one and half a percent on week’s first trading session and registered third straight negative close. In the final hour of trade, the index witnessed a great amount of traction and regained its crucial 5,100 mark following firm leads from European counters. Finally, Nifty snapped the day’s trade in the green near its intraday high with a handsome gain of over 60 points.

Meanwhile, broad based buying supported most of the sectoral indices on the NSE to settle in the positive territory with CNX Realty surging the most and ending with a gain of 2.43% followed by CNX PSU Bank up 2.02% and CNX Auto up 1.76% while, CNX Pharma down by 0.23% was the lone loser on the NSE sectoral indices. The India Volatility Index (VIX), a gauge for market’s short term expectation of volatility, dropped 3.27% and reached 24.20.

The India VIX witnessed contraction of 3.28% at 24.20 as compared to its previous close of at 25.02 on Monday.

The 50-share S&P CNX Nifty gain 61.80 by point or 1.22% to settle at 5115.90.

Nifty June 2012 futures closed at 5,126.45 at a premium of 10.55 points over spot closing of 5,115.90, while Nifty July 2012 futures were at 5,147.85 at a premium of 31.95 points over spot closing. The near month June 2012 derivatives contract will expire on Thursday i.e. June 28, 2012. Nifty June futures saw an addition of 0.64 million (mn) units taking the total outstanding open interest (OI) to 15.73 mn units.

From the most active contract, HDIL June 2012 futures were at a premium of 0.25 point at 76.15 compared with spot closing of 75.90. The number of contracts traded was 14,263.

Tata Motors June 2012 futures were at a premium of 1.55 point at 244.45 compared with spot closing of 242.90. The number of contracts traded was 21,498.

Tata Steel June 2012 futures were at a discount of 1.60 point at 411.25 compared with spot closing of 412.85. The number of contracts traded was 13,910.

ICICI Bank June 2012 futures were at a premium of 4.95 point at 842.65 compared with spot closing of 837.70. The number of contracts traded was 20,475.

RIL June 2012 futures were at a premium of 4.85 point at 726.85 compared with spot closing of 722.00. The number of contracts traded was 10,378. 

Among Nifty calls, 5200 SP from the Jun month expiry was the most active call with an addition of 0.27 million open interest.

Among Nifty puts, 4800 SP from the Jun month expiry was the most active put with an addition of 0.21 million open interest.

The maximum OI outstanding for Calls was at 5200 SP (5.85mn) and that for Puts was at 4800 SP (8.06mn).

The respective Support and Resistance levels are: Resistance 5158.15-- Pivot Point 5086.65--Support 5044.4.

The Nifty Put Call Ratio (PCR) OI wise stood at 1.69 for June-month contract.

The top five scrips with highest PCR on OI were ABG Ship 7.33, ABB 4.00, MRPL 3.67, ITC 1.53, and Opto Circuts 1.50.

Among the most active underlying, LITL witnessed an addition of 2.54 million of Open Interest in the June month futures contract followed by IFCI which witnessed an addition of 1.11 million of Open Interest in the near month contract. Meanwhile, RCOM witnessed contraction of 0.04 million in the June month futures. Also, Jaiprakash Associates witnessed an addition of 1.42 million in Open Interest in the June month contract. Finally, Tata Motors witnessed an addition of 1.89 million of Open Interest in the near month futures contract.