NIFTY PLUNGES, ACHIEVES DOWNSIDE TARGET; FED IN FOCUS

NIFTY PLUNGES, ACHIEVES DOWNSIDE TARGET; FED IN FOCUS

WORLD MARKETS

US indices, after a negative start, saw a sustained northward move through the session to end with gains between 0.6%-0.75% following reports of Chinese stimulus and amid hopes that the Federal Reserve will maintain its dovish policy stance.

US Fed ends a two-day policy meeting today and many experts were bracing for more hawkish language, but a shift in expectations occurred after Wall Street Journal journalist Jon Hilsenrath argued that the Fed would keep its "significant underutilization" of labor market resources in its expected statement.

Also bolstering equities and commodities was a Bloomberg report, which cited Sina.com, in saying the People's Bank of China would begin a 500 billion yuan standing lending-facility to the country's five largest banks.

Data showed that the US producer prices held flat in August, illustrating little-to-no inflation pressure.

European markets fell between 0.2%-0.4%. U.K. August inflation dropped slightly in line with expectations.

Nymex crude rose more than 2% to $94.9 a barrel; Gold rose $1.6 to $1237 an ounce.

                                                             

AT HOME

After trading in a narrow range in the morning trade, benchmark indices saw a sharp sell-off in the noon trade to end with deep cuts of about a percent and quarter, marking the largest fall in a month and half. Sensex slumped 324 points to settle at 26492 while Nifty finished at 7933, down 109 points. BSE mid-cap and small-cap indices lost 3.4% and 4% respectively. All the BSE sectoral indices ended in red with Realty and Power indices leading the tally, giving away 3.4% and 3.3% respectively.

FIIs net sold stocks, index futures and stock futures worth Rs 829 cr, 163 cr and 30 cr respectively. DIIs were net buyers to the tune of Rs 466 cr.

Rupee appreciated 8 paise to close at 61.055/$.

OUTLOOK

Today morning Asian markets are trading with average gains of half a percent and SGX Nifty is suggesting about 30 points higher opening for our market.

In yesterday's report we had mentioned that having breached the 8050 support, Nifty is likely to head to 7935, which is the 38.2% retracement level of the recent 7540-8180 upmove.

Nifty plunged 109 points to settle at 7933, achieving the target mentioned above and vindicating our view.

Apart from the 7935 support mentioned above, Nifty is now also closer to the 34 DMA placed around 7890. This makes 7935-7890 is an important support area. On the way up, 8050, the erstwhile support, would now act as the immediate resistance on the way up, a crossover of which is required to generate a buy on the hourly chart and bring the bulls back in the game.

Traders are advised to stay on the sideline and watch for the breach of 8050/7890 levels for taking fresh view on Nifty.

US Fed concludes its two day policy meeting today and markets would be keenly watching for cues to when the interest rate might begin to rise.