NIFTY SET FOR A PLUNGE, VINDICATING OUR BEARISH VIEW

NIFTY SET FOR A PLUNGE, VINDICATING OUR BEARISH VIEW

WORLD MARKETS                             

US indices nosedived 2%-3% on the back of sliding commodity prices and persistent worries over the health of China's economy.

Data from China showed industrial profits declined 8.7% in August from a year earlier, the largest drop since 2011.

Nymex oil slipped $1.3 or 2.8% to $44.43 a barrel and copper fell more than 1.5%. Gold settled down $14 at $1132 an ounce.

Health care fell more than 4% as the greatest decliner among all the sectors of S & P 500. Goldman Sachs plunged nearly 3.8% as the greatest weight on the Dow. Apple closed nearly 2% lower despite news that it sold more than 13 million units of the new iPhone 6s and 6s Plus models in a record first weekend of sales.

August personal income data showed an increase of 0.3% in personal income and a 0.4% increase in consumer spending, roughly in-line with estimates. August pending home sales posted a decline of 1.4%, missing expectations of a slight gain. The September Dallas Fed Survey showed manufacturing activity was flat.

European markets fell between 2.1%-2.7% as concerns over carmaker Volkswagen and mining shares continued to dent market sentiment. Shares of major European banks also came under pressure after the Swiss competition regulator said that it had opened an investigation into possible manipulation of the precious metals market by several major banks including UBS, Julius Baer, Deutsche Bank, HSBC, Barclays, Morgan Stanley and Mitsui. Shell ended down 2.6% after the company said it would stop exploration activity in Alaska for the "foreseeable future."

AT HOME

After trading with a positive bias for better part of the day, benchmark indices nosedived in last hour and half to end with cuts of nearly a percent, breaking two-day winning streak. Sensex settled at 25617, down 247 points while Nifty lost 73 points to finish at 7796. BSE mid-cap and small-cap indices lost 0.2% each. BSE Metal index tumbled 2.6%, becoming top loser among the sectoral indices, followed by 1.7% each cut in Auto and Capital Goods indices. Consumer Durable and Realty indices gained 2.9% and 1% respectively.

FIIs net sold stocks worth Rs 650 cr but net bought index futures and stock futures worth Rs 9 cr and 25 cr respectively. DIIs were net buyers to the tune of Rs 506 cr.

Rupee appreciated 11 paise to end at 66.04/$.

OUTLOOK

Today morning Asian markets are trading with cuts of 1.5% to 3.5% and SGX Nifty is suggesting about 100 points lower opening for our market.

Key event to watch out today would be RBI's monetary policy review. A 25 bps cut in repo rate is widely expected and is largely discounted. The focus in that case would shift to tone of the policy to gauge the possibility of further rate cut going forward.

Readers would recall that we have maintained our negative bias on Nifty for quite some time. Even when Nifty was undergoing the rebound after making 7540 bottom, we maintained a firm opinion that this is just a pullback rally and the larger trend continues to be bearish.

The benchmark, as of yesterday, was down nearly 250 points from the top of 8055 made in the pullback rally and is set to open more than 100 point down today, vindicating our negative bias.

A gap down opening today would break the 7723 bottom made last week and a sustained trading below that would open up the possibility of the retest of the 7540 bottom.