A “DOVISH” HIKE IT IS

A “DOVISH” HIKE IT IS

WORLD MARKETS                             

US indices ended with gains of 1.3%-1.5% yesterday after the Federal Reserve raised rates for the first time in nearly a decade.

As was widely expected, the U.S. central bank raised its target funds rate by a quarter point to a range of 0.25% to 0.5%. Fed Chair Janet Yellen said in a press conference that policy would remain accommodative and that the significance of the first hike should not be overblown.

Treasury yields rose, with the 2-year yield crossing 1% for the first time since 2010. The 10-year yield hit a high of 2.33%, its highest since Dec. 4. Dollar index gained about 0.2%. Gold rose $15 to $1077 an ounce.

Nymex oil fell $1.83 or 5% to $35.52 a barrel, after weekly EIA crude inventories showed a rise of 4.8 million barrels.

US Industrial output slipped 0.6% in November after a downwardly revised 0.4% dip in October. December Flash Manufacturing PMI fell to 51.3, the weakest improvement in manufacturing sector business conditions in three years. Housing starts rose 10.5% in November, while building permits rose 11%. Mortgage refinances rose 1% on rate fears.

European markets, except a modestly lower Italy, ended flat to modestly higher.

AT HOME

After a positive start, benchmark indices added some more gains through the session to end higher by about seven tenth of a percent, extending the winning streak to third straight day. Sensex settled at 25494, up 174 points while Nifty rose 50 points to finish at 7751. BSE mid-cap and small-cap indices gained 0.4% and 0.2% respectively. BSE Telecom and Oil & Gas indices gained the most among the sectoral indices, rising 2.4% and 1.7% respectively while FMCG and Consumer Durable indices lost 0.6% each.

FIIs net sold stocks worth Rs 503 cr but net bought index futures and stock futures worth Rs 92 cr and 537 cr respectively. DIIs were net buyers to the tune of Rs 1024 cr.

Rupee appreciated 19 paise to end at 66.73/$.

M & M plunged 5.3% after the Supreme Court imposed a ban on registration of diesel cars with over 2000 cc engine in Delhi till March 31, 2016.

The government yesterday raised excise duty on petrol by Rs. 0.30 a litre and on diesel by a steep by Rs. 1.17 a litre. Since November 2014, the government has raised excise duty on petrol by Rs 9.65 a litre and on diesel by Rs 7.97 a litre in six instalments.

OUTLOOK

Today morning Nikkei is up 2%, other Asian markets are trading with gains of upto half a percent and SGX Nifty is suggesting about 15 points higher opening for our market.

We had advised initiating trading longs after Nifty crossed immediate hurdle of 7700 for the target of 7815, which is the 61.8% retracement level of the recent 7979-7551 fall. Above 7815, 34-DMA, placed around 7850, would be the next hurdle to eye.

This makes 7815-7850 the immediate target area.

7650 continues to be immediate support on the hourly chart, with the stop loss of which trading longs should be held on to.