RBI policy fails to boost sentiment; Nifty tanks 2%

Bears hammered bulls in final hour of trade and took full control over the market dragging Nifty below its crucial 4,700 mark. Earlier the market traded near its crucial 4,800 mark ahead of Reserve Bank of India (RBI) policy announcement but, the index plunged viciously from their session highs in the late afternoon trade with the NSE Nifty sliding to its new low for the year 2011 despite the RBI leaving all policy rates and ratios unchanged to support a slowing Indian economy. Globally, the US economic data and Spanish bond auction improved sentiments. Back home, all the sectoral indices on the NSE ended in the red with realty and banks led the fall.

The Indian equity market extended its gains after a flat start following sharp appreciation in the rupee. Global cues too remained supportive and the index recaptured its crucial 4,800 mark ahead of RBI policy announcement. In the mid noon trade, market touched intraday high following positive opening in European counterparts but, unable to hold that level and took a brutal turn witnessing massive selling pressure as institutional investors resumed offloading positions after the Reserve Bank of India (RBI) policy review failed to boost sentiments. The RBI in its much awaited meet kept the key interest rates unchanged. Repo rate is at 8.5 per cent, reverse repo rate continues to be 7.5 per cent and CRR unchanged at 6 per cent. However, the central bank indicated that further rate hikes may not happen if current moderating trend in inflation persists. The monetary tightening cycle may come to an end as growth decelerates. Reacting to RBI’s move, Finance Minister Pranab Mukherjee said the decision would improve business sentiment and recover the growth momentum. The investors shrugged off the Finance Minister’s comments and continued offloading their positions. Finally, Nifty snapped the session with a cut of 2 percentage point due to cruel turn-around in second half.

On the global front, the US markets ended modestly higher overnight, halting a three-day slide while, Asian stocks rose on Friday amid improving US jobs and manufacturing data and the expected approval in Italy of an austerity plan intended to get the country’s finances under control. However, European counterparts were trading mixed at this point of time. Back home, all the sectoral indices on the NSE hammered badly and settled in the red, CNX Realty remained the major loser, losing 3.45% followed by Bank Nifty down 3.24% and CNX PSU Bank down by 3.06% in the trade. The India Volatility Index (VIX), a gauge for market’s short term expectation of volatility, surges 3.05% and reached 29.69.

The India VIX witnessed an addition of 0.88% at 29.69 as compared to its previous close of at 28.81 on Thursday.

The 50-share S&P CNX Nifty lost 94.79 points or 2.00% to settle at 4,651.60.

Nifty December 2011 futures closed at 4,625.85 at a discount of 25.75 points over spot closing of 4,651.60, while Nifty January 2011 futures were at 4,646.05 at a discount of 5.55 points over spot closing. The near month December 2011 derivatives contract expires on Thursday, December 29, 2011. Nifty December futures saw addition of 17.06% or 3.50 million (mn) units taking the total outstanding open interest (OI) to 24.05 mn units.

From the most active contract by contract value, SBI’s December 2011 futures were at a discount of 8.20 point at 1660.05 compared with spot closing of 1668.25. The number of contracts traded was 57,784.

ICICI Bank December 2011 futures were at a discount of 4.60 point at 668.40 compared with spot closing of 673.00. The number of contracts traded was 48,514.

Axis Bank December 2011 futures were at a discount of 23.60 at 876.40 compared with spot closing of 900.00. The number of contracts traded was 34,580.

RIL December 2011 futures were at a premium of 3.40 points at 723.00 compared with spot closing of 719.60. The number of contracts traded was 32,818.

Infosys December 2011 futures were at a discount of 6.00 point at 2716.00 compared with spot closing of 2722.00. The number of contracts traded was 16,958.

Among Nifty calls, 4800 SP from the December month expiry was the most active call with an addition of 0.38 million or 9.28%.

Among Nifty puts, 4700 SP from the December month expiry was the most active put with a contraction of 0.72 million or 8.46%.

The maximum Call OI outstanding for Calls was at 4800 SP (4.46 mn) and that for Puts was at 4700 SP (7.82 mn).

The respective Support and Resistance levels are: Resistance 4770.9-- Pivot Point 4699.55-- Support 4580.25.

The Nifty Put Call Ratio (PCR) OI wise stood at 0.91 for December -month contract.

The top five scrips with highest PCR on OI were Patni 11.81, Voltas 7.00, Bombay Rayon Fashions 4.00, ABB 2.75 and Cipla 1.76.

Among most active underlying, SBI witnessed an addition of 3.67% of Open Interest in the December month futures contract followed by ICICI Bank which witnessed an addition of 11.78% of Open Interest in the near month contract. Meanwhile Reliance Industries witnessed an addition of 5.00% in the December month futures. Also, Axis Bank witnessed an addition of 30.18% in Open Interest in the December month contract. Finally, Tata Steel witnessed an addition of 6.25% of Open Interest in the near month futures contract.