Nifty resumes southbound journey as inflation disappoints street

The domestic index S&P CNX Nifty resumed its southbound journey after a day halt and snapped the day’s trade with a cut of about 0.80 percent, amid a volatile trading session on Wednesday, as higher-than-expected November inflation stoked fears of rate hike by the central bank. Moreover, weakness in European counterparts also hurt the sentiment.

Earlier, the Indian equity market made a negative start on fresh selling triggered by weak global cues. Afterwards, market maintained volatile movements, with Nifty swinging between negative and positive zone till mid morning trade. The index gained strength in late morning trade and hit its intraday high after credit rating agency Moody’s Investors Service said that the sharp decline in the value of the Indian rupee against the dollar is generally exerting only a moderate impact on rated Indian companies. The sentiment was also improved after comments from chief economic adviser Kaushik Basu bolstered expectations that inflation will ease further in the coming months. But, the index turned negative as investors reacted negatively to the higher than expected inflation number. The WPI inflation for the month of November came in at 9.11 percent compared to 9.73 percent in October. The market was looking at an inflation of below 9 per cent for November. Meanwhile, metal stocks like Tata Steel, Coal India, Hindalco, JSW Steel and Sterlite have fallen between 1-3 percent because demand of steel has fallen below GDP growth for the first time. In the mid noon trade, market regained some strength supported by surge in index heavyweight Reliance Industries. Moreover, Media stocks too supported the sentiments after the Lok Sabha passed a bill aimed at digitisation of cable TV with the government saying that it will not harm cable operators as it would provide only those channels a person wanted to watch and at affordable cost. But, in the final hour of trade, market took ugly turn and lost about a percentage point following weak European counterparts. Finally, Nifty snapped the volatile day of trade with a cut of about 40 points.

On the global front, the US markets extended their losing streak for yet another day overnight while, Asian markets fell on Wednesday with traders unconvinced by Europe's deal to save its currency and downbeat over the US Fed's lack of fresh economy-boosting plans. Moreover, most of the European counterparts were trading in the negative terrain at this point of time. Back home, most of the sectoral indices on the NSE settled in the red, CNX Realty remained the major loser, losing 2.28% followed by CNX PSE down 2.21% and CNX Metal down by 2.14% while, CNX Media and CNX FMCG rose 0.82% and 0.29% respectively in the trade. The India Volatility Index (VIX), a gauge for market’s short term expectation of volatility, surges 2.41% and reached 28.79.

The India VIX witnessed an addition of 2.41% at 28.79 as compared to its previous close of at 28.11 on Tuesday.

The 50-share S&P CNX Nifty lost 37.35 points or 0.78% to settle at 4,763.25 .

Nifty December 2011 futures closed at 4,764.00 at a premium of 0.75 points over spot closing of 4,763.25, while Nifty January 2011 futures were at 4,786.50 at a premium of 23.25 points over spot closing. The near month December 2011 derivatives contract expires on Thursday, December 29, 2011. Nifty December futures saw addition of 2.02 million (mn) units taking the total outstanding open interest (OI) to 21.99 mn units.

From the most active contract by contract value, SBI's December 2011 futures were at a discount of 11.75 point at 1770.25 compared with spot closing of 1782.00. The number of contracts traded was 48,108.

ICICI Bank December 2011 futures were flat at 706.00 compared with spot closing of 706.00. The number of contracts traded was 31,685.

L&T December 2011 futures were at a premium of 0.95 at 1162.00 compared with spot closing of 1161.05. The number of contracts traded was 15,449.

RIL December 2011 futures were at a premium of 1.90 points at 741.60 compared with spot closing of 739.70. The number of contracts traded was 21,122.

Infosys December 2011 futures were at a premium of 1.60 point at 2748.50 compared with spot closing of 2746.90. The number of contracts traded was 11,451.

Among Nifty calls, 4900 SP from the December month expiry was the most active call with an addition of 0.63 million or 13.22%.

Among Nifty puts, 4700 SP from the December month expiry was the most active put with a addition of 0.43 million or 5.04%.

The maximum Call OI outstanding for Calls was at 4900 SP (5.46 mn) and that for Puts was at 4700 SP (9.07 mn).

The respective Support and Resistance levels are: Resistance 4818.40 -- Pivot Point 4784.4-- Support 4729.25.

The Nifty Put Call Ratio (PCR) OI wise stood at 1.02 for December -month contract.

The top five scrips with highest PCR on OI were Patni 11.81, Voltas 6.00, Bombay Rayon Fashions 4.00, Cipla 1.60 and Mphasis 1.50.

Among most active underlying, SBI witnessed an addition of 3.69% of Open Interest in the December month futures contract followed by ICICI Bank which witnessed an addition of 0.86% of Open Interest in the near month contract. Meanwhile Reliance Industries witnessed a contraction of 3.28% in the December month futures. Also, Tata Steel witnessed an addition of 5.50% in Open Interest in the December month contract. Finally, L&T witnessed an addition of 3.67% of Open Interest in the near month futures contract.