Bears hit back with a vengeance as key policy rates remain unchanged

Bears struck back with a bang on Tuesday and Nifty snapped the day’s trade with a fall of over one and a half percent breaching its crucial 5,600 level for the first time since September 20, 2012 as investors went on a selling spree after the Reserve Bank of India (RBI) at its quarterly policy review, disappointed the market by maintaining a cautious stance on key policy rates while, it reduced the cash reserve ratio - the percentage of deposits banks keep with the Reserve Bank by 0.25 percent to infuse additional liquidity that will inject Rs 17,500 crore into the financial system. Moreover, investors shrugged off supportive global cues as most of the Asian equity indices ended the session in the green terrain as the Bank of Japan announced monetary easing that was marginally higher than market forecasts and cut its growth outlook. Moreover, European counters too were trading in the green at this point of time as the initial damage inflicted by a powerful storm on the US east coast looked to have been less severe than many had expected.

Earlier, the domestic benchmark started the day’s trade with decent gains recapturing its crucial 5,580 mark on the back of firm trend in Asian markets. Afterwards, market traded on a firm note as investors waited for the outcome of RBI’s credit policy meet but, post the central bank’s policy meet, the Nifty witnessed a vertical fall of about ninety points and entered into the negative terrain breaching its crucial 5,600 mark as the apex bank kept repo rate unchanged. Moreover, banks, especially state-owned ones, were further hurt after the RBI increased the amount of provisioning against restructured assets for the sector to 2.75 percent from 2 percent, as part of its monetary policy review. The sentiments also got hurt after RBI lowered economic growth estimate to 5.8 percent for 2012-13, from 6.5 percent projected earlier while, the forecast for inflation for March 2013 was raised to 7.5 percent, from 7.0 percent. Nifty continued its downfall till end as tyre stocks accelerated amidst sluggish trade, after Competition Commission of India (CCI) gave a clean chit to the tyre manufacturing companies, which were off lately being probed for alleged cartelisation. The anti-trust regulator issued order for probe on allegations of cartelisation among tyre manufacturers following a compliant. Finally, Nifty ended the session tad below its crucial 5,600 level with a cut of over a percentage point.

Meanwhile, most of the sectoral indices on the NSE hammered badly and settled in the red, CNX PSU Bank remained the major loser, losing 4.06% followed by Bank Nifty down 2.35% and CNX Realty down by 2.28% while, CNX IT and CNX Media remained the only gainers up by 0.56% and 0.27% respectively. The India Volatility Index (VIX), a gauge for market’s short term expectation of volatility, rose 0.33% and reached 15.17.

The India VIX witnessed an addition of 0.33% at 15.17 as compared to its previous close of at 15.12 on Monday.

The 50-share S&P CNX Nifty lost 67.70 points or 1.19% to settle at 5,597.90.

Nifty November 2012 futures closed at 5628.00 on Tuesday at a premium of 30.10 points over spot closing of 5,597.90, while Nifty December 2012 futures ended at 5660.80, at a premium of 62.90 points over spot closing. Nifty November futures saw an addition of 0.09 million (mn) units taking the total outstanding open interest (OI) to 17.91 mn units. The near month November 2012 derivatives contract will expire on November 29, 2012.

From the most active contracts, Tata Motors November 2012 futures were trading at a premium of 2.45 at 249.75 compared with spot closing of 247.30. The number of contracts traded was 14,039.

DLF November 2012 futures were trading at a premium of 1.40 at 200.40 compared with spot closing of 199.00. The number of contracts traded was 12,358.

BHEL November 2012 futures were at a premium of 0.25 point at 228.50 compared with spot closing of 228.25. The number of contracts traded was 15,807.

United Spirits November 2012 futures were at a premium of 7.60 point at 1151.60 compared with spot closing of 1144.00. The number of contracts traded was 24,979.

ICICI Bank November 2012 futures were at a premium of 10.00 point at 1052.25 compared with spot closing of 1042.25. The number of contracts traded was 30,684.

Among Nifty calls, 5900 SP from the November month expiry was the most active call with an addition of 1.30 million open interest.

Among Nifty puts, 5300 SP from the November month expiry was the most active put with an addition of 0.30 million open interest.

The maximum OI outstanding for Calls was at 5900 SP (5.53 mn) and that for Puts was at 5300 SP (5.20 mn).

The respective Support and Resistance levels are: Resistance 5661.9 -- Pivot Point 5625.9 -- Support 5561.9.

The Nifty Put Call Ratio (PCR) OI wise stood at 1.03 for November -month contract.

The top five scrips with highest PCR on OI were GUJ Fluoro 8.14, Tata Comm 3.00, Mphasis 2.00, Maruti 1.56 and Grasim 1.14.

Among most active underlying, IFCI witnessed an addition of 1.95 million of Open Interest in the November month futures contract followed by Unitech which witnessed contraction of 0.95 million of Open Interest in the near month contract. Meanwhile, Jaiprakash Associates witnessed contraction of 0.10 million in the November month futures. Also, RCOM witnessed an addition of 0.09 million in Open Interest in the November month contract. Finally, Tata Motors witnessed an addition of 1.12 million of Open Interest in the near month futures contract.