Nifty makes smart pull back after Fed pledge to keep rates low

After continued six session fall, the local benchmark -- Nifty -- witnessed a smart pull back and snapped the day’s trade higher by over one and half a percent, regaining its crucial 5,150 mark after the US Federal Reserve pledged to keep interest rates near zero through the middle of 2013. Earlier, the market made a gap up start tracking positive cues from global indices and surpassed its crucial 5,150 level in the initial trade. Afterwards, the index traded in the tight range near its crucial 5,150 level till mid noon as sustained buying witnessed in all the sectoral indices. Fertilizer stocks too helped the sentiments as India eyed stake in Belaruskali - one of the world's largest producers of potash. The deal will help India to ensure long-term supply of fertilizers to cope with increasing demand. Moreover, the GoM has approved up to 10% price hike for urea in the first year of the policy, which would help urea makers have better control over profitability. The new proposals are yet to be approved by the Cabinet. Shares of fertilizer stocks like RCF, Fertilizers & Chemicals Travancore, Chambal fertilizer and National Fertilizer soared by 8.5-13 percent. Moreover, Mahindra Satyam snapped the trade with a gain of over 10 percent after the software exporter reported its quarterly net profit numbers which rose more than double, on higher client spend and margin expansion. In the mid noon trade, selling pressure in oil & gas stocks took the markets off the day’s high and benchmark slipped about 25-30 points. Moreover, a sharp decline in European markets after a firm start and falling Dow future too have dampened sentiments in India. But, the domestic index regained its strength in the late trade following the recovery in European market and finally, Nifty snapped the day’s trade regaining its psychological 5,150 level with a gain of about 90 points.

On the global front, the US markets made a smart bounce back overnight with major indices surging by 4-5 percent after the Federal Reserve pledged to keep its key interest rate at its record low of nearly zero through the middle of 2013 while, Asian markets finally got sigh of relief as pull back rally witnessed in all the Asian equity indices barring Straits Times on Wednesday. Moreover, all the European counterparts were trading in the positive terrain where CAC, DAX and FTSE were trading with a gain in the range of 0.50-1.50 percent at this point of time. Back home, broad based buying supported all the sectoral indices on the NSE to settle in the positive territory with CNX Realty surging the most and ending with a gain of over three and a half percent followed by Bank Nifty up 2.62% and CNX IT up 2.50% in the trade. The India Volatility Index (VIX), a gauge for market’s short term expectation of volatility, declined 17% and reached 28.95, while S&P Nifty moved higher by 88.15 points or 1.74% to close at 5,161.00.

The India VIX closed down by 17.00% at 28.95 on Wednesday as compared to 34.88 on Tuesday.

The 50-share S&P CNX Nifty added 88.15 points or 1.74% and settled at 5161.00.

Nifty August 2011 futures closed at 5,148.00, at a discount of 13.00 point over spot closing of 5,161.00, while Nifty September 2011 futures were at 5,157.85 at a discount of 3.15 points over spot closing. The near month August 2011 derivatives contract expires on Thursday, August 25, 2011. Nifty August futures saw addition of 9.89% or 2.34 million (mn) units, taking the total outstanding open interest (OI) to 26.03 mn units.

From the most active contract by contract value, SBI’s August 2011 futures closed at a premium of 3.10 points at 2279.10 compared with spot closing of 2276.00. The number of contracts traded was 20,735.

ICICI Bank August 2011 futures were at a premium of 0.50 point at 965.10 compared with spot closing of 964.60. The number of contracts traded was 18,767.

RIL August 2011 futures were at a premium of 0.60 at 771.00 compared with spot closing of 770.40. The number of contracts traded was 23,065.

Infosys August 2011 futures were at a premium of 2.15 at 2457.15 compared with spot closing of 2455.00. The number of contracts traded was 13,859.

Tata Steel August 2011 futures were at a premium of 0.45 at 484.25 compared with spot closing of 483.80. The number of contracts traded was 15,963.

Among Nifty calls, 5200 SP from the August month expiry was the most active call with decline of 0.43 million or 9.37%.

Among Nifty puts, 5000 SP from the August month expiry was the most active put with an addition of 1.09 million or 16.30%.

The maximum Call OI outstanding for Calls was at 5200 SP (5.03 mn) and that for Puts was at 5000 SP (7.85 mn).

The respective Support and Resistance levels are: Resistance 5198.18 -- Pivot Point 5160.76 -- Support 5123.58.

The Nifty Put Call Ratio (PCR) OI wise stood at 2.80 for August -month contract.

The top five scrips with highest PCR on OI were Bombay Rayon Fashions 7.00, MRF 4.00, Sun Pharmaceuticals Industries 1.48, Maruti Suzuki 1.29 and JSW Energy 1.25.

Among most active underlying, Reliance Industries witnessed a decline of 0.23% of Open Interest (OI) in the August month futures contract followed by State bank of India which witnessed decline of 0.95% of Open Interest (OI) in the near month contract. Meanwhile Tata Motors witnessed an addition of 0.50% of OI in the August month futures.