NIFTY TUMBLES AFTER FAILING TO CROSS 7770 HURDLE;
VINDICATES OUR CAUTION
WORLD MARKETS
US indices, weighed down by overall
weakness in world equities, fell 0.8%-1% yesterday, marking biggest fall in
nearly a month.
ISM non-manufacturing PMI for March
came in at 54.5, up from February's 53.4 print. The U.S. Markit services PMI
for March also rose, coming in at 51.3 versus 49.7 in February.
Nymex oil rose 19 cents to $35.89 a barrel.
Brent rose 18 cents to $37.87. Gold gained #10 to $1230 an ounce. Yen traded
near its strongest level against the US dollar since October 2014.
US 10-year yield fell to 1.717%, its
lowest since March 1. The German 10-year yield recovered slightly after a sharp
fall to a low of 0.081%, its lowest since April 2015.
European markets, weighed down by
weakness in natural resource stocks, tumbled 1.2%-3%. Eurozone composite as
well as Services PMI for March came in at 53.1, both below flash estimates. Data
from Germany showed that industrial orders fell in February as foreign demand
weakened.
Earlier, Nikkei and Hang Seng fell 2.4% 1.5% respectively.
Shanghai Composite closed up nearly 1.5%.
AT HOME
After a gap down opening, benchmark
indices extended the weakness through the session to end with deep cuts of 2%,
suffering the largest cut since 11th February. Sensex slumped 516 points to
settle at 24883 while Nifty lost 156 points to finish at 7603. BSE mid-cap and
small-cap indices lost 1.4% each. Except a 0.3% rise in BSE Consumer Durable
index, all the sectoral indices ended in red with Telecom index and Bankex
leading the losses, down 3.7% and 3.2% respectively.
RBI, in its first bi-monthly monetary
policy meeting of the fiscal year, cut its policy repo rate by 25 bps to 6.50%
as widely expected and also said that it would maintain an 'accommodative
stance' on monetary policy, meaning it was open to more rate cuts in future
depending on macroeconomic conditions.
Statutory Liquidity Ratio, the percentage
of liabilities that banks have to hold in liquid assets, was also cut by 25 bps
to 21.25%. More importantly the central bank announced steps to boost liquidity
in the system which would help banks pass on the benefits of lower rates to its
borrowers. These included lowering the liquidity deficit in the system to a
position 'closer to neutrality'. These included reducing the daily maintenance
of CRR from 95% of the requirement to 90% and lowering the liquidity deficit in
the system to a position 'closer to neutrality'. The daily average liquidity
deficit in the system is around Rs 1.5 lakh crore, and bringing it to near zero
will free up that much funds and help lower cost of funds. The RBI reiterated
its FY17 growth guidance of 7.6%, on back of assumptions of normal monsoon and
boost in consumption via the Seventh Pay Commission implementation. Rajan said
that the implementation is likely to hurt inflation by 1-1.5% over a two-year
period.
FIIs net sold stocks and index
futures worth rs 801 cr and 1224 cr respectively but net bought stock futures
worth Rs 324 cr. DIIs were net buyers to the tune of Rs 56 cr.
Rupee depreciated 26 paise to end at
66.46/$.
OUTLOOK
Today morning Asian markets are
trading mixed with modest changes and SGX Nifty is suggesting a flattish start
for our market.
Readers would recall that we, for
past couple of sessions, have been saying that after a steep run-up since the
budget day, Nifty is close to important 34-week moving average hurdle, a
crossover of which is required for the fresh upmove.
The benchmark, after getting resisted
around the same level over past couple of days, plunged sharply to 7603
yesterday, vindicating our view.
After yesterday's steep fall, the
benchmark is close to 7582 bottom made last week. Upon breach of that, next
support to eye would be about 7480, where the previous bottom on hourly chart
made on 17th March is placed.
Traders are advised to hold on to
short positions with the stop loss of 7710, which is the immediate resistance
on the hourly chart.
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