Bears strike back with a vengeance as Q1GDP dampens rate cut hope

After a day of relief, bears struck back with a bang on Friday and S&P CNX Nifty ended the trade on a soft note, dragged down by banking, realty and infra stocks as better-than-expected 5.5 percent growth in first quarter dashed hopes of interest rate cut. On the global front, Asian markets snapped the session on mixed note as investors waited for a speech by Fed Chairman Ben Bernanke, hoping for possible signs of new US stimulus. Though, Japanese Nikkei average fell to a four-week closing low today as resources-related shares remained under pressure on concern over slowing China growth. European stocks, after opening on cautious note, pared early losses and turned positive in the morning trade, halting a sharp three-day retreat, led by gains in Italy’s blue-chip index. Back home, concern, that the impact of deficient rainfall will reflect in the second quarter numbers and increased inflation will further delay in any rate cuts, hampered the sentiments.

Earlier, domestic market opened almost flat awaiting Q1 GDP numbers but immediately turned lower led by metal shares, which tumbled on concerns that demand would slowdown after China’s factory output rose to its slowest rate in eight months in July. China is the world’s largest metal consumer. However, market saw some recovery post first quarter GDP announcement as the numbers remained slightly better-than-expected at 5.5 percent against the street expectation of 5.3 percent, after eight successive quarters of declining growth. The manufacturing sector grew at an annual 0.2 percent during the quarter, while farm output rose 2.9 percent. But, the recovery proved short lived as investors turned cautious as services sector growth continued to slide, and the gross capital formation and private consumption numbers too remained muted. The selling got intensified led by sharp slide of power, steel and infrastructure sector stocks amid long political impasse in Parliament over the issue of coal block allocation, which made investors now believe strongly that no major reform could be in store during the monsoon session of Parliament, which ends on September 08. Market continued its downtick movement till end and breached its crucial 5,250 mark at one point of time. But, small amount of short covering helped Nifty to hold on to its crucial 5,250 level and the index ended the trade with a cut of over a percentage point.

Meanwhile, all the sectoral indices on the NSE settled in the red, CNX Metal remained the major loser, losing 1.36% followed by CNX Realty down 1.36% and CNX IT down by 1.18%. The India Volatility Index (VIX), a gauge for market’s short term expectation of volatility, surged 3.78% and reached 17.30.

The India VIX witnessed an addition of 3.78% at 17.30 as compared to its previous close of at 16.67 on Thursday.

The 50-share S&P CNX Nifty lost 56.55 points or 1.06% to settle at 5,258.50.Nifty September 2012 futures closed at 5291.65 on Friday at a premium of 33.15 points over spot closing of 5,258.50, while Nifty October 2012 futures were at 5319.25 at a premium of 60.75 points over spot closing. Nifty September futures saw contraction of 0.89 million (mn) units taking the total outstanding open interest (OI) to 19.59 mn units. The near month September 2012 derivatives contract will expire on Thursday i.e. September 27, 2012.

From the most active contracts, Tata Motors September 2012 futures were at a premium of 1.20 points at 235.40 compared with spot closing of 234.20. The number of contracts traded was 10,265.

Tata Steel September 2012 futures were trading at a premium of 3.60 points at 364.10 compared with spot closing of 360.50. The number of contracts traded was 14,413.

Reliance Industries September 2012 futures were at a premium of 7.70 point at 772.75 compared with spot closing of 765.05. The number of contracts traded was 7,598.

HDFC September 2012 futures were at a premium of 6.80 points at 738.20 compared with spot closing of 731.40. The number of contracts traded was 14,980.

ICICI Bank September 2012 futures were at a premium of 6.65 point at 909.65 compared with spot closing of 903.00. The number of contracts traded was 16,897.

Among Nifty calls, 5600 SP from the September month expiry was the most active call with an addition of 1.20 million open interest.

Among Nifty puts, 5200 SP from the September month expiry was the most active put with an addition of 2.20 million open interest.

The maximum OI outstanding for Calls was at 5600 SP (4.95 mn) and that for Puts was at 5200 SP (5.81 mn).

The respective Support and Resistance levels are: Resistance 5294.86 -- Pivot Point 5266.88--Support 5230.51.

The Nifty Put Call Ratio (PCR) OI wise stood at 1.04 for September-month contract.

The top five scrips with highest PCR on OI were Welcorp 80.00, Syndi Bank 4.00, ON Mobile 3.57, DIVIS Lab 2.00, and Maruti 1.30.

Among the most active underlying, Suzlon witnessed an addition of 8.47 million of Open Interest in the September month futures contract followed by IFCI which witnessed an addition of 3.20 million of Open Interest in the near month contract. Meanwhile, Jaiprakash Associates witnessed contraction of 0.63 million in the September month futures. Also, RCOM witnessed an addition of 0.70 million in Open Interest in the September month contract. Finally, Hindalco Industries witnessed an addition of 0.57 million of Open Interest in the near month futures contract.