Intense selling in late trade drags Nifty below 5,050 level

Intense selling witnessed at the end of the day, dragged Nifty into red and the local benchmark ended the choppy day of trade with a cut of over half a percent. Moreover, global sentiments remained subdued ahead of the meeting between French President Nicolas Sarkozy and German Chancellor Angela Merkel in Paris while, concerns of possible rate hike by the Reserve Bank of India (RBI) on the domestic front too took bears on the front foot. Earlier, the Indian equity market made a firm start and regained its 5,100 mark triggered by positive global cues as Wall Street climbed up for the third straight session overnight. But soon after that, the index started moving downwards as most of the Asian markets reversed their initial gains. Market continued to decline despite ease in India’s monthly inflation numbers as marketmen speculated that the reading may be insufficient for the RBI to pause its liquidity tightening measures. India’s inflation numbers for the month of July slowed to 9.22% against 9.44% in June despite the spillover of the domestic fuel price hike in May. Furthermore, somber opening in European counterparts too dampened the market sentiments and market breached its crucial 5,100 level in early noon trade. In addition, sentiments in Europe were also undermined after the release of German GDP numbers for the second quarter which indicated that growth in Europe's largest economy had slowed sharply as it rose merely 0.1% in the second quarter from the first quarter and by 2.7% in annual terms. The domestic index lost its track in last leg of trade and breached its psychological 5050 mark witnessing a steep cut of 50-60 points as institutional investors turned sellers in the last leg of the trade. Moreover, carnage seen in CNX Nifty Junior and CNX mid cap stocks, led by fund based selling in infrastructure stocks like, IVRCL, JP Associates, Unitech and DLF which got clobbered out of shape and ended with a huge cut of 5-10 percent in. However, in the final minutes of trade the index pared some of its losses as fresh buying was witnessed in frontline stocks like Bharti Airtel and TCS. Finally, Nifty ended the choppy day of trade with a cut of about 40 points.

On the global front, the US market closed higher overnight for a third session in a row, amassing gain of more than 7%, making it the longest winning run since July, as traders were optimistic that European debt problem can soon be resolved while, most of the Asian equity indices reversed their initial gains and snapped the day’s trade in the red on Tuesday. Moreover, most of the European counterparts were trading in the red at this point of time. Back home, most of the sectoral indices on the NSE settled in the negative territory with CNX Realty losing the most and ending with a cut of over five percent followed by CNX MNC, down 1.43% and Bank Nifty down 1.24% while, CNX FMCG and CNX IT up by 0.99% and 0.49% respectively, remained the only gainers in the trade. The India Volatility Index (VIX), a gauge for market’s short term expectation of volatility, fell 2.07% and reached 26.46, while S&P Nifty declined by 37.15 points or 0.73% to close at 5,035.80.

The India VIX closed down by 2.07% at 26.46 as compared to 27.02 on Friday.

The 50-share S&P CNX Nifty lost 37.15 points or 0.73% and settled at 5,035.80.

Nifty August 2011 futures closed at 5,040.00, at a premium of 4.20 point over spot closing of 5,035.80, while Nifty September 2011 futures were at 5,050.60 at a premium of 14.80 points over spot closing. The near month August 2011 derivatives contract expires on Thursday, August 25, 2011. Nifty August futures saw addition of 13.15% or 3.11 million (mn) units, taking the total outstanding open interest (OI) to 26.79 mn units.

From the most active contract by contract value, SBI’s August 2011 futures closed at a discount of 5.00 point at 2201.00 compared with spot closing of 2206.00. The number of contracts traded was 42,455.

DLF August 2011 futures were at a discount of 4.60 point at 182.50 compared with spot closing of 187.10. The number of contracts traded was 25,246.

ICICI Bank August 2011 futures were at a discount of 0.10 point at 939.90 compared with spot closing of 940.00. The number of contracts traded was 16,656.

Tata Steel August 2011 futures were at a discount of 2.00 point at 467.90 compared with spot closing of 469.90. The number of contracts traded was 15,173.

Bharti Airtel August 2011 futures were at a discount of 2.25 point at 394.75 compared with spot closing of 397.00. The number of contracts traded was 8,572.

Among Nifty calls, 5100 SP from the August month expiry was the most active call with an addition of 0.70 million or 18.28%.

Among Nifty puts, 5100 SP from the August month expiry was the most active put with an addition of 0.41 million or 8.47%.

The maximum Call OI outstanding for Calls was at 5100 SP (4.56 mn) and that for Puts was at 5000 SP (5.28 mn).

The respective Support and Resistance levels are: Resistance 5106.86-- Pivot Point 5061.13 -- Support 4990.06.

The Nifty Put Call Ratio (PCR) OI wise stood at 0.96 for August -month contract.

The top five scrips with highest PCR on OI were Bombay Dyeing and Manufacturing Company 8.33,Bombay Rayon Fashions 8.00, Zee Entertainment Enterprise 4.40, MRF 4.00 and Max India 2.00

Among most active underlying, State Bank of India witnessed an addition of 6.26% of Open Interest (OI) in the August month futures contract followed by DLF and Reliance which witnessed an addition of 13.02% and 0.45% of Open Interest (OI) in the near month contract respectively. Meanwhile Tata Steel witnessed an addition of 4.59% of OI in the August month futures.