ASIA STARTS THE WEEK LOWER ON GLOBAL GROWTH CONCERNS; NIFTY LIKELY TO TEST 7785 SUPPORT

ASIA STARTS THE WEEK LOWER ON GLOBAL GROWTH CONCERNS; NIFTY LIKELY TO TEST 7785 SUPPORT

WORLD MARKETS                             

US indices fell between 0.7%-2.3% on Friday as computer-chip manufacturers led the losses after Microchip Technology lowered its sales outlook and Standard & Poor's downgraded its outlook for France to negative from stable.

U.S. import prices fell in September for a third month as the price of petroleum prices fell and a stronger dollar made it cheaper for Americans to purchase European goods.

European markets fell between 1%-2.4%. August industrial production for France came in flat on the previous month, below estimates. Comparative figures for Italy showed a 0.3% rise, but they also missed expectations.

Nymex crude rose 0.3% to $86 a barrel; Gold fell 0.3% to $1222 an ounce.

For the week, Dow lost 2.7%, S & P 500 3.1% and Nasdaq 4.5%, extending the losing streak to third straight week.

AT HOME

After Thursday's dramatic upmove, Friday was marked by equally dramatic reversal as benchmark indices, after a gap down opening, saw further losses through the session to end lower by a percent and quarter. Sensex lost 340 points to settle at 26297 while Nifty finished at 7860, down 101 points. BSE mid-cap and small-cap indices lost 1.4% and 1.1% respectively. Except a 2.3% and 1.2% rise in BSE IT and Teck indices, all other sectoral indices ended in red with Metal index leading the tally, plunging 4.1%, followed by 2.8% cut in Auto index.

Infosys surged after reporting better-than-estimated quarterly earnings and declaring an unexpected 1:1 bonus. Dollar revenues rose 3.1% sequentially to $2201 mn vs expected 2.9% growth. Rupee revenue rose by 4.5% to Rs 13342 while profit rose 7.3% to Rs 3096 cr. Operating profit margin expanded by 96 bps to 26.1%. The company maintained full year dollar revenue growth guidance at 7-9%.

FIIs net sold stocks, index futures and stock futures worth Rs 720 cr, 1464 cr and 176 cr respectively. DIIs were net buyers to the tune of Rs 558 cr.

Rupee depreciated 30 paise to close at 61.35/$.

August industrial output, as represented by IIP, grew at merely 0.4% as against the expectation of a 2.4% uptick.

For the week, Sensex and Nifty lost 1% each, extending the losing streak to third straight week.

OUTLOOK

China has reported a trade surplus of $31 bn for September. Imports are up 7% as against the expectation of a dip of 2.7% while exports are up 15.3%, beating the estimated 11.8% rise.

Asian markets are trading with cuts ranging from 0.5%-1% and SGX Nifty is suggesting about 50 points lower opening for our market. Crude oil is down more than 1%, extending losses from last week, after Kuwait's oil minister reportedly said that the Organization of the Petroleum Exporting Countries (OPEC) is unlikely to cut production to support falling prices. Also, top exporter Saudi Arabia said that it was comfortable with oil prices below $90 a barrel.

Ever since Nifty closed below 7925 on 25th September, a lower-top lower-bottom formation on the daily chart has been in place and as we have been telling, until this formation is negated, the short term trend will continue to be negative.

In that sense, 7972, the top made last week, which is also the immediate previous top on the daily chart, would be the important resistance to eye.

On the way down, 7785, the 61.8% retracement level of the entire 7540-8180 upmove, continues to be crucial support, a breach of which would open up the possibility of the retest of the 7540 bottom.

India's inflation based on CPI for September would be released today and is seen further decelerating to 7.2% from 7.8% in August.

Reliance Industries and Indusind Bank will report their quarterly earnings today.