MARKETS TUMBLE ON HAWKISH RBI, POORER MONSOON FORECAST
US indices ended modestly lower yesterday as rising bond yields took a toll on utilities but optimism over Greece debt talks helped to limit losses.
Auto sales for May showed the strongest pace in nearly a decade. Factory orders for April showed a decline of 0.4%. March's figure was increased to 2.2% from 2.1%.
US 10-year Treasury yield traded as high as 2.279% after holding below 2.2% for the last week. Dollar index fell 1.5% with the euro topping $1.11.
Greece continued to be in focus. Media reports suggested that the European Commission, the ECB and the IMF agreed on a proposed deal for Greece. The proposal still needs acceptance from Athens, which offered a rival plan.
Nymex oil rose $1.06 or 1.8% to $61.26 a barrel for its highest close since December 9.
Key European markets fell 0.4%-0.9% with DAX leading the tally. Italy and Spain gained 0.6% and 0.3% respectively. Eurozone inflation came in at 0.3% in May, above the 0.2% forecast.
Dragged down by the hawkish tone of the RBI policy statement and forecast of the poorer monsoon, benchmark indices nosedived nearly two and a half percent to close at the lowest level since 14th May. Sensex sank 661 points to settle at 27188 while Nifty finished at 8236, down 197 points. BSE mid-cap and small-cap indices lost 2.2% and 2.1% respectively. All the BSE sectoral indices ended in red with Realty index and Bankex leading the tally, giving away 3.8% and 3.5% respectively.
FIIs net sold stocks and index futures worth Rs 594 cr and 2164 cr respectively but net bought stock futures worth Rs 4 cr. DIIs were net buyers to the tune of Rs 272 cr.
Rupee depreciated 12 paise to end at 63.82/$.
In the second bi-monthly policy statement for the new fiscal, the Reserve Bank of India frontloaded its rate cut programme by slashing repo rates by 25 bps to 7.25% while keeping CRR and SLR rates unchanged at 4% and 21.5% respectively. The apex bank however struck a cautious note on inflation on worries over sub-normal monsoon projection. The Bank lowered the economic growth forecast for the current fiscal to 7.6% from 7.8% projected in earlier while raised the inflation forecast to 6% from 5.8%.
Earth Sciences Minister Harsh Vardhan yesterday informed that this year's monsoon forecast has been downgraded to 88% of the long-term average, as against 93% earlier.
Today morning Asian markets are trading mixed and SGX Nifty is suggesting about 25 points lower opening for our market.
In yesterday's report we had advised holding on to trading longs with the stop loss of 8350, which was the immediate support on the hourly chart.
The benchmark broke this support and plunged all the way to 8226 before closing at 8236, also breaking the immediate previous bottom of 8278. With this Nifty has again resumed the bearish lower-top lower-bottom formation on the daily chart. Next support on the way down is 8185, the 61.8% retracement level of the 7997-8490 upmove. A breach of 8285 would open up the possibility of the retest of 7997 bottom.
On the way up, immediate hurdle on hourly chart as well as 200 and 34 DMAs are placed at 8340, with the stop loss of which short positions can be held on to.