DILEMMA

The benchmark indices opened with a gap down, tracking their Asian peers, and traded with a strong negative bias throughout the trading session and ultimately closed at their lowest point of the day. The Nifty and the Sensex closed, down by 46 and 147 points respectively. The market breadth was extremely negative with 515 advances to 966 declines. On the sectoral front, once again the Banking sector was the biggest loser, followed by the Energy and Metal sectors, while the IT sector was the sole and biggest gainer for the day. On the individual stocks front, Bajaj Auto, BPCL, TCS, ONGC & DLF were the top five Nifty gainers for the day, on the other hand BHEL, GAIL, Reliance Infra, Tata Steel & Coal India were the top five Nifty losers for the day. On the institutional side both the FIIs and DIIs were net sellers to the tune of a mere 74 & 331 crores respectively in the cash market.

On the derivatives side also the story was same, with FIIs turning net sellers in both Index and Stock futures, to the tune of a mere 5 and 429 crores respectively. Nifty future settled at 5571 with a premium of 17 points to the spot, along with a marginal increase in open interest. On the options side, PCR increased to 1.24, along with a increase in the India VIX by 4.43%. On the Call options side, with the exception of the 5600, 5700 & 5500 calls which added the maximum open interest, there was uniform loss of open interest from the 4800 to 5800 calls. On the Put options side, the 5500 put added the maximum open interest, followed by the 5400, 5000 & 4900 puts, while the 5600 put lost the maximum open interest, followed by the 5300 & 5700 puts. The entire activity in the cash as well as the F&O markets indicates massive profit booking in the cash as well as stock futures along with liquidation of longs on the options side and marginal increase in longs in the Index futures.

On the technical side, Nifty could not hold on to the 5600 level, and must cover the gaps which were created on the way up, in order to confirm the trend reversal and tomorrow’s session will be crucial to determine the Nifty’s trend just before the expiry week. The levels to watch out for Nifty will be 5578 & 5603 on the upside and 5531, 5509 & 5484 on the downside. On the currency front, the Rupee fell to its lowest level of the week, in the back drop of the serious political crisis which threatens to undo the big ticket reforms measures undertaken by the government. The Rupee finally settled at 53.38, while the near month USD-INR future settled at 54.36 for the day.

On the international markets front, the Asian and the European markets have closed deep in the red and the U.S. markets are also trading with losses as data from Japan, China & Europe coupled with disappointing data from the U.S. economy, increased concern that a global economic slowdown is worsening. On the Energy future’s front, the Brent crude oil future is trading up by 1.13%  at 109.41 $/bbl, while the WTI crude oil future is trading almost flat at 92.19 $/bbl and strangely the Natural gas future is trading up by 1.29% at 2.79 $/MMBtu, even after an unexpected rise in the weekly U.S. Natural gas inventories.