US EQUITIES PLUNGE ON GLOBAL GROWTH CONCERNS; NIFTY ON TRACK TO ACHIEVE 7785 TARGET

US EQUITIES PLUNGE ON GLOBAL GROWTH CONCERNS; NIFTY ON TRACK TO ACHIEVE 7785 TARGET

WORLD MARKETS                             

US indices plunged a percent and half yesterday, with the S & P 500 touching 8-week low amid concerns about slowing global growth and the potential impact on coming third-quarter earnings from U.S. corporations.

The IMF downgraded its global growth forecast for 2014 3.3%, down 0.1% from its July forecast. For 2015, the growth is expected to be 3.8%.

German industrial output fell by 4% in August, marking the worst fall in five-and-a-half years. This came a day after the country's industrial orders had their largest monthly decline since the global financial crisis in 2009.

European markets fell between 1%-2%.

Nymex crude fell $1.5 to $88.8 a barrel to close at their lowest in more than two years; Gold rose $5.1 to $1212 an ounce.

AT HOME

After a flattish start, benchmark indices saw a sustained down move through the session to end with deep cuts of more than a percent. Sensex slumped 296 points to settle at 26272 while Nifty finished at 7852, down 93 points. BSE mid-cap and small-cap indices lost 0.9% and 0.8% respectively. All the BSE sectoral indices ended in red with Metal and Capital Goods indices leading the tally, giving away 2.6% and 1.8% respectively.

India's HSBC Services PMI rose to 51.6 in September from 50.6 in August, reversing a slowdown seen in the previous two months. The composite PMI too improved to 51.8 from 51.6.

FIIs net sold stocks and stock futures worth Rs 333 cr and 304 cr respectively but net bought index futures worth Rs 152 cr. DIIs were net buyers to the tune of Rs 328 cr.

Rupee gained 18 paise to close at 61.43/$.

The IMF has upgraded India’s FY15 GDP growth to 5.6% from the interim forecast of 5.4% made in July and estimates FY16 growth to be at 6.4%.

OUTLOOK

China's HSBC Services PMI has come in at 53.5, down from 54.1 in August.

Asian markets are trading with average cuts of half a percent and SGX Nifty is suggesting about 30 points lower opening for our market.

We have been bearish on Nifty for quite some time and have been advising a "sell-on-rallies" approach until the benchmark negates the lower-top lower-bottom formation on the daily chart.

We have also been working with a downside target of 7785, which is the 61.8% retracement level of the 7540-8180 upmove.

Today's gap down opening would see Nifty reach very near to this level. 7785 would be a crucial support to eye a breach of which would open up the possibility of the retest of the 7540 bottom.

Immediate resistance on the hourly chart has moved lower to 7940, which should serve as the new stop loss for trading shorts.