ASIAN MARKETS MELT UNDER CHINESE HEAT; NIFTY SET TO BREAK 7710 SUPPORT

ASIAN MARKETS MELT UNDER CHINESE HEAT; NIFTY SET TO BREAK 7710 SUPPORT

WORLD MARKETS                             

US indices nosedived 1.1%-1.5% yesterday, weighed down by continued concerns about global economic growth, low oil prices and increased geopolitical tensions.

Energy closed down 3.6% to lead all S & P 500 sectors lower after Nymex oil fell $2 or 5.6% to $33.97 a barrel, its lowest since December 2008. Brent settled at $34.23, its lowest since June 2004.

North Korea yesterday said it had successfully tested a hydrogen bomb and said that it won't give up nuclear capability unless U.S. drops its hostile foreign policy towards the country.

The World Bank cut its 2016 global growth forecast to 2.9%, citing pressure from "weak growth among major emerging markets."

Back in the US, Markit Services PMI for December stood at  54.3, below November's final print of 56.1. ISM non-manufacturing came in at 55.3, down from November's 55.9. New orders for manufactured goods slipped 0.2% after a downwardly revised 1.3% gain in October. December ADP report showed creation of 257,000 payrolls. U.S. November trade deficit came in at $42.4 billion. Imports of goods fell to their lowest in nearly five years, outpacing a drop in exports.

China Caixin Services PMI for December came in at 50.2, down 1 point from November and the lowest in 17 months. The Chinese yuan plunged to a five-year low in offshore trading, sharply widening the gap with the mainland-traded yuan.

European markets tumbled 1%-2.7%

Gold gained $13.50 to $1092 an ounce.

AT HOME

After trading with a positive bias in the morning trade, benchmark indices sold-off in the late noon trade to end lower by about six-tenth of a percent, extending the losing streak to third straight day. Sensex settled at 25406, down 174 points while Nifty lost 44 points to finish at 7741. BSE mid-cap and small-cap indices lost 0.3% and 0.4% respectively. BSE FMCG and Metal indices fell 1.6% and 1.5% respectively, becoming top losers among the sectoral indices while Energy and Oil & Gas indices gained 1.4% and 0.8% respectively.

FIIs net sold stocks, index futures and stock futures worth Rs 243 cr, 559 cr and 57 cr respectively. DIIs were net buyers to the tune of Rs 577 cr.

Rupee depreciated 23 paise to end at 66.82/$.

India's Nikkei/Markit Services PMI surged to a 10-month high of 53.6 in December from November's 50.1 read.

OUTLOOK

Today, Chinese Markets hit the lower circuit of 5% soon after opening and hit another circuit of 7% after the 15-minute cool-off period. Trading has been halted for rest of day. Other Asian markets are trading with cuts of 1.5%-3% and SGX Nifty is suggesting about 70-80 points lower opening for our market.

Just to reiterate, we have maintained our negative bias on Nifty ever since immediate support of 7890 was breached and have been working with downside target of 7710, which is the 61.8% retracement level of the recent 7550-7973 pullback rally.

The benchmark touched a low of 7721 yesterday, nearly achieving this target, before closing at 7741.

However, a gap down opening today will take the benchmark even below this support and a sustained trading below 7710 would open up the possibility of the retest of the 7550 bottom.

Immediate resistance on the hourly chart has moved lower to 7850. The short term bias will continue to be negative until that is taken out.