LARGEST PERCENTAGE FALL FOR NIFTY IN FOUR MONTHS; 8050 IS THE NEXT MEANINGFUL SUPPORT

LARGEST PERCENTAGE FALL FOR NIFTY IN FOUR MONTHS; 8050 IS THE NEXT MEANINGFUL SUPPORT

WORLD MARKETS                             

US indices fell between 0.7%-1.3% yesterday, with the S & P 500 extending the losing streak to fifth straight day.

Energy stocks led the losers as oil continued to fall with the Nymex oil plunging another 4.2% to close at $47.93 a barrel. Brent fell 4% to $50.90. Gold rose 1.3% to $1219 an ounce. Dollar index surged to 91.73. US 10-year treasury yield fell 9 bps to 1.9429%.

Yesterday's economic reports had the Institute for Supply Management's non-manufacturing index declining to 56.2 last month from 59.3 in November, marking the lowest reading in six months. Separate data had factory orders down in November.

European markets saw cuts of upto 1.2% with the Spain and FTSE leading the tally. Markit's final composite PMI for the euro zone came in at 51.4—lower than the earlier estimate of 51.7. In the U.K., Markit's PMI index for the services sector hit a 19-month low and suffered its biggest decline in more than three years.

AT HOME

Suffering the worst percentage fall since 3rd September 2013, benchmark indices plunged 3% in today's trade to end at the lowest level since 17th December 2014. Sensex nosedived 855 points to settle at 26987 while Nifty finished at 8127, down 251 points. BSE mid-cap and small-cap indices also lost 3% each. All the BSE sectoral indices ended in red with Oil & Gas and Realty indices leading the tally, giving away 4.2% and 3.7% respectively.

India's HSBC Services PMI for December fell to 51.1 from 52.6 in November. The composite PMI too eased to 52.9 from 53.6.

FIIs net sold stocks and index futures worth Rs 1571 cr and 2817 cr respectively but net bought stock futures worth Rs 260 cr. DIIs were net buyers to the tune of Rs 1190 cr.

Rupee depreciated 16 paise to end at 63.57/$.

OUTLOOK

Today morning, barring a modestly lower Hang Seng and a flattish Shanghai, other Asian markets are trading with modest gains and SGX Nifty is suggesting about 30 points lower opening for our market.

In yesterday's report we had mentioned that the immediate support on the hourly chart is placed at 8290, a sustained trading below which would generate a sell on the hourly chart and would pave the way for the further correction and had therefore advised keeping a stop loss of 8290 in trading longs.

The benchmark broke 8290 support in the initial trade itself and as feared plunged all the way to 8111 before closing at 8127.

With yesterday's fall, benchmark has also broken immediate previous bottom placed at 8147 which was also the 61.8% retracement level of the recent 7961-8446 upmove. This has opened up the possibility of the retest of the 7961 bottom. Before that a trendline adjoining bottoms made in October and December 2014 lands a support around 8050. Also, that is where the lower bad of bollinger on the daily chart is placed. This makes 8050-7960 a broad support zone.

On the way up 8300 is the immediate resistance on the hourly chart above which 8446, the top made yesterday would be the bigger hurdle to eye.

Traders are advised to book profit in short positions as 8050 support approaches. Fresh longs should wait for the crossover of 8300.