Ease in food inflation helps Nifty to recoup most of losses

Recovery in the second half of trade helped Nifty to recoup most of the day’s losses to end with a marginal cut, led by Reliance Industries, after food inflation for the week ended December 3 eased to a four-year low of 4.35 percent. Earlier, market traded choppy during the first half of trade but, recovered significantly in the second half on hopes that the Reserve Bank of India (RBI) is likely to keep interest rates unchanged at its monetary policy review on Friday and firm gains in European shares also aided sentiment.

The market breached its crucial 4,750 mark in early trade on concerns over slowing industrial growth amid a weakening trend on other Asian bourses as worries over the euro zone debt crisis continued to dampen the investor sentiment. The market extended initial losses in mid morning trade and breached its psychological 4,700 mark with Nifty hitting 3-week low. Moreover, data showing selling by foreign funds recently weighed on sentiment. Foreign institutional investors (FIIs) sold shares worth Rs 140.13 crore on December 14, 2011. Sentiment remained dampened as sugar stocks fell after New York raw sugar futures for March delivery dropped 2.7 percent to 22.8 cents a pound on ICE on December 14. Bajaj Hindusthan, Balrampur Chini Mills, Shree Renuka Sugars dropped by between 2-11 percent while, Capital goods stocks tumbled on worries of new order flows will be hit adversely in a slowing economy. But, market pared some of its initial losses as ease in inflation numbers provided some relief to the sentiments. Primary articles inflation for week ended December 3 has come in at 5.48 percent versus 6.92 percent, food articles inflation at 4.35 percent versus 6.6 percent, while fuel group inflation is at 15.24 percent versus 15.53 percent. Moreover, recovery in Reliance Industries too aided some sentiment. The northward move continued in noon session recapturing its important 4,700 level as investors kept themselves busy in buying beaten down fundamentally strong stocks amid positive opening in European counterparts. Meanwhile, Pharma stocks rose on defensive buying in a weak market. Finally, market closed with a marginal cut of about 15 points a tad below its crucial 4,750 mark.

On the global front, the US markets continued their declining trend for the third consecutive day and the major indices lost over a percent while, Asian stock markets fell on Thursday, as Japanese business confidence dropped and fears grew of a global economic slowdown. However, most of the European counterparts were trading in the positive terrain at this point of time. Back home, most of the sectoral indices on the NSE settled in the red, CNX PSU Bank remained the major loser, losing 1.72% followed by CNX Auto down 1.47% and Bank Nifty down by 1.03% while, CNX Energy and CNX Pharma rose 0.90% and 0.50% respectively in the trade. The India Volatility Index (VIX), a gauge for market’s short term expectation of volatility, rose 0.06% and reached 28.81.

The India VIX witnessed an addition of 0.06% at 28.81 as compared to its previous close of at 28.79 on Wednesday.

The 50-share S&P CNX Nifty lost 16.90 points or 0.35% to settle at 4,746.35.

Nifty December 2011 futures closed at 4,765.10 at a premium of 18.75 points over spot closing of 4,746.35, while Nifty January 2011 futures were at 4,787.05 at a premium of 40.70 points over spot closing. The near month December 2011 derivatives contract expires on Thursday, December 29, 2011. Nifty December futures saw addition of 5.89% or 1.20 million (mn) units taking the total outstanding open interest (OI) to 21.74 mn units.

From the most active contract by contract value, SBI’s December 2011 futures were at a premium of 0.70 point at 1739.50 compared with spot closing of 1738.80. The number of contracts traded was 44,269.

RIL December 2011 futures were at a premium of 1.45 point at 752.30 compared with spot closing of 750.85. The number of contracts traded was 27,969.

Titan Industries December 2011 futures were at a premium of 0.45 at 164.45 compared with spot closing of 164.00. The number of contracts traded was 12,080.

Tata Motors December 2011 futures were at a premium of 0.80 points at 173.60 compared with spot closing of 172.80. The number of contracts traded was 21,713.

L&T December 2011 futures were at a premium of 5.40 point at 1138.00 compared with spot closing of 1132.60. The number of contracts traded was 16,100.

Among Nifty calls, 4800 SP from the December month expiry was the most active call with an addition of 0.37 million or 7.92%.

Among Nifty puts, 4700 SP from the December month expiry was the most active put with a addition of 0.28 million or 3.23%.

The maximum Call OI outstanding for Calls was at 4800 SP (4.36 mn) and that for Puts was at 4700 SP (9.23 mn).

The respective Support and Resistance levels are: Resistance 4785.38-- Pivot Point 4729.61-- Support 4690.58.

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 1.53 and Mphasis 1.50.

Among most active underlying, SBI witnessed an addition of 3.92% of Open Interest in the December month futures contract followed by Reliance Industries which witnessed an addition of 3.87% of Open Interest in the near month contract. Meanwhile Tata Motors witnessed an addition of 5.61% in the December month futures. Also, ICICI Bank witnessed an addition of 3.92% in Open Interest in the December month contract. Finally, Tata Steel witnessed an addition of 7.07% of Open Interest in the near month futures contract.