Nifty buckles on higher inflation, weakening rupee

Prolonging its previous sessions’ losses, S&P Nifty snapped the day’s trade in the red for fifth day in a row on Monday due to weakening rupee, waning of rate cut hopes after higher-than-expected inflation for April while, Europe turmoil too added fuel to the fire. World stock markets fell on Monday as optimism over a move by China’s central bank to encourage lending were offset by lingering uncertainty about crisis-struck Greece. Asian stocks also endured losses, although one notable exception was Japan, where the benchmark Nikkei 225 index rose marginally. Back home, heavyweight Reliance Industries also weighed down market-men’s mood ending close to its 52-week low, down by over two percent as investors were concerned about declining profit growth in core businesses of refining and petrochemicals.

Earlier, the Indian equity market made a decent start and traded in the green upto mid morning trade amid hopes of easing inflation data. The expectation was that India’s inflation rate probably eased only slightly in April, held firm by food prices, underscoring the RBI’s stance that it had little room for further rate cuts. But, once the inflation data released, market witnessed a sharp fall of about 60 points and Nifty breached its important 4,900 mark. India’s monthly inflation, represented by the wholesale price index or WPI index, stood at 7.2 per cent against 6.9 per cent in March 2012. This was expected to be 6.7 per cent by the street. Food articles inflation was at 10.5 per cent. The higher-than-expected inflation reduced the prospects of further interest rate cuts. In the noon trade selling intensified as European markets fell quite sharply ahead of Greek’s politicians’ last attempt to form government today. Moreover, the sentiments also weighed down by banking space after Moody’s Investors Service downgraded the standalone bank financial strength rating (BFSR) of three Indian banks - Axis Bank, HDFC Bank and ICICI Bank to D+ from C-. However in the last few minutes of trade, capital goods major Larson & Toubro (L&T) helped the benchmark to pare the losses a bit. L&T reported a net profit of Rs 1,920 crore and net sales of Rs 18,481 crore for the quarter ended March 2012, much better than expected. Finally, Nifty managed to end the session a tad over its crucial 4,900 mark but with a cut of about half a percent.

Meanwhile, most of the sectoral indices on the NSE were settled in the red, CNX Realty remained the major loser, down 1.77% followed by CNX PSU down 1.54% and Bank Nifty down by 1.49% while CNX Pharma and CNX IT surged 1.54% and 0.43% respectively in the trade. The India Volatility Index (VIX), a gauge for market’s short term expectation of volatility, surged 3.46% and reached 23.26.

The India VIX witnessed an addition of 0.78% at 23.26 as compared to its previous close of at 22.48 on Friday.

The 50-share S&P CNX Nifty lost 21.10 points or 0.43% to settle at 4907.80.

Among Nifty calls, 5200 SP from the May month expiry was the most active call with an addition of 0.43 million open interest.

Among Nifty puts, 4900 SP from the May month expiry was the most active put with  an addition  of 0.24 million open interest.

The maximum OI outstanding for Calls was at 5200 SP (7.60mn) and that for Puts was at 4900 SP (7.06mn).

The respective Support and Resistance levels are: Resistance 4951.83-- Pivot Point 4913.16--Support 4869.13.

The Nifty Put Call Ratio (PCR) OI wise stood at 0.90 for May -month contract.

The top five scrips with highest PCR on OI were Siemens 4.85, Grasim 1.75, Ind Hotel 1.31, TCS 1.03 and LT 1.03

Among the most active underlying, Suzlon witnessed an addition of 2.32 million of Open Interest in the April month futures contract followed by IFCI which witnessed an addition of 1.74 million of Open Interest in the near month contract. Meanwhile, RCOM witnessed an addition of 0.12 million in the April month futures. Also, JP Associates witnessed contraction of 1.20 million in Open Interest in the April month contract. Finally, Tata Motors witnessed contraction of 0.14 million of Open Interest in the near month futures contract.