High inflation, weak global cues drag Nifty below 5,100 level

Bears retaliated back on Thursday as selling intensified in the second half of trade dragged by rate-sensitives after high May inflation, which dashed hopes of rate cut by the central bank on key policy rates. Moreover, weak global cues too added fuel to the fire with all the Asian equity indices barring KOSPI Composite snapping the day’s trade in the negative terrain on Thursday as investors continued to cut their exposure to risky assets, hedging against the potentially disruptive consequences of Greece’s election at the weekend and Federal Reserve and G20 meetings next week. While, European counters too trading in the red at this point of time. Back home, the depreciation in rupee against dollar too dampened the sentiments. The rupee was last trading at 55.81 against the US dollar, down 13 paise over yesterday’s close of 55.68.

Earlier, the 50-share index opened weak amid negative trends from global markets as Moody’s cut its rating on Spanish government debt by three notches. Afterwards, market traded near its equator as investors waited for May wholesale price index (WPI). But, once the data released, it acted as a dampener for the market. India’s May inflation rose 7.55% in May from a year earlier, driven by double-digit rise in food and fuel prices. Moreover, March’s WPI inflation was revised higher to 7.69% as against 6.89% (provisional). Hectic selling emerged in interest-rate sensitive counters pulling Nifty below 5,100 mark as higher inflation dashed hopes of a rate cut by Reserve Bank of India (RBI). Moreover, sentiment was also soured after the Cabinet Committee of Economic Affairs (CCEA) in its meeting today deferred the Fertiliser Ministry's proposal to hike retail prices of urea by 10 percent to Rs 5,841 per tonne for the 2012-13 fiscal. Reacting to this, National Fertilizers, Rashtriya Chemicals & Fertilizers (RCF), Coromandel International and Chambal Fertilisers & Chemicals all gave up their early gains to end in red terrain. In the final hour of trade, selling intensified as investors offloaded their positions in banking, Realty, Infra and Auto stocks. Finally, Nifty snapped the day’s trade near its intraday low with a cut of over 60 points.

Meanwhile, most of the sectoral indices on the NSE were settled in the red, CNX PSU Bank remained the major loser, down 3.42% followed by CNX Realty down 2.91% and Bank Nifty down by 2.88% while CNX IT and CNX Media rose 0.40% and 0.21% respectively remained the only gainers in the trade. The India Volatility Index (VIX), a gauge for market’s short term expectation of volatility, surged 5.54% and reached 25.71.

The India VIX witnessed an addition of 5.54% at 25.71 as compared to its previous close of at 24.36 on Wednesday.

The 50-share S&P CNX Nifty lost 66.70 by point or 1.30% to settle at 5,054.75.

Nifty June 2012 futures closed at 5,054.10 at a discount of 0.65 points over spot closing of 5,054.75, while Nifty July 2012 futures were at 5,078.20 at a premium of 23.45 points over spot closing. The near month June 2012 derivatives contract will expire on Thursday i.e. June 28, 2012. Nifty June futures saw contraction of 0.59 million (mn) units taking the total outstanding open interest (OI) to 15.58 mn units.

From the most active contract, Tata Motors June 2012 futures were at a premium of 1.05 point at 227.85 compared with spot closing of 226.80. The number of contracts traded was 22,397.

HDIL June 2012 futures were at a premium of 0.10 point at 72.55 compared with spot closing of 72.45. The number of contracts traded was 10,795.

Tata Steel June 2012 futures were at a discount of 1.85 point at 404.15 compared with spot closing of 406.00. The number of contracts traded was 12,405.

ICICI Bank June 2012 futures were at a premium of 5.40 point at 822.00 compared with spot closing of 816.60. The number of contracts traded was 20,853.

RIL June 2012 futures were at a premium of 1.15 point at 717.70 compared with spot closing of 716.55. The number of contracts traded was 7,950. 

Among Nifty calls, 5200 SP from the Jun month expiry was the most active call with contraction of 0.06 million open interest.

Among Nifty puts, 4800 SP from the Jun month expiry was the most active put with an addition of 0.10 million open interest.

The maximum OI outstanding for Calls was at 5200 SP (6.38mn) and that for Puts was at 4800 SP (8.17mn).

The respective Support and Resistance levels are: Resistance 5107.3-- Pivot Point 5077.45--Support 5024.9.

The Nifty Put Call Ratio (PCR) OI wise stood at 1.65 for June-month contract.

The top five scrips with highest PCR on OI were ABG Ship 7.33, ABB 4.00, Orient Bank 3.00, Tata Chem 3.00 and MRPL 2.75

Among the most active underlying, IFCI witnessed contraction of 0.81 million of Open Interest in the June month futures contract followed by LITL which witnessed contraction of 2.08 million of Open Interest in the near month contract. Meanwhile, RCOM witnessed contraction of 1.38 million in the June month futures. Also, Jaiprakash Associates witnessed contraction of 0.04 million in Open Interest in the June month contract. Finally, Tata Motors witnessed an addition of 0.83 million of Open Interest in the near month futures contract.