Nifty ends lower as budget proposes tax on stock gains

Key Indian equity benchmark Nifty ended lower on Thursday, as Arun Jaitley in the Budget proposed to levy long-term capital gains tax (LTCG) of 10% on gains exceeding Rs 100,000 from sale of equity shares. The index managed to trade higher in the first half, amid report that Central Statistics Office has revised the Gross Domestic Product (GDP) growth rate for 2015-16 to 8.2% from the earlier estimates of 8% and kept the 2016-17 growth unchanged at 7.1%. However, the nifty turned volatile and entered into red terrain after the finance minister Arun Jaitley in his budget speech revised the fiscal deficit for FY18 to 3.5% from 3.2% targeted earlier. Some concerns also came with the report that India’s core sector output grew at a slower pace of 4.0% in December 2017, from 7.4% in November 2017, on the back of declining coal and crude oil output. Besides, the seasonally adjusted Nikkei India Manufacturing Purchasing Managers’ Index (PMI) slowed down to 52.4 in January from 54.7 in December as per the survey report, also weighed on sentiments.

Traders were seen piling up positions in Auto, FMCG and Metal stocks, while selling was witnessed in IT, Realty and Media stocks. The top gainers from the F&O segment were Escorts, Muthoot Finance and MRF. On the other hand, the top losers were Jain Irrigation Systems, Titan Company and Bharat Electronics. In the index option segment, maximum OI continues to be seen in the 11000-12000 calls and 10500-11000 puts indicating this is the trading range expectation.

The India Volatility Index (VIX), a gauge for market’s short term expectation of volatility decreased by 11.44% and reached 14.10. The 50-share Nifty was down by 10.80 points or 0.10% to settle at 11,016.90.

Nifty February 2018 futures closed at 11031.30 on Thursday, at a premium of 14.40 points over spot closing of 11016.90, while Nifty March 2018 futures ended at 11053.95, at a premium of 37.05 points over spot closing. Nifty February futures saw a contraction of 0.79 million (mn) units, taking the total outstanding open interest (OI) to 23.86 mn units. The near month derivatives contract will expire on February 22, 2018.

From the most active contracts, ITC February 2018 futures traded at a premium of 1.30 points at 276.80 compared with spot closing of 275.50. The numbers of contracts traded were 43,323.

ICICI Bank February 2018 futures traded at a discount of 0.90 points at 345.90 compared with spot closing of 346.80. The numbers of contracts traded were 24,386.

Vedanta 2018 futures traded at a discount of 0.20 points at 342.85 compared with spot closing of 343.05. The numbers of contracts traded were 24,036.

State Bank of India February 2018 futures traded at a premium of 0.70 points at 306.10 compared with spot closing of 305.40. The numbers of contracts traded were 20,552.

Reliance Industries February 2018 futures traded at a premium of 4.00 point at 949.00 compared with spot closing of 945.00. The numbers of contracts traded were 18,792.

Among Nifty calls, 11200 SP from the February month expiry was the most active call with an addition of 0.57 million open interests. Among Nifty puts, 11000 SP from the February month expiry was the most active put with an addition of 0.39 million open interests.  The maximum OI outstanding for Calls was at 11500 SP (6.12 mn) and that for Puts was at 10500 SP (5.92 mn). The respective Support and Resistance levels of Nifty are: Resistance 11129.90--- Pivot Point 11004.35--- Support --- 10891.35.

The Nifty Put Call Ratio (PCR) finally stood at 0.95 for February month contract. The top five scrips with highest PCR on OI were ICICI Bank (1.48), Torrent Power (1.44), Bosch (1.20), Mangalore Refinery and Petrochemicals (1.15) and Godfrey Phillips India (1.11).
Among most active underlying, ITC witnessed an addition of 3.19 million units of Open Interest in the February month futures contract, followed by ICICI Bank witnessing a contraction of 1.63 million units of Open Interest in the February month contract, Reliance Industries witnessed a contraction of 0.12 million units of Open Interest in the February month contract, Larsen & Toubro witnessed a contraction of  0.37 million units of Open Interest in the February month contract and State Bank of India witnessed  an addition of 2.61 million units of Open Interest in the February month future contract.