NIFTY NEARLY ACHIEVES 8740 TARGET; TRAIL STOP-LOSS TO 8610
S & P 500 ended flat, Dow rose 0.1% and Nasdaq added half a percent yesterday. Apple spiked 6% after reporting better-than-expected quarterly results Tuesday after the close.
The Federal Reserve kept its benchmark overnight lending rate target unchanged at 0.5% to 0.75%, and its statement noted that "Measures of consumer and business sentiment have improved of late".
The latest report from ADP and Moody's showed private companies added 246,000 jobs in January, well above the expected 165,000. IHS Markit Manufacturing index's final read for January came in at 56, marking the strongest manufacturing production growth for almost two years. December construction spending fell 0.2%, while economist had forecast a gain 0.4%.
US crude rose $1.07 to $53.88 per barrel and Brent added $122 to $56.80 after U.S. President Donald Trump took an aggressive stance towards Iran for test-firing a ballistic missile. Gold fell $3 to $1208 per ounce.
Dollar index rose about 0.2%. US treasuries fell with the benchmark 10-year note yield holding around 2.475% and the two-year note yield near 1.22%.
European markets gained 0.1%-1.1%. Basic resources led the gains after data showed an expansion in Chinese industrial production.
Japanese policymakers rejected Trump's charges of currency manipulation. Prime Minister Shinzo Abe defended the Bank of Japan's huge stimulus program and said it was to reflate the economy, and was not currency manipulation.
Giving a thumbs-up to the budget, Sensex and Nifty soared 1.8% each, registering biggest gain since 25th November and closing at the highest level since 5th October, 2016. Sensex climbed 486 points to settle at 28142 while Nifty finished at 8716, up 155 points. BSE mid-cap and small-cap indices gained 1.8% and 1.7% respectively. BSE Auto and Finance indices were the top Nifty gainers, putting on 3.5% and 2.9% respectively while IT and Teck indices were the top losers, giving away 1.2% and 0.9% respectively.
Presenting his third budget, Finance Minister Jaitley pledged to keep the fiscal deficit at 3.2% of GDP in 2017-18, from 3% in 2016-17, but promised to get back to 3% in the year after.
The budget announced a 24% hike in rural development allocation to Rs 1.87 lakh cr. Allocation for MNREGS was hike 24% to Rs 48000 cr.
From the stock market perspective, major relief came in the form of maintaining status-quo for short-term and long-term capital gains tax rates. Exempting foreign portfolio investors from indirect transfers also came as a relief after a tax circular in December that had sparked fears among overseas investors.
Jaitley kept the income-tax exemption limit at Rs 2.5 lakh a year, but marginally rejigged the tax rates at the lower and higher ends. Those earning between Rs 2.5 lakh and Rs 5 lakh will now be taxed at 5% from 10% earlier, and those earning between Rs 50 lakh and Rs 1 crore annually will have to pay surcharge of 10% in addition to a 30% income tax. The minister, however, did not raise tax breaks offered under the popular Section 80C.
The Budget left the headline corporate income tax rate unchanged at 30%. However, tax rate for medium and small enterprises with annual turnover of upto Rs 50 crore was cut to 25% from 30%.
The total capital outlay for Indian railways have been raised to 1.31 lakh crore in 2017-18 from Rs 1.21 lakh crore in 2016-17, while the outlay for the national highway programme has been raised by Rs 7,000 crore to Rs 64,000 crore in 2017-18.
Budget announced changes in electoral funding, under which political parties can only receive up to Rs 2,000 in cash from a single source, and proposed to ban cash transactions above Rs 3 lakh.
Jaitley announced the abolition of the Foreign Investment Promotion Board (FIPB), a move that will hasten fund flow into the economy He said that new schemes will be launched in leather and footwear sector, while 100 Indian International Skill Centers will be established, giving a push to the government’s flagship Make India and Skill India schemes
FIIs net bought stocks and index futures worth Rs 93 cr and 119 cr respectively but net sold stock futures worth Rs 447 cr. DIIs were net buyers to the tune of Rs 1134 cr.
Rupee appreciated 39 paise to end at 67.48/$.
India's January Nikkei manufacturing PMI came in at 50.4, up from 49.6 in December.
Maruti reported 27% rise in January sales at 1.44 lakh units. Ashok Leyland sales were up 7% at 14872 units. Tata Motor sold 1% less vehicles at 46349 units. M & M sold 10% less vehicles at 39303 units while tractor sales rose 6% to 15909 units. Hero Motocorp sales dipped 13.5% to 4.87 lakh units.
Today morning Asian markets are trading with cuts of upto 0.4% and SGX Nifty is suggesting about 30 points lower start for our market.
Readers would recall that After Nifty achieved and crossed the 8560 target, we have been working with the target of 8740, which was the top made in late October 2016. We had also advised holding on to long positions with the stop-loss of 8460. Yesterday, the benchmark, after touching a low of 8537, reversed and rallied sharply to touch a high of 8722, coming in very close to 8740 target and vindicating our view.
Above 8740, 8800, the top made in early October 2016, would be the next target to eye. Immediate support on the hourly chart has moved up to 8610, with the stop-loss of which trading longs should be held on to.