Tug of war continues between bulls and bears; Nifty down 1%

After a huge rally in previous session, Bears once again came out with a bang and took full control over domestic market dragging Nifty near its crucial 4,800 mark as European counterparts opened on a subdued note after concern about possible ratings agency downgrades ratcheted up the pressure on euro zone policymakers battling to end the region’s debt crisis. On the domestic turf, demand for rollback of FDI in retail sector got louder, which also dampened the sentiment. The parliament was adjourned for the sixth day in a row this winter season, as the opposition, including some UPA allies, stuck on stance for a rollback of the proposed FDI in retail. Market snapped the trade with a cut of about a percent point. However, global cues remained firm as the US markets surged overnight, posting their best day in at least a month while, Asian markets rallied for the second consecutive day on optimism over Europe’s debt crisis.

Local market turned red after a flat to positive start as index heavyweight Reliance Industries edged lower in initial trade as it has initiated arbitration proceedings against the government to seek an independent view of a tribunal on the issue of the company’s entitlement of recovery of entire costs on KG-D6 gas blocks from the revenue generated from the blocks. The sentiment was also dampened as PSU oil marketing companies viz. BPCL, HPCL and IOC declined in the trade on reports that the state-run refiners could cut petrol prices by about one rupee a litre. In the mid morning trade market started recovering after falling to a level of 4,800 on the back of short covering in fundamentally strong stocks and recaptured its crucial 4,850 mark in early noon trade but, the index couldn’t able to hold that level and started its southbound journey following tepid start from European counterparts as it was reported  that Standard & Poor’s could change France’s triple-A rating outlook to negative within days, while Moody's warned it could downgrade the subordinated debt of 87 banks across 15 countries on concerns that government would be too cash-strapped to bail them out. Meanwhile, reports suggest that India’s Q2 GDP is likely to fall sharply. Some even fear a dip below 7%. The data will be released by the Government tomorrow. India’s Q1 GDP grew by 7.7%, weakest in six quarters. Market touched its intraday low breaching its psychological 4,800 mark as shares of retail companies fell for second successive session as pressure mounts on the Government to rollback the decision on allowing up to 51% FDI in multi-brand retail trade. Finally, Nifty snapped the session with a cut of about a percentage point but, managed to hold its crucial 4,800 level as some recovery was seen in European markets.

On the global front, the US markets rejoiced after a weekend and the major indices surged on the back of strong start to the US holiday shopping season while, Asian markets extended their previous session’s rally on Tuesday, tracking a positive close overnight on Wall Street after some optimism on Europe’s debt crisis helped to improve investor sentiment. However, most of the European counterparts were trading in the positive terrain after a subdued start on concern over possible ratings agency downgrades. Back home, most of the sectoral indices on the NSE were settled in the red, CNX Realty remained the major loser, down 2.38% followed by CNX PSU Bank down 1.99% and Bank Nifty down by 1.92% while CNX media and CNX FMCG added 1.57% and 0.69% respectively in the trade. The India Volatility Index (VIX), a gauge for market’s short term expectation of volatility, gained 0.86% and reached 26.87.

The India VIX witnessed an addition of 0.86% at 26.87 as compared to its previous close of at 26.64 on Monday

The 50-share S&P CNX Nifty lost 46.25 or 0.95% to settle at 4,805.10.

Nifty December 2011 futures closed at 4,812.00 at a premium of 6.90 points over spot closing of 4,805.10, while Nifty January 2011 futures were at 4,832.00 at a premium of 26.90 points over spot closing. The near month December 2011 derivatives contract expires on Thursday, December 29, 2011. Nifty December futures saw addition of 7.60% or 1.62 million (mn) units taking the total outstanding open interest (OI) to 22.95 mn units.

From the most active contract by contract value, SBI's December 2011 futures were at a discount of 14.10 point at 1741.80 compared with spot closing of 1755.90. The number of contracts traded was 34,129.

ICICI Bank December 2011 futures were at a premium of 4.05 point at 740.75 compared with spot closing of 736.70. The number of contracts traded was 32,211.

L&T December 2011 futures were at a premium of 2.20 points at 1279.50 compared with spot closing of 1277.30. The number of contracts traded was 11,725.

RIL December 2011 futures were at a premium of 4.60 points at 765.70 compared with spot closing of 761.10. The number of contracts traded was 19,293.

Bharti Airtel December 2011 futures were at a premium of 0.65 point at 373.55 compared with spot closing of 372.90. The number of contracts traded was 9,369.

Among Nifty calls, 5000 SP from the December month expiry was the most active call with addition of 0.56 million or 11.47%.

Among Nifty puts, 4700 SP from the December month expiry was the most active put with an addition of 0.22million or 3.16%.

The maximum Call OI outstanding for Calls was at 5000 SP (5.50 mn) and that for Puts was at 4700 SP (7.13 mn).

The respective Support and Resistance levels are: Resistance 4851.76-- Pivot Point 4819.43-- Support 4772.76.

The Nifty Put Call Ratio (PCR) OI wise stood at 1.35 for December -month contract.

The top five scrips with highest PCR on OI were Patni 14.67,  Gujarat State Petronet 4.00, Financial Technologies (India) 2.00, MphasiS  2.00 and Cipla 1.88.

Among most active underlying, SBI witnessed an addition of 5.40% of Open Interest (OI) in the December month futures contract followed by ICICI Bank which witnessed an addition of 4.86% of Open Interest (OI) in the near month contract. Meanwhile Reliance Industries witnessed n addition of 2.27% in the December month futures. Also, Tata Steel witnessed an addition of 3.01% in Open Interest (OI) in the December month contract.