WAIT AND WATCH

Once again the markets opened with a strong gap up and touched their intraday highs within the first two hours of the trading session, but from that point onwards the markets started losing all their gains and touched their intraday lows at the start of the second half of the trading session and to everyone’s surprise the markets bounced back from this level once again and recovered most of their gains and ultimately ended the day on a decent note. The Nifty and the Sensex closed, up by 32 and 78 points respectively. The market breadth was positive with 896 advances to 616 declines. On the sectoral front, the Banking sector was the biggest gainer, followed by the Energy, Infra and Auto sectors, on the other hand the FMCG sector was the biggest loser, followed by the IT and Pharma sectors. On the individual stocks front, Rel Infra, DLF, Bank of Baroda, IDFC & JP Associate were the top five Nifty gainers for the day, while ITC, TCS, Dr. Reddy, BPCL & HindUnilever were the top five Nifty losers for the day. On the institutional side, FIIs were net buyers to the tune of, a whooping 2252 crores, while the DIIs were net sellers to the tune of 838 crores in the cash market.

On the derivatives side, the FIIs were net buyers in both Index and Stock futures, to the tune of 1122 and 428 crores respectively. Nifty future settled at 5617, with just 7 points premium to the spot, along with a considerable increase in open interest. On the Option side, PCR fell to 0.98 along with a massive jump in the India VIX by 15.60%. On the Call options side, the 5600 call lost the maximum open interest, followed by the 5500 & 5400 calls, on the other hand the 5800 call added the maximum open interest, followed by the 5700 call. On the Put options side, the 5600 put added the maximum open interest, followed by the 5500 and 5700 puts. The entire activity in the cash as well as the F&O markets indicates, addition of fresh longs in the cash as well as index futures along with put writing at higher levels, which validates this strong up-move and suggests that this uptrend can be sustained if the FIIs keep on getting positive vibes from the government regarding steps taken for fiscal consolidation.

On the technical side, Nifty closed at its seven month high mark with increase in volumes and managed to close on a positive note even after Friday’s gap up closing, indicating strength in the uptrend, but the sharp spike in the volatility levels and over-brought position on the daily and weekly charts may spoil the party and the most important factor, the political developments on the domestic front will be closely watched by the participants to take further calls on the Indian markets. The levels to watch out for Nifty, will be 5646, 5682 & 5713 on the upside and 5579, 5548 & 5512 on the downside. On the currency front, the Rupee rose today, but retreated from its four month high after the RBI kept interest rates unchanged, thereby negating some of the positive impact from the government’s major reforms. The Rupee finally settled at 54.01 while the near month USD-INR future settled at 54 for the day.

On the international markets front, the Asian markets have closed on a strongly positive note, but the European markets have closed on negative and the U.S. markets are also trading with losses mainly on the back of two factors, 1) European union finance ministers failed to agree on the terms of bailout and the role of ECB. 2) Federal reserve Bank of New York’s index general economic index dropped to minus 10.41, indicating contraction.

On the Energy futures front, the Brent Crude oil future is trading down by 1.19% at 115.30 $/bbl, and the WTI crude oil future is trading almost flat at 98.92 $/bbl , while the Natural Gas future is trading down by 2.57% at 2.86 $/MMBtu.