Nifty continues to wilt as June IIP data raises concern of rate hike

The local benchmark -- Nifty -- continued its downtrend and snapped the day’s trade with a cut of over 65 points as investors remained cautious over murky global outlook and expectations that the Reserve Bank of India (RBI) would continue to hike rates after better than expected industrial output data. Earlier, the Indian equity market made a firm start following the rally in US market, supported by unexpected drop in jobless claims and higher-than-estimated earnings. But, the index pared all its initial gains and dipped into the red as some of the Asian counterparts reversed their initial gains. Afterwards, the local benchmark traded near its neutral line till late morning as investors waited for the industrial production (IIP) data for the month of June. But, once the IIP data was released, market started its southbound journey as better-than-expected IIP data raised concerns that the RBI would hike rates by another 25 basis points in September as growth in the short-term remained sturdy. June industrial output data showed a growth of 8.8% as against 5.9% in the previous month, driven by manufacturing, capital goods, basic goods and electricity sectors. Moreover, subdued opening of European counterparts too dampened the sentiments and market touched intraday low near its crucial 5.050 level. Meanwhile, Software space continued to wilt and stocks like Infosys, Wipro and TCS ended the trade with cut of 2.5-3 percent as the worries over global economic slowdown did not augur well for the Indian IT industry which relies heavily on outsourcing work from US and European region. After that, market continued to trade in the tight range and finally, Nifty ended the choppy day of trade with a cut of over one and a half percentage point. Moreover, L&T Finance Holding, a new listing today closed with lower by about four percent from its issue price.

On the global front, the US markets witnessed wild moves and went for a massive rally overnight after witnessing a severe plunge in day ago, supported by unexpected drop in jobless claims and higher-than-estimated earnings coupled with trade deficit, which was smaller than expected while, Asian equity indices finished the day’s trade mostly in the positive terrain as sentiments remained strong in the region on the back of overnight rally on Wall Street. Moreover, all the European counterparts were trading in the red where, major indices like CAC, DAX and FTSE all were witnessing cut in the range of 1.5-3 percent at this point of time. Back home, all sectoral indices on the NSE settled in the negative territory with CNX IT losing the most, ending with a cut of over two and half a percent followed by CNX PSU Bank down by 2.17% and CNX Services down by 1.87%. The India Volatility Index (VIX), a gauge for market’s short term expectation of volatility, declined 7.11% and reached 27.02, while S&P Nifty dropped by 65.35 points or 1.27% to close at 5,072.95.

The India VIX closed down by 7.11% at 27.02 as compared to 29.09 on Thursday.

The 50-share S&P CNX Nifty lost 65.35 points or 1.27% and settled at 5,072.95.

Nifty August 2011 futures closed at 5,074.50, at a premium of 1.55 point over spot closing of 5,072.95, while Nifty September 2011 futures were at 5,088.00 at a premium of 15.05 points over spot closing. The near month August 2011 derivatives contract expires on Thursday, August 25, 2011. Nifty August futures saw addition of 7.91% or 1.79 million (mn) units, taking the total outstanding open interest (OI) to 24.47 mn units.

From the most active contract by contract value, SBI’s August 2011 futures closed at a discount of 6.00 point at 2190.00 compared with spot closing of 2196.00. The number of contracts traded was 47,232.

Tata Steel August 2011 futures were at a premium of 1.00 point at 472.00 compared with spot closing of 471.00. The number of contracts traded was 28,393.

Tata Motors August 2011 futures were at a premium of 1.90 point at 801.00 compared with spot closing of 799.10. The number of contracts traded was 28,717.

ICICI Bank August 2011 futures were at a premium of 3.50 point at 942.20 compared with spot closing of 938.70. The number of contracts traded was 21,045.

Infosys August 2011 futures were at a premium of 5.45 point at 2385.40 compared with spot closing of 2379.95. The number of contracts traded was 12,838.

Among Nifty calls, 5200 SP from the August month expiry was the most active call with an addition of 1.03 million or 22.34%.

Among Nifty puts, 5100 SP from the August month expiry was the most active put with an addition of 0.19 million or 3.80%.

The maximum Call OI outstanding for Calls was at 5100 SP (5.63 mn) and that for Puts was at 5000 SP (5.41 mn).

The respective Support and Resistance levels are: Resistance 5160.48 -- Pivot Point 5106.92 -- Support 5019.38.

The Nifty Put Call Ratio (PCR) OI wise stood at 0.95 for August -month contract.

The top five scrips with highest PCR on OI were Bombay Rayon Fashions 7.50, MRF 3.00, Bombay Dyeing and Manufacturing Company 2.50, JSW Energy 1.50 and Hotel Leela Venture 1.40.

Among most active underlying, State bank of India witnessed an addition of 18.31% of Open Interest (OI) in the August month futures contract followed by Tata Motors and Tata Steel which witnessed an addition of 6.83% and 8.68% of Open Interest (OI) in the near month contract respectively. Meanwhile Reliance witnessed an addition of 2.59% of OI in the August month futures.