DOVISH FED SPARKS RISK-ON TRADE; NIFTY SET TO RE-CHALLENGE 7600 HURDLE
US indices gained 0.4%-0.8% on the back of rebound in oil prices and dovish Fed statement.
The Fed left rates unchanged at between 0.25% and 0.5% at its March meeting and cut its projection for the number of 2016 rate hikes from four to two, and projected just two hikes in 2017. This was far more dovish than markets had expected, resulting in sharp rallies in commodities, emerging markets and commodity-related currencies.
The central bank also cut its outlook for 2016 GDP growth to 2.2% from 2.4% previously.
Nymex oil climbed 5.8% to $38.46 a barrel and Brent rose 4% to $40.33 after Qatari oil ministry said that OPEC and non-OPEC producers will to hold a meeting in Doha on April 17 and data from Energy Information Administration showed a build-up of 1.3 mn barrels in the US, instead of the expected 3.4 mn.
In economic news, CPI declined 0.2% but core CPI rose 0.3% in February for a 2.3% rise over the 12 months through February. Housing starts rose 5.2% in February. Industrial production declined 0.5% in February, with capacity utilization at 76.7%.
Weekly mortgage application volume fell 3.3% on a seasonally adjusted basis, but still nearly 21% higher y-o-y.
Dollar index fell more than a percent to 95.5, its lowest since Feb. 12. Gold jumped more than 2% to $1261 an ounce.
In Europe, FTSE and DAX gained about half a percent while France, Italy and Spain ended with modest cuts.
It was a dramatic day of trade as benchmark indices, after falling about three fourth of a percent in the morning trade, climbed nearly a percent and quarter from the bottom of the day to end higher by half a percent. Sensex settled at 24682, up 131 points while Nifty added 38 points to finish at 7499. BSE mid-cap and small-cap indices however lost 0.4% and 0.2% respectively. BSE Bankex and IT indices gained 0.9% each, becoming top gainers among the sectoral indices while Consumer Durable index plunged 3.6%, becoming top loser, followed by 1.1% cut in Telecom index.
FIIs net bought stocks worth Rs 626 cr but net sold index futures and stock futures worth Rs 115 cr and 955 cr respectively. DIIs were net sellers to the tune of Rs 680 cr.
Rupee appreciated 16 paise to end at 67.22/$.
The Lok Sabha yesterday passed the contentious Aadhaar (Targeted Delivery of Financial and other subsidies, benefits and services) Bill, 2016, even as it was sent back by the Rajya Sabha, which sought five amendments to the bill. The government had tabled the Aadhaar Bill as a money bill, on which the Rajya Sabha does not have the power to vote and can only suggest changes. With Lok Sabha having ignored the proposed amendments, the Aadhaar Bill is now deemed to have been passed by Parliament.
Today morning Asian markets are trading with gains of 0.5%-1.5% and SGX Nifty is suggesting about 90 points higher opening for our market.
In yesterday's report we had reiterated the view that 7460 is the immediate support, a sustained trading below which will generate a sell on the hourly chart and can take the benchmark to around 7300, where 34-DMA is placed.
Nifty broke this support and fell to 7405 intraday but rebounded sharply in the noon trade to end at 7499.
A big gap up opening today would take the benchmark closer to 7600 hurdle we have been talking for couple of days.
A successful crossover of 7600 would open up the space for the further upside till about 7800, where 34-week moving average is placed.
Traders can initiate fresh longs upon crossover of the high made in first hour of trade with the stop loss of 7490, which is the immediate support on the hourly chart.