Consumer sentiment took a plunge in October

Domestic News:

Consumer sentiment took a plunge in October, according to a Conference Board report released after the start of trading. Home prices rose for the fourth month in a row in August, according to the S&P Case-Shiller Home Price index of the 20 largest metropolitan areas. The largest U.S.-based steel maker said it lost $303 million, or $2.11 per share, for the three months ended Sept. 30. The Governor of Reserve Bank of India hiked Statutory Liquidity Ratio (SLR) by 1% to 25% from the earlier 24%. Other key rates were kept unchanged. The Finance Ministry will explore a partial year-end rollback of the excise duty cuts announced earlier. Government may cut sugar levy quota for the month of November by around 9%. The CBI has alleged that the grant of ‘Unified Access Service Licenses’ for 2G spectrum to some private companies caused a loss of over Rs.22000 crore to the government.

Corporate news:

Pantaloon Retail (India) Ltd. has finalized a plan to spin off its value retail business-discount store chains such as Big Bazaar and Food Bazaar-into a subsidiary in a bid to unlock value by offloading a stake in the groups’ largest business and grow it independently. The promoter of Vishal Retail, R C Agarwal, may have to forego the company he founded, as the debt-ridden company tries to bring in a strategic investor, a condition set by its bankers before they kick in a corporate debt restructuring plan. Binani Cement is in talks to acquire a cement firm in Turkey for around Rs.1000 crore as part of its strategy to more than double its production capacity over a two-year period. Shipping Corporation of India (SCI), the country’s largest shipping company, has outlined a USD4 billion capex to expand its fleet of vessels by 2012. Reliance Retail and Reliance Fresh, two subsidiaries of Reliance Industries in the retail sector, suffered losses as the company focused to expand its presence in various parts of the country. Hyundai Motor India has taken Mahindra Renault to the Delhi High Court, objecting to the latter’s plan to launch a compact car in the country with the name ‘Sandero’, alleging the rival was trying to cash on its popular Santro brand with a similar sounding name. Birla Corporation is looking at overseas opportunities for acquisition of cement facilities. After diversifying into hospitality sector with an investment of Rs.100 crore on converting a 20-acre orchard into a five-star resort-cum-spa in Anand, the Elecon group of engineering companies plans to invest another Rs.400 crore on its expansion and further diversification into developing recreational, sports and residential properties.

Technical View:

Nifty: (4864): The index opened on a negative and declined throughout the day’s trading session. It ended the day with loss of 124 points. The index encountered stiff resistance around the 10 and 20 dma level and is exhibiting near term weakness.
It has closed below the critical support level of 4900 suggesting near term negative bias. On the downside lower supports are around 4780-4736. Nifty Oct contract ends the Day down by 129.70 points at a premium of 1.85 points in Oct contracts adding OI by 15.2% across all active Nifty contracts. Nifty Open Int PCR at 1.095 compared to 1. 314 last Day on back of paring of 36.33 Lakh in Nifty puts and addition of 64.3 Lakh call options. Nifty VIX at 28.18 from 25.28 the previous Day. Highest OI in Nifty put at 4700 Oct strike and calls is at 5100 Oct strike. Market wide rolls seen at 44.56% compared to 3 month average of 40.79% and 6 month average of 38.39%. Nifty rollover seen at 50.16% compared to the 3 month average of 44.14. Nifty sees 36% higher rollover (86114 contracts) compared to the previous expiry. FII side sees short build up in Nifty futures, Long liquidation in stock futures and Nifty options was bought.

Views and Outlook:

Higher rolls were seen and significant short build up seen in Nifty. Nifty OI PCR is moving down and IV is seen rising and is indicating further downsides in the coming days. Highest OI in Nifty put options moves down to 4700 Oct strike with indications of support moving down to 4730 levels in the current expiry.