Nifty in tailspin; closes at 2-month closing low

The local equity benchmark Nifty ended Monday’s session in red, extending losing streak for the fifth straight session, largely pulled down by weak realty and financial services stocks. The index made a cautious start, amid industry chamber CII’s report that over 40 per cent of Indian firms expect the Reserve Bank of India (RBI) will go in for another interest rate hike in the current fiscal. In the current survey, about 42 per cent of the respondents felt that the RBI will engage in further interest rates hikes in 2018-19 as compared to the previous survey where a majority of the respondents anticipated a cut or no change in policy rates in 2018-19. Markets extended losses despite Finance Minister Arun Jaitley’s statement that the government will take all the necessary steps to ensure that adequate liquidity is maintained/provided to non-banking financial companies (NBFCs), mutual funds (MFs) and small and medium enterprises (SMEs).

In the second half of the session, the Nifty plunged further to close near intraday low point, after Moody's Investors Service’s latest report showed that the government’s measures to boost capital inflow in to the country is unlikely to reverse the rupee depreciation. Moody's also noted that steps to reduce non-essential goods import may provide support to contain the imports bill, but will likely have a lagged effect. The market participants paid no heed towards a report that Fitch Ratings raised India’s growth forecast for the current fiscal to 7.8 percent, from 7.4 percent projected earlier. In its Global Economic Outlook, Fitch, however, flagged tightening of financial conditions, rising oil bill and weak bank balance sheets as headwinds to growth.

All the sectoral indices ended in red on the NSE expect IT. The top gainers from the F&O segment were Infibeam Avenues, Dewan Housing Finance Corporation and Torrent Power. On the other hand, the top losers were Can Fin Homes, IRB Infrastructure Developers and Vodafone Idea. In the index option segment, maximum OI continues to be seen in the 11,300-11,800 calls and 10,900 -11,200 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 12.18% and reached 17.42. The 50-share Nifty was down by 175.70 points or 1.58% to settle at 10,967.40.

Nifty September 2018 futures closed at 10997.95 on Monday, at a premium of 30.55 points over spot closing of 10,967.40, while Nifty October 2018 futures ended at 11041.50, at a premium of 74.10 points over spot closing. Nifty September futures saw a contraction of 2.75 million (mn) units, taking the total outstanding open interest (OI) to 20.63 mn units. The near month derivatives contract will expire on September 27, 2018.

From the most active contracts, Yes Bank September 2018 futures traded at a premium of 1.15 points at 226.90 compared with spot closing of 225.75. The numbers of contracts traded were 60,403.

Dewan Housing Finance Corporation September 2018 futures traded at a premium of 0.90 points at 393.05 compared with spot closing of 392.15. The numbers of contracts traded were 44,746.

Indiabulls Housing Finance September 2018 futures traded at a discount of 1.50 points at 983.50 compared with spot closing of 985.00. The numbers of contracts traded were 38,501.

Bajaj Finance September 2018 futures traded at a premium of 29.15 points at 2264.15 compared with spot closing of 2235.00. The numbers of contracts traded were 32,713.

Tata Steel September 2018 futures traded at a discount of 0.20 points at 607.25 compared with spot closing of 607.45. The numbers of contracts traded were 29,775.

Among Nifty calls, 11200 SP from the September month expiry was the most active call with an addition of 0.94 million open interests. Among Nifty puts, 11000 SP from the September month expiry was the most active put with a contraction of 0.44 million open interests. The maximum OI outstanding for Calls was at 11,500 SP (3.06mn) and that for Puts was at 11,000 SP (3.40mn). The respective Support and Resistance levels of Nifty are: Resistance 11,115.50 ---- Pivot Point 11,029.55 --- Support --- 10,888.95.

The Nifty Put Call Ratio (PCR) finally stood at 0.84 for September month contract. The top five scrips with highest PCR on OI were Godfrey Phillips India (1.20), TCS (1.16), Chennai Petroleum Corporation (1.10), Repco Home Finance (0.97) and Bharat Petroleum Corporation (0.91).

Among most active underlying, Reliance Industries witnessed a contraction of 5.57 million units of Open Interest in the September month futures contract, followed by Yes Bank witnessing a contraction of 11.32 million units of Open Interest in the September month contract, Bajaj Finance witnessed a contraction of 0.72 million units of Open Interest in the September month contract, Tata Consultancy Services witnessed a contraction of 0.55 million units of Open Interest in the September month contract and Maruti Suzuki India witnessed a contraction of 0.38 million units of Open Interest in the September month future contract.