Nifty ends flat ahead of July F&O expiry

An Indian equity benchmark Nifty ended the session flat with a negative bias on Wednesday, ahead of   Futures and Options (F&O) derivative expiry for July series due tomorrow. After a cautious start, the index remained volatile throughout the session, following weak global cues.  Domestic sentiments got hit with Minister of State for Agriculture Parshottam Rupala’s statement that Union Government, at present, is not considering any loan waiver Scheme for farmers, as such, waivers may impact the credit culture of a State by incentivising the defaulters, even if they are in a position to repay the loan, and thus, create/amplify the moral hazard by discouraging those borrowers who have been regular in repaying their loans. The market participants also got worried with a report that the International Monetary Fund (IMF) has cautioned India it should not rely on global financial markets to finance its current account deficit (CAD) when it goes above 3% of gross domestic product (GDP). The Fund basically advised India to rely more on stable sources of foreign inflow - foreign direct investment (FDI).

However, downside remained capped on the back of a private poll stating that India will remain the fastest-growing major economy this year supported by increased government spending ahead of next year’s general election, but rising oil prices pose the biggest downside risk. Some support also came with Prime Minister Narendra Modi’s statement that India is emerging as a global manufacturing and start-up hub and many of the 'Made-in-India' products, including cars and smart phones, are exported to nations from whom the country used to import. Meanwhile, Chairman of the PHD Chamber of Commerce and Industry, Anil Khaitan said that India needs to focus on exports and regulatory reform to propel the Indian economy forward.

Traders were seen piling up positions in PSU Bank, Metal and FIN Service, while selling was witnessed in Realty, Media and Pharma. The top gainers from the F&O segment were Multi Commodity Exchange of India, Tata Elxsi and NMDC. On the other hand, the top losers were PC Jeweller, Hexaware Technologies and Hindustan Construction Company. In the index option segment, maximum OI continues to be seen in the 10,800-11,200 calls and 10,700-11,000 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 1.18% and reached 12.32. The 50-share Nifty was down by 2.30 points or 0.02% to settle at 11,132.00.

Nifty July 2018 futures closed at 11136.40 on Wednesday, at a premium of 4.40 points over spot closing of 11132.00, while Nifty August 2018 futures ended at 11162.95, at a premium of 30.95 points over spot closing. Nifty July futures saw a contraction of 4.48 million (mn) units, taking the total outstanding open interest (OI) to 14.19 mn units. The near month derivatives contract will expire on July 26, 2018.

From the most active contracts, Jubilant Foodworks July 2018 futures traded at a premium of 3.75 points at 1398.05 compared with spot closing of 1394.30. The numbers of contracts traded were 36,967.

Tata Motors July 2018 futures traded at a premium of 0.25 points at 257.70 compared with spot closing of 257.45. The numbers of contracts traded were 23,985.

Tata Steel July 2018 futures traded at a premium of 0.20 points at 535.30 compared with spot closing of 535.10. The numbers of contracts traded were 23,642.

Infosys July 2018 futures traded at a discount of 0.25 points at 1380.90 compared with spot closing of 1381.15. The numbers of contracts traded were 20,856.

Reliance Industries July 2018 futures traded at a premium of 3.60 points at 1116.25 compared with spot closing of 1112.65. The numbers of contracts traded were 20,243.

Among Nifty calls, 11200 SP from the July month expiry was the most active call with a contraction of 0.002 million open interests. Among Nifty puts, 11000 SP from the July month expiry was the most active put with an contraction of 0.11 million open interests. The maximum OI outstanding for Calls was at 11,200 SP (3.21 mn) and that for Puts was at 11,000 SP (4.98 mn). The respective Support and Resistance levels of Nifty are: Resistance 11,155.02 -- Pivot Point 11,134.13 -- Support -- 11,111.12.

The Nifty Put Call Ratio (PCR) finally stood at 1.97 for July month contract. The top five scrips with highest PCR on OI were Repco Home Finance (3.78), Adani Power (2.88), Just Dail (1.86) Engineers India (1.74) and Icici Prudential Life Insurance Comp (1.60).

Among most active underlying, Reliance Industries witnessed a contraction of 8.37 million units of Open Interest in the July month futures contract, followed by Jubilant Foodworks witnessing a contraction of 1.22 million units of Open Interest in the July month contract, Infosys witnessed a contraction of 6.54 million units of Open Interest in the July month contract, Tata Elxsi witnessed a contraction of 0.30 million units of Open Interest in the July month contract and Bajaj Finance witnessed a contraction of 1.32 million units of Open Interest in the July month future contract.