Bears hit back with a vengeance as key policy rates remain unchanged

Bears struck back with a bang on Monday and Nifty snapped the day’s trade with a fall of over one and a half percent breaching its crucial 5,100 level as investors went on a selling spree after the Reserve Bank of India (RBI) at its mid-quarter policy review today, disappointed the market by maintaining a cautious stance on key policy rates and cash reserve ratio in view of high inflation levels. However, global cues remained supportive as buoyed by favourable outcome from Greek election; sentiment in the Asian region remained bullish run with all the equity indices snapping the day’s trade in the positive terrain on Monday. Moreover, most markets in the European region too traded with over one and half a percent gains as fears of a global financial turmoil due to Euro-zone break-up got dispelled with the Greek election’s likely outcome. Back home, the rupee falls further to 55.83/84 on the back of sharp falls in domestic stocks after RBI disappointed by leaving interest rates unchanged.

Earlier, the domestic benchmark started the day’s trade with decent gains recapturing its crucial 5,150 mark on the back of positive outcome from Greek election. Afterwards, market traded on a firm note as investors waited for the outcome of RBI’s credit policy meet but, post the central bank’s policy meet, the Nifty witnessed a vertical fall of over 100 points and entered into the negative terrain breaching its crucial 5,100 mark as the apex bank kept repo rate unchanged. It also rejected the widespread demand for reduction in Cash Reserve Ratio (CRR) to pump in more money into the banking system. Meanwhile, selling witnessed in rate sensitives like, Banking, Realty, Infra and Auto stocks after disappointing result of credit policy meet however, some export oriented stocks such as Rajesh Exports and Gitanjali Gems made the most of RBI’s announcement of hiking export credit refinance limit. Thereafter, constant selling pressure across the board kept the equities trailing in the negative terrain till the closing bell and finally, Nifty ended the day’s trade near its intraday low with a cut of about one and a half percent.

Meanwhile, all the sectoral indices on the NSE hammered badly and settled in the red, CNX PSU Bank remained the major loser, losing 3.83% followed by Bank Nifty down 3.13% and CNX Realty down by 2.85% in the trade. The India Volatility Index (VIX), a gauge for market’s short term expectation of volatility, tumbled 11.51% and reached 22.60.

The India VIX witnessed contraction of 11.51% at 22.60 as compared to its previous close of at 25.54 on Friday.

The 50-share S&P CNX Nifty lost 74.80 by point or 1.46% to settle at 5,064.25.

Nifty June 2012 futures closed at 5,058.80 at a discount of 5.45 points over spot closing of 5,064.25, while Nifty July 2012 futures were at 5,080.40 at a premium of 16.15 points over spot closing. The near month June 2012 derivatives contract will expire on Thursday i.e. June 28, 2012. Nifty June futures saw an addition of 0.16 million (mn) units taking the total outstanding open interest (OI) to 16.50 mn units.

From the most active contract, HDIL June 2012 futures were at a discount of 0.40 point at 71.20 compared with spot closing of 71.60. The number of contracts traded was 14,878.

Tata Motors June 2012 futures were at a discount of 0.15 point at 238.35 compared with spot closing of 238.50. The number of contracts traded was 28,231.

Tata Steel June 2012 futures were at a discount of 2.65 point at 416.85 compared with spot closing of 419.50. The number of contracts traded was 24,102.

DLF June 2012 futures were at a premium of 0.55 point at 188.10 compared with spot closing of 187.55. The number of contracts traded was 11,593.

ICICI Bank June 2012 futures were at a discount of 3.25 point at 816.20 compared with spot closing of 819.45. The number of contracts traded was 30,073.

Among Nifty calls, 5200 SP from the Jun month expiry was the most active call with an addition of 0.33 million open interest.

Among Nifty puts, 4800 SP from the Jun month expiry was the most active put with an addition of 0.15 million open interest.

The maximum OI outstanding for Calls was at 5200 SP (6.78mn) and that for Puts was at 4800 SP (8.51mn).

The respective Support and Resistance levels are: Resistance 5155.73-- Pivot Point 5098.71--Support 5007.23.

The Nifty Put Call Ratio (PCR) OI wise stood at 1.67 for June-month contract.

The top five scrips with highest PCR on OI were ABG Ship 6.83, ABB 4.00, Orient Bank 3.00, Tata Chem 3.00 and Grasim 1.83.

Among the most active underlying, IFCI witnessed an addition of 0.83 million of Open Interest in the June month futures contract followed by UNITECH which witnessed an addition of 2.61 million of Open Interest in the near month contract. Meanwhile, RCOM witnessed an addition of 0.86 million in the June month futures. Also, Jaiprakash Associates witnessed contraction of 1.68 million in Open Interest in the June month contract. Finally, Tata Motors witnessed contraction of 2.97 million of Open Interest in the near month futures contract.