BREAKOUT

The markets opened with a gap up on Tuesday, surprising everyone, and the  exceptionally high deficit figures were negated after Moodys announced that it would retain India’s investment grade rating and the markets reacted with unexpected optimism . The markets gained strength with every passing hour and ultimately closed near their day’s high till the end of the session, marking the end of a short term consolidation period. The Nifty and the Sensex closed up by 92 & 305 points respectively. The market breadth was also extremely positive with 1002 advances to 512 declines. On the sectoral front, there was across the sector buying, but the FMCG sector was the biggest gainer, followed by the Banking, IT, Energy, Pharma & Auto sectors. On the individual stocks front, Bharti Airtel, JP Associate, BPCL, HDFC & Rel Infra were the top five Nifty gainers, while Power Grid, NTPC & ONGC were the top three Nifty losers for the day. On the Institutional side, FIIs were net buyers to the tune of a massive 1083 crores and the DIIs were net sellers to the tune of 209 crores.

On the derivatives side, FIIs were net buyers in both Index futures and Options to the tune of 1342 & 392 crores respectively, while they were net buyers in Stock futures to the tune of 140 crores and net sellers in Stock options to the tune of mere 68 crores. Nifty December future settled at 5769, with a massive 42 points premium to the spot, along with a considerable addition of open interest. On the Options side, PCR stood at 1.11 along with a fall in the India VIX by 4.84%. On the December Call options side, the 6000 call added the maximum open interest, followed by the 5900 & 5800 calls, while the 5700 call lost the maximum open interest, followed by the 5400 & 5600 calls. On the Put Options side, the 5700 put added the maximum open interest, followed by the 5800, 5600 & 5500 puts. The entire activity in the cash market indicates across the sector buying, with special focus on a few sectors, while in the F&O space the data suggests creation of massive long positions in the December Index as well as Stocks futures and options.

On the technical side, Nifty conquered the 5700 milestone after eleven trading sessions with marginal increase in volumes. The technical indicators on the daily as well as weekly charts are also supportive of the current upsurge. The levels to watch out for Nifty will be 5760 & 5781 on the upside and 5650, 5634 & 5618 on the downside. On the currency front, the Rupee snapped its five day losing streak on Tuesday, as custodian banks sols dollars on the back of sharp gains in the domestic market, but persistent dollar demand from the oil refiners to meet the month end requirements capped the gains. The partially convertible Rupee finally closed at 55.45 on Tuesday, while the near month USD-INR future settled at 55.72 for the day.

On the International markets front the Asian markets have closed in the red, while the European markets have closed almost flat and the U.S. markets after erasing earlier losses are trading almost flat after Speaker of the house said he is optimistic that lawmakers engaged in budget talks can avert the crisis sooner than later. On the Energy future’s front, both the Brent and WTI crude oil futures are trading down by 0.91  1.07% at 108.88 & 86.25 $/bbl after a less the expected fall in the weekly U.S. crude oil inventories, while the Natural Gas future is also trading down by 3.35% at 3.76 $MMBtu, after the data showed a more than expected rise in the weekly Natural Gas inventories.

DILEMMA

The benchmark indices opened on a positive note and touched their intraday highs within the first twenty minutes of the trade, and just when everything seemed fine, the markets started giving up all their gains and ultimately entered the negative zone for a brief period, at the end of the first half of the trading session but surprisingly the market recovered from this point onwards and came striking close to breaching the intraday highs, but once again could not hold on to  their gains and ended up almost flat till the end of the session. The Nifty and the Sensex closed up by 9 and 30 points respectively. The market breadth was surprisingly positive with 869 advances to 622 declines. On the sectoral front, the FMCG sector was the biggest gainer, followed by the IT and Infra sectors, while the Banking sector was the biggest loser for the day. On the individual stocks front, IDFC, Wipro, Tata Steel, Hindalco & Infosys were the top five Nifty gainers, while M&M, BPCL, BHEL, Ultratech Cement & Sun Pharma were the top five Nifty losers for the day. On the institutional side, FIIs were net buyers to the tune of 163 crores, while the DIIs were net sellers to the tune of 196 crores in the cash market.

On the derivatives side, the FIIs were net buyers in Index futures to the tune of 162 crores and net sellers in Index options to the tune of 580 crores. The FIIs were net sellers in Stock futures and Options to the tune of 27 & 12 crores respectively. Nifty future settled at 5643 with just 7 points premium to the spot, along with a considerable loss of open interest. On the Options side, PCR stood at 1.03, along with a marginal fall in the India VIX by 0.07%. On the Call and Put Options side, the entire action has shifted to the new series, as the position are being rolled over to the new series. The entire activity in the Cash market was again sector specific and as usual DIIs continued booking profits.

On the technical side, once again Nifty has managed to close above the 5600 level, but further upmove will largely depend on the story unfolding in the domestic as well as the international arena. The political logjam showing no signs of resolution and the global headwinds may deter the market participants to take fresh positions in the market. The levels to watch out for Nifty will be 5648 & 5661 on the upside and 5622 ,5605 & 5596 on the downside. On the currency front, the Rupee slid for the fifth day and hit its lowest level in more than two and a half months weighed down by heavy dollar buying by the oil refiners. The partially convertible Rupee finally closed at 55.73, while the near month USD-INR future settled at 56.69 for the day.

On the International markets front, the Asian and the European markets have closed on a negative note and the U.S. markets are also trading with losses as the lawmakers prepare to debate the so called fiscal cliff and euro area finance ministers discussed Greek aid. On the Energy futures front, both the Brent and WTI crude oil futures are trading down by 0.37 & 0.52% at 110.97 & 87.81 $/bbl respectively, while the Natural gas future is trading down by 4.15% at 3.86 $/MMBtu