Nifty resumes southward journey on S&P's rating downgrade warning

Erasing last session’s gains, S&P CNX Nifty resumed its south-bound journey as investors remained sideways ahead of second quarter earnings season, which starts from October 12, 2012 with Infosys Q2 numbers. The key benchmark snapped the day’s trade near its intraday low with a cut of about a percentage point as market-men offloaded their positions after global ratings agency Standard & Poor’s (S&P) warned of a significant chance of downgrading India’s debt rating in the future. It also said that it sees India’s FY13 fiscal deficit at 6 percent of GDP as against the government’s projection of 5.1 percent. The sentiments also remain dampened as Indian rupee depreciated to 53.15 against the dollar in the afternoon trade as demand for the American currency by importers persisted.

Investors also fretted about the world’s economic prospects after the International Monetary Fund (IMF) downgraded its global growth estimates for 2012 and 2013. Asian markets fell mostly on Wednesday with Japanese Nikkei ending with sharp losses of about two percent by the strengthening of yen, with selling fuelled by report that the country's leading carmakers sales in China declined in September because of diplomatic squabble between Tokyo and Beijing. European market too dented the market mood amid concerns about the outlook for global growth, while Spain’s bond yields crept higher as the country continues to resist a bailout.

Back home, market started the session with a cut of over half a percent following weakness in Asian counterparts. The traders also remained cautious on concern of IMF revising India’s growth forecast down to 4.9 percent in 2012, along with the global downgrade. The market lost some more ground in the late morning trade as sentiment got impacted by S&P’s remarks that India still faces a one-in-three chance of a credit rating downgrade within the next 24 months despite a new drive for economic reform. Meanwhile, SIAM slashed the FY13 car sales growth forecast from its previous estimate of 9-11 percent growth, citing high interest rates and slowing economic growth also dented the investors’ mood. Afterwards, selling got intensified and the index extended its losses registering intraday lows during the late trade below its crucial 5,650 mark triggered by weak opening of European markets. Meanwhile, realty counters spread the major blow to the market tumbling over four and half a percent after Arvind Kejriwal released more evidence of links between DLF, Haryana government and Robert Vadra. The social activist-turned-politician has also named two other realty players - Indiabulls and BPTP - for having close links with politicians. Finally, Nifty ended the session near its intraday low with a cut of over fifty points but, managed to re-claim 5,650 level.

Meanwhile, all the sectoral indices on the NSE settled in the red, CNX Realty remained the major loser, down 4.84 followed by CNX Media down 2.65%, CNX PSU Bank down 1.83%, CNX Infra down 1.53% and CNX Finance down by 1.38%. The India Volatility Index (VIX), a gauge for market’s short term expectation of volatility, rose 0.18% and reached 16.83.

The India VIX witnessed an addition of 0.18% at 16.83 as compared to its previous close of at 16.80 on Tuesday. The 50-share S&P CNX Nifty gained 52.45 points or 0.92% to settle at 5,652.15.

Nifty October 2012 futures closed at 5672.45 on Wednesday at a premium of 20.30 points over spot closing of 5,652.15, while Nifty November 2012 futures were at 5707.10 at a premium of 54.95 points over spot closing. Nifty October futures saw contraction of 0.69 million (mn) units taking the total outstanding open interest (OI) to 25.60 mn units. The near month October 2012 derivatives contract will expire on October 25, 2012.

From the most active contracts, JP Associates October 2012 futures were trading at a discount of 1.25 at 86.50 compared with spot closing of 87.75. The number of contracts traded was 14,812.

Tata Motors October 2012 futures were trading at a premium of 0.80 at 268.60 compared with spot closing of 267.80. The number of contracts traded was 11,371.

DLF October 2012 futures were at a premium of 2.20 point at 214.30 compared with spot closing of 212.10. The number of contracts traded was 14,803.

IndiaBulls Real Estate October 2012 futures were at a premium of 0.75 point at 60.80 compared with spot closing of 60.05. The number of contracts traded was 11,572.

Tata Steel October 2012 futures were at a premium of 2.55 point at 413.55 compared with spot closing of 411.00. The number of contracts traded was 22,248.

Among Nifty calls, 5900 SP from the October month expiry was the most active call with an addition of 0.82 million open interest.

Among Nifty puts, 5500 SP from the October month expiry was the most active put with an addition of 0.51 million open interest.

The maximum OI outstanding for Calls was at 5900 SP (7.73 mn) and that for Puts was at 5500 SP (6.54 mn).

The respective Support and Resistance levels are: Resistance 5676.75 -- Pivot Point 5661.9 --Support 5637.3.

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

The top five scrips with highest PCR on OI were ITC 1.77, PNB 1.43, Union Bank 1.31, Infosys 1.09 and Maruti 1.09.

Among the most active underlying, IFCI, witnessed contraction of 0.30 million of Open Interest in the October month futures contract followed by JP Associates, which witnessed an addition  of 7.06 million of Open Interest in the near month contract. Meanwhile, RCOM witnessed contraction of 0.47 million in the October month futures. Also, Unitech witnessed contraction of 0.44 million in Open Interest in the October month contract. Finally, HDIL witnessed contraction of 4.04 million of Open Interest in the near month futures contract.