NIFTY REBOUNDS AFTER FORMING POSITIVE DIVERGENCE

NIFTY REBOUNDS AFTER FORMING POSITIVE DIVERGENCE

WORLD MARKETS                             

US indices soared 1.3%-2.7% on Friday, helped by a recovery in oil from multiyear lows and hopes of stimulus in Europe and Japan.

Energy rose 4.3% to lead all the sectors as Nymex oil shot up $2.66 or 9% to $32.19 a barrel, for its biggest one day gain since the end of August and settled at the highest level since Jan 8.

The ECB left rates unchanged Thursday but Draghi's remarks raised expectations of more stimulus at the central bank's March meeting. Hopes of the Bank of Japan announcing more easing at their meeting this week also boosted Asian equities on Friday, with the Nikkei 225 surging 5.9%. The Shanghai composite closed up 1.3%.

U.S. Markit Flash Manufacturing PMI came in at 52.7, in expansion territory and above the final December print of 51.2. Existing home sales in December jumped a record 14.7% to an annual rate of 5.46 million units. The Chicago Fed December National Activity Index came in at minus 0.22, versus November's negative 0.36 read. December U.S. leading indicators fell 0.2%.

European markets gained 2%-3.3%. Euro zone Purchasing Managers Index (PMI) for January fell to 53.5 from 54.3 last month.

For the week, US indices gained 0.7%-2.3%. European markets, except a 0.9% cut in Italy, gained 2%-3%. Nymex oil rose 9.4% for its biggest weekly gain since August.

AT HOME

It was a good end to the week as benchmark indices, after a gap up opening, moved further higher through the session to end with hefty gains of 2%. Sensex soared 473 points to settle at 24436 while Nifty finished at 7422, up 146 points. BSE mid-cap and small-cap indices gained 1.9% and 2.2% respectively. Except a 2.4% cut in BSE Telecom index, all the sectoral indices ended higher with  Metal and Auto indices leading the tally, up 4.3% and 3.6% respectively.

FIIs net sold stocks worth Rs 770 cr but net bought index futures and stock futures worth Rs 557 cr and 859 cr respectively. DIIs were net buyers to the tune of Rs 916 cr.

Rupee appreciated 39 paise to end at 67.625/$.

ITC missed street estimates with December quarter net profit rising 0.6% y-o-y to Rs 2652 cr. Revenue rose 2.6% to Rs 9177 cr. Operating profit grew at lower-than-expected 4% to Rs 3605 cr while margin was in line, expanding 60 bps to 39.3%.

For the week, Sensex and Nifty lost 0.1% and 0.2% respectively.

OUTLOOK

Today morning Asian markets are trading with gains of 0.5%-1.5% and SGX Nifty is suggesting about 15 points higher opening for our market.

Readers would recall that in Thursday's report we had mentioned that while Nifty closed at a fresh low on Wednesday, RSI made a higher bottom, forming a "positive divergence" on the daily chart. We had therefore advised booking some profit in short positions and trailing the stop loss in remaining ones to 7440, which was the immediate hurdle on the hourly chart.

The benchmark, after making a double bottom near Wednesday's low of 7240 on Thursday, surged 2% on Friday to close at 7422.

After today's positive start, benchmark would be closer to 7440 hurdle mentioned above, a sustained trading above which will generate a "buy" on the hourly chart and can take the benchmark to 7605-7620 area, where next set of resistance is placed. 

On the way down 7240 is the immediate support, upon breach of which 7100, the 50% retracement level of the entire 5119-9119 upmove, would be the next support to eye.

Traders are advised to wait for the breach of 7240-7440 range for taking a fresh view on Nifty.

HDFC Bank will report its quarterly earnings today.