PRUDENT MORNING MANTRA - 24.06.2014

LAST HALF AN HOUR REBOUND PUTS NIFT BACK ABOVE 7487 SUPPORT; 7560 IS IMMEDIATE RESISTANCE

WORLD MARKETS

Dow and S & P 500 ended a tad lower, breaking a 6-day rising streak while Nasdaq closed marginally higher.

The sale of previously-owned homes rose 4.9% in May to an annualized rate of 4.9 million, versus a 1.5% gain the month before. Flash manufacturing PMI for June rose to 57.5 from 56.4 in May.

European markets lost between 0.4%-1.3%. The euro zone PMI for June came in at 52.8 against forecasts of 53.5. This marked a second consecutive monthly fall, rasing fears that the recovery is losing momentum. The index also highlighted ongoing divergence between the euro zone's two largest economies, with French activity contracting further in June, while Germany's private sector continued to expand.

However, basic resources stocks, which have heavy exposure to China, ended higher, after China's HSBC PMI showed the first expansion in six months.

U.S. Secretary of State John Kerry traveled to Baghdad yesterday, where he pushed the Iraqi prime minister to form a more inclusive government as it attempts to stem a Sunni insurgency across much of the northern and western parts of the country.

Nymex crude lost 0.6% to $106.2a barrel; Gold rose 0.1% to $1318.4 an ounce.

AT HOME

Benchmark indices, after plunging nearly a percent during the session, saw a smart rebound in last half an hour to end lower by just a fourth of a percent. Sensex lost 74 points to settle at 25031 while Nifty finished at 7493, down 18 points. BSE mid-cap and small-cap indices in fact ended with gains of 0.6% each. BSE FMCG index nosedived 4.1%, becoming top loser among the sectoral indices, followed by 1.6% cut in the IT index. Oil & Gas and Metal indices gained 1.4% and 1.1% respectively.

ITC plunged 6.2%, marking owrst fall since May 19, 2009, on reports that the government may raise taxes on cigarettes aggressively in the upcoming budget in July.

Sugar stocks soared after the Food Minister Ram Vilas Paswan, in a move to bail out the ailing sugar industry, allowed an import duty hike from 15% to 40%, extended sugar export incentives till September 2014 and raised ethanol blending with petrol to 10%.

FIIs net sold stocks, index futures and stock futures worth Rs 214 cr, 15 cr and 457 cr respectively. DIIs were net buyers to the tune of Rs 117 cr.

Rupee depreciated 2 paise to close at 60.20/$.

The Budget Session will commence on July 7. The Economic Survey will be tabled on July 9 and the General budget on July 10. Railway budget will be presented on July 8.

OUTLOOK

Today morning, Asian markets, barring a 0.6% lower Nikkei, are trading with modest gains and SGX Nifty is suggesting about 20 points higher opening for our market.

Nifty, after breaking the 7487 support, tumbled to 7441 intraday, but saw a sharp rebound in last half an hour to end at 7493, holding the 7487 level on closing basis.

The benchmark however, continues to make lower-tops and lower-bottoms on the hourly chart and a negation of this formation is required to put it back on the bull track. Nearest resistance on the hourly chart is placed at 7560, upon crossover of which next major hurdle to eye would be 7663, the top made last week.

On the way down, 7409 and 7340, the 50% and 61.8% retracement levels of the recent 7118-7700 upmove, continue to be support levels to eye.

Traders are advised to wait for the crossover of 7560 for initiating fresh longs.