PERPLEXING

The markets opened with a strong gap up, on the back of positive international news flow and expectation of  favorable news from the RBI, and continued to trade in the same range for the next two hours, till the quarterly monetary policy review was announced, which came as a shocker for the overjoyed market and took the wind out of the markets sail. The markets vertically nosedived from this level and could not recover till the end of the session and ultimately both the indices closed near their lowest point of the day. The Nifty and the Sensex closed down by 75 and 244 points respectively for the day. The market breadth turned extremely negative till the end of the session with 420 advances to 1052 declines. On the sectoral front, the Banking sector was the biggest looser, followed by the FMCG, Midcap and energy sectors. On the individual stocks front, Power Grid, Tata Steel, Bajaj Auto & Cairn somehow managed to buck the trend. On the institutional side, surprisingly the FIIs were net buyers to the tune of 412 crores, while the DIIs were net sellers to the tune of merely 63 crores in the cash market.

On the derivatives side, the FIIs brought Index futures,worth 189 crores and sold Stock futures worth 360 crores. Nifty future closed at 5059, along with a marginal increase in open interest. On the options side, PCR marginally increased to 1.13, along with a massive fall in the India VIX by 11.51%. On the Call options side, the 5300 call added the maximum open interest followed by the 5000 & 5200 calls, on the other hand the 4900 call lost the maximum open interest followed by the 5400 call. On the Put options side, the 4600 put lost the maximum open interest, followed by the 5100 & 5200 puts, on the other hand the 4700 put added the maximum open interest, followed by the 4900 put. The entire activity in the F&O space suggests, build up of fresh shorts in the index futures, along with massive call writing at higher levels, but the FII buy figures in the cash market is quite confusing and leads us to believe that some value buying might be emerging in the markets, after the sudden fall, and at the same time the participants are hedging their portfolios by taking the reverse position in the futures market.

On the technical side, Nifty somehow managed to cling to the level of 5050 and managed to close above the psychological mark. On the candlestick charts, the "evening star" formation on Thursday, along with the "engulfing bear" formation today, once again confirms the bearish reversal. The levels to watch out for Nifty, will be 5092 & 5126 on the upside, and 5027, 4980 & 4920 on the downside. On the currency front, the Rupee depreciated considerably and the USD-INR future closed at 56.01 for the day.

On the international market front, the Asian markets have closed on a firm note, while the European markets have closed on a mixed note, and the U.S. markets are trading almost on a flat note. On the energy futures side, the Brent and the WTI crude futures are also trading deep in the red at 96.05 and 83.68 $/bbl respectively, while the Natural Gas future is trading up by 5.5% at 2.60 $/MMBtu.