US debt rating downgrade drags Nifty below 5,150 mark

Nifty continued its south-bound journey for the fifth consecutive day and snapped the session below its crucial 5,150 mark on Monday on concern over US debt rating downgrade while, European debt woes too dampened the sentiments. However, market recovered partially in mid noon trades but, clobbered out of shape in late trade and ended the session with a cut of over 90 points. Earlier, the Indian equity markets made a gap down start and got butchered in the early trade as investors remained concerned over US economy as well as the global outlook after ratings agency Standard & Poor’s downgraded the US debt rating to AA+ with a negative outlook on Friday. Market breached its crucial 5,100 mark in early trade and touched its intraday low near its crucial 5,050 level. But, the benchmark got support at that level and started paring its initial losses. Afterwards, the local index continued cutting its losses as European market reversed its initial decline, buoyed by a European Central Bank (ECB) purchase of Italian and Spanish bonds. The sentiments also got some support after Indian finance minister reinforced confidence by stating that fundamentals of Indian economy are intact and stating that India is better placed to overcome global challenges and then the index touched its intraday high near its psychological 5,200 level. Moreover, fertilizers stocks led the sentiments higher as stocks like Nagarjuna Fertilizers & Chemicals, Rashtriya Chemicals & Fertilizers, National Fertilizers and Chambal Fertilisers & Chemicals all edged higher after the government moved a step closer to decontrolling urea prices and bringing it under the nutrient based policy. But, subdued opening in US futures markets and profit booking in selective stocks on domestic front again dampened the sentiments and the index again started falling down. Meanwhile, IT space languished throughout the day’s trade amid fears of a worsening condition in Europe and US may adversely impact their earnings. Finally, Nifty ended the volatile day of trade with a cut of about 1.80 percentage points below its crucial 5,150 mark as sentiment weighed down in late trade.

On the global front, all the Asian counterparts witnessed bloodbath and snapped the day’s trade with a huge cut after last week’s historic downgrade of the United States’ credit rating. Lingering concerns about the sovereign debt crisis in the euro-zone also weighed on the sentiment. Moreover, all the European counterparts were bleeding badly, major indices like CAC and DAX were trading with a cut of over two and half a percent at this point of time. Back home, all the sectoral indices on the NSE were hammered badly and settled in the negative territory with CNX Realty losing the most, ending with a cut of over four and a half percent followed by CNX IT down by 4.39% and CNX Service down by 2.32% on NSE sectoral space. The India Volatility Index (VIX), a gauge for market’s short term expectation of volatility, soared 15.58% and reached 28.78, while S&P Nifty dropped by 92.75 points or 1.78% to close at 5,118.50.

The India VIX closed up by 15.58% at 28.78 on Monday as compared to 24.90 on Friday The 50-share S&P CNX Nifty tumbled 92.75 points or 1.78% and settled at 5118.50.

Nifty August 2011 futures closed at 5,133.25, at a premium of 14.75 point over spot closing of 5,118.50, while Nifty September 2011 futures were at 5,146.00 at a premium of 27.50 points over spot closing. The near month August 2011 derivatives contract expires on Thursday, August 25, 2011. Nifty August futures saw addition of 11.43% or 2.65 million (mn) units, taking the total outstanding open interest (OI) to 25.83 mn units.

From the most active contract by contract value, L&T August 2011 futures closed at a discount of 5.50 points at 1621.00 compared with spot closing of 1626.50. The number of contracts traded was 23,453.

SBI’s August 2011 futures were at a premium of 10.40 point at 2226.50 compared with spot closing of 2216.10. The number of contracts traded was 26,769.

RIL August 2011 futures were at a premium of 3.75 at 784.00 compared with spot closing of 780.25. The number of contracts traded was 27,955.

ICICI Bank August 2011 futures were at a premium of 1.20 at 955.35 compared with spot closing of 954.15. The number of contracts traded was 22,181.

DLF August 2011 futures were at a premium of 0.70 at 196.00 compared with spot closing of 195.30. The number of contracts traded was 22,553.

Among Nifty calls, 5200 SP from the August month expiry was the most active call with addition of 0.90 million or 21.48%.

Among Nifty puts, 5000 SP from the August month expiry was the most active put with an addition of 0.20 million or 2.88%.

The maximum Call OI outstanding for Calls was at 5200 SP (5.09 mn) and that for Puts was at 5000 SP (7.20 mn).

The respective Support and Resistance levels are: Resistance 5197.11-- Pivot Point 5125.58-- Support 5046.96.

The Nifty Put Call Ratio (PCR) OI wise stood at 0.85 for August -month contract.

The top five scrips with highest PCR on OI were MRF 4.00, Tata Chemicals 3.00, Sun Pharmaceuticals Industries 3.00, ACC 1.39, GMDC 1.00.

Among most active underlying, State bank of India witnessed an addition of 4.03% of Open Interest (OI) in the August month futures contract followed by Reliance which witnessed a decline of 2.11% of Open Interest (OI) in the near month contract. Meanwhile ICICI Bank witnessed an addition of 6.54% of OI in the August month futures. Lastly, Infosys witnessed an addition of 3.82% of Open Interest (OI) in the August month futures contract