Nifty drifts lower on weak corporate earnings and disappointing IIP data

Bearish trading sentiments dragged Nifty lower by a percentage point amid steady outflows of capital from the equity market in the wake of weak corporate earnings posted by Tata Steel and DLF. Moreover, the domestic markets followed sharp sell-off in Asian markets on Thursday and US equities on Wednesday. This was on the back of fears that Italy may seek a bailout after Italian bond yields hit 7.45%. However, the global cues on Friday remained firm as US equity markets saw some buying overnight after Italian yields move down on reports that ECB is buying Italian and Spanish bonds and most of the Asian counterparts ended on higher note.

Domestic index made a gap-down start and Nifty breached its crucial 5,200 mark on the back of disappointing Q2FY12 numbers reported by DLF and Tata Steel. Tata Steel’s Q2 consolidated net plunged 89.26% at Rs 212.43 crore for Q2FY12 as compared to Rs 1978.81 crore for Q2FY11 while, DLF Q2 consolidated net profit dipped 11% at Rs 372.41 crore as its net profit continued to be hit by rising interest rates, muted home sales, growing raw material costs and mounting debt. Selling intensified in mid morning trade and the index touched intraday low breaching its psychological 5,150 level as September Index of Industrial Production (IIP) dropped to 1.9% in September as against 4.1% in August. Manufacturing, basic goods, consumer goods, consumer durables goods sectors showed less growth in the September as compared to a year ago period. Afterwards, market traded in tight band till mid morning trade near its intraday low as banking stocks witnessed huge selling pressure. Deterioration in asset quality is the most worried part for banks, which forced the international rating agency Moody’s to put negative outlook in the Indian banking system on Wednesday. This was proved after increased non-performing assets in the second quarter of SBI, which lost nearly 7% on Wednesday and 3.5% today. In the final hour of trade market made recovery of about 40 points tracing firm cues from European equity indices. Moreover, a surge of over two percent in Reliance Industries too helped the markets recover while; gain of over a half percent in Auto counter also provided some strength to the index and market reclaimed its crucial 5,150 mark. Finally Nifty ended the choppy trade with a cut of over 50 points.

Globally, the US markets ended higher on Thursday, regaining some of the prior session’s losses after the government reported that jobless claims fell to a seven-month low and worries about Europe’s ability to handle its debt crisis abated while, most of the Asian stock markets ended modestly higher on Friday, rebounding a bit after the recent global selloff as investors watched for further developments in the euro-zone debt crisis. Moreover, the European counterparts were trading mostly in the green at this point of time. Back home, most of the sectoral indices on the NSE settled in the negative territory with Bank Nifty losing the most, ending with a cut of over three percent followed by CNX Realty down by 2.57%, CNX Metal down by 2.37% and CNX PSU Bank down by 2.00% while, CNX Energy and CNX Auto up by 0.86% and 0.73% in the trade. The India Volatility Index (VIX), a gauge for market’s short term expectation of volatility, surged 1.81% and reached 24.74.

The 50-share S&P CNX Nifty lost 52.20 points or 1.00% and settled at 5,168.85.

Nifty November 2011 futures closed at 5,199.50 at a premium of 30.65 points over spot closing of 5,168.85, while Nifty December 2011 futures were at 5,226.95 at a premium of 58.10 points over spot closing. The near month November 2011 derivatives contract expires on Thursday, November 24, 2011. Nifty November futures saw addition of 1.30 million (mn) units taking the total outstanding open interest (OI) to 28.87 mn units.

From the most active contract by contract value, SBI’s November 2011 futures were at a premium of 9.75 point at 1805.00 compared with spot closing of 1795.25. The number of contracts traded was 58,751.

ICICI Bank November 2011 futures were at a premium of 3.65 point at 829.65 compared with spot closing of 826.00. The number of contracts traded was 27,833.

Infosys November 2011 futures were at a premium of 19.90 point at 2794.90 compared with spot closing of 2775.00. The number of contracts traded was 15,679.

RIL November 2011 futures were at a premium of 3.20 point at 891.00 compared with spot closing of 887.80. The number of contracts traded was 23,599.

Axis Bank November 2011 futures were at a premium of 6.15 point at 1062.15 compared with spot closing of 1056.00. The number of contracts traded was 17,767.

Among Nifty calls, 5200 SP from the November month expiry was the most active call with an addition of 1.54 million or 52.69%.

Among Nifty puts, 5200 SP from the November month expiry was the most active put with a  contraction of 0.65 million or 13.72%.

The maximum Call OI outstanding for Calls was at 5300 SP (4.46 mn) and that for Puts was at 5200 SP (4.10mn).

The respective Support and Resistance levels are: Resistance 5197.55-- Pivot Point 5169.9-- Support 5141.20.

The Nifty Put Call Ratio (PCR) OI wise stood at 1.27 for November-month contract.

The top five scrips with highest PCR on OI were kotak Bank 4.67, Siemens 4.00, Syndicate Bank 3.63, Dr Reddy’s Lab 1.97, BF Utilities 1.67.

Among most active underlying, SBI witnessed an addition of 9.81% of Open Interest (OI) in the November month futures contract followed by ICICI Bank witnessed an addition of 6.87% Open Interest (OI) in the near month contract. Meanwhile Reliance witnessed an addition of 4.15% of OI in the November month futures. Also, Tata steel witnessed an addition of 3.73% of Open Interest (OI) in the November month contract followed by Tata Motors witnessed an addition of 2.43% of Open Interest (OI) in the November month contract.