Trade tensions drag Nifty below 10,750 mark

Extending previous session’s losses, the local benchmark Nifty ended in red terrain on Tuesday, with a cut of around a percent. The index made a negative start, weighed down by signs of a trade war with reports that US President Donald Trump might consider imposing tariffs on additional $200 billion worth of Chinese goods. Traders remained worried with Commerce and Industry Minister Suresh Prabhu’s statement that global trade is facing headwinds and these challenges are needed to be tackled properly to boost world economy. He also said that the US decision to impose high import duties on certain steel and aluminium products have led to a trade war kind of situation, with other countries too raising their tariff walls. Investors got cautious with India Ratings’ latest report that the adverse conditions in the interest rate market, increasing risk aversion by state-run banks, volatile external environment and limited access to alternative financing options as critical drivers for corporate credit quality in FY19, especially for weak entities.

In the second half, the Nifty added losses to close near the day’s low point, on the back of heavy selling. Domestic sentiments also got hit with Commerce Secretary Rita Teaotia’s statement that exporters, particularly from the food and agriculture sectors, should strictly comply with global norms for quality and standards, or else they might lose their export market share to other countries. Separately, former chairman of the empowered committee on GST, Amit Mitra said that around Rs 25,000 crore refund is pending for the exporters while more than 3 lakh applications seeking refunds have piled up with the central government. He also said that the exporters are suffering hugely for this. Market participants paid no heed towards Interim Finance Minister Piyush Goyal’s statement that the government is hopeful of achieving double-digit gross domestic product (GDP) growth in the country by the fourth quarter of the ongoing financial year. He stated that there is a demand uptick in the economy and India is a market place of billions of aspirational consumers. The street also overlooked Union Minister Arun Jaitley’s statement that Indian economy may maintain the tag of fastest growing major economy for some years.

All the sectoral indices ended in red on the NSE. The top gainers from the F&O segment were Jaiprakash Associates, Container Corporation and Motherson Sumi Systems. On the other hand, the top losers were CG Power and Industrial Solutions, Steel Authority of India and India Cements. In the index option segment, maximum OI continues to be seen in the 10,800-11,000 calls and 10,500-10,700 puts indicating this is the trading range expectation.

The India Volatility Index (VIX), a gauge for market’s short term expectation of volatility increased by 4.66% and reached 12.95. The 50-share Nifty was down by 89.40 points or 0.83% to settle at 10,710.45.

Nifty June 2018 futures closed at 10719.85 on Tuesday, at a premium of 9.40 points over spot closing of 10710.45, while Nifty July 2018 futures ended at 10729.40, at a premium of 18.95 points over spot closing.  Nifty June futures saw a contraction of 0.14 million (mn) units, taking the total outstanding open interest (OI) to 24.74 mn units. The near month derivatives contract will expire on June 28, 2018.

From the most active contracts, ICICI Bank June 2018 futures traded at a premium of 0.45 points at 292.75 compared with spot closing of 292.30. The numbers of contracts traded were 24,357.

Tata Steel June 2018 futures traded at a premium of 2.30 points at 556.30 compared with spot closing of 554.00. The numbers of contracts traded were 21,508.

Dr. Reddy's Laboratories June 2018 futures traded at a premium of 11.10 points at 2398.05 compared with spot closing of 2386.95. The numbers of contracts traded were 19,036.

State Bank of India June 2018 futures traded at a premium of 0.70 points at 273.20 compared with spot closing of 272.50. The numbers of contracts traded were 16,883.

Vedanta June 2018 futures traded at a premium of 0.25 points at 224.30 compared with spot closing of 224.05. The numbers of contracts traded were 15,885.  

Among Nifty calls, 10800 SP from the June month expiry was the most active call with an addition of 0.75 million open interests. Among Nifty puts, 10700 SP from the June month expiry was the most active put with contraction of 0.16 million open interests. The maximum OI outstanding for Calls was at 11000 SP (5.33 mn) and that for Puts was at 10700 SP (4.80 mn). The respective Support and Resistance levels of Nifty are: Resistance 10,766.20 -- Pivot Point 10,733.70 -- Support -- 10677.95.

The Nifty Put Call Ratio (PCR) finally stood at 1.12 for June month contract. The top five scrips with highest PCR on OI were Cummins India (1.50), Just Dial (1.47), Dr Reddy's Laboratories (1.17), LIC Housing Finance (1.11) and Andhra Bank (1.10).

Among most active underlying, Reliance Industries witnessed a contraction of 1.44 million units of Open Interest in the June month futures contract, followed by ICICI Bank witnessing a contraction of 0.61 million units of Open Interest in the June month contract, State Bank of India witnessed a contraction of 2.46 million units of Open Interest in the June month contract, Tata Consultancy Services witnessed a contraction of 0.31 million units of Open Interest in the June month contract and Tata Steel witnessed an addition of 0.92 million units of Open Interest in the June month future contract.