BENCHMARK INDICES REBOUND FROM MORNING LOWS; 10680-10840 ARE THE LEVELS TO EYE

BENCHMARK INDICES REBOUND FROM MORNING LOWS; 10680-10840 ARE THE LEVELS TO EYE

WORLD MARKETS

US indices gained 0.2%-0.6% as retail shares jumped on the back of strong quarterly earnings from retailer Macy's.

Macy's rallied 10.8% after reporting same-store sales growth of 4.2% last quarter versus an estimate of 1.4%.

U.S. 10-year yield surpassed the 3.1% level for the first time since Jul 8, 2011.

Oil rose to a fresh 3-1/2 year high buoyed by a second consecutive weekly decline in U.S. crude inventories and continued signs of a pull back in the global glut of oil. WTI rose 0.3% to $71.49 while Brent rose 85 cents or 1.1% to $79.28/bbl.

FTSE, CAC and DAX gained 0.2%-0.3% but Italy, on concerns over its future government, plunged 2.3% and Spain fell 1%. Italian 10-year bond yield rose 16 basis points, its biggest daily rise since November 2016.

US President Trump said that whether his planned meeting with North Korean leader Kim Jong Un goes through remained to be seen. Earlier, North Korea said it would rethink the June 12 summit if the U.S. insisted on denuclearization.

AT HOME

After falling nearly a percent in first hour, Sensex and Nifty recouped nearly half of the losses through the session to end lower by 0.4% and 0.6% respectively. Sensex lost 156 points to settle at 35388 while Nifty finished at 10741, down 61 points. BSE mid-cap index fell 0.3% while small-cap index rose 0.1%. BSE Energy and Oil & Gas indices tumbled 1.8% and 1.6% respectively, becoming top losers among sectoral indices while Realty and FMCG indices were the top gainers, up 2% and 1.6% respectively.

FIIs net sold stocks, index futures and stock futures worth Rs 699 cr, 637 cr and 397 cr respectively. DIIs were net buyers to the tune of Rs 229 cr.

Rupee appreciated 32 paise to end at 67.79/$.

Karnataka governor yesterday invited the BJP to form the government and has given him 15 days to prove majority. Congress moved to Supreme Court against the decision but Supreme Court, in late night proceedings, refused to stay Yeddyrappa's swearing-in as Karnataka CM. A three-judge apex court bench also made it clear that the swearing-in and the government formation would be subject to the final outcome of the case before it. Next hearing will take place on Friday 10.30 am.

JSW Steel earnings beat estimates on all counts. Net profit soared 186% y-o-y to Rs 2879 cr while revenue rose 25% to Rs 20817 cr. EBIDTA rose 67% to Rs 5290 cr and margin expanded 640 bps to 25.4%.

Tata Steel to beat estimated with consolidated net profit of Rs 14688 cr as against a loss of Rs 1168 c in the same quarter last year, on the back of a one-time gain of Rs 11376 cr from the restructuring of its UK business' pension scheme. Revenue grew 6.7% to Rs 36132 cr. Margins fell to 17.98% from 20.75%.

ITC reported in-line with estimated net profit but beat on margin. Net profit rose 9.9% y-o-y to Rs 2933 cr while revenue fell 5% to Rs 10586 cr on account of 4.3% decline in cigarette sales. EBIDTA rose 7% to Rs 4144 cr while margins expanded 430 bps to 39.1%.

Hindalco's revenue was slightly above estimate but operational performance as well as net profit fell short of expectation. Net profit fell 25% y-o-y to Rs 377 cr. Revenue rose 6% to Rs 11681 cr. EBIDTA fell 6.6% to Rs 1258 cr and margin fell 140 bps to 10.8%.

OUTLOOK

Today morning, Nikkei is up 0.4% but Hang Seng and Shanghai are modestly lower. SGX Nifty is suggesting a flattish start for our market.

In yesterday's report we had mentioned that a breach of 10760 would generate a "Sell" on the hourly chart and 10670, where 20-DMA was placed, would be the next downside target if that happens.

Nifty yesterday broke 10760 support and plunged all the way to 10700 but recovered later to end at 10741.

20-DMA, placed around 10680, continues to be immediate downside support below which 10600 would be the next important support to eye.

10840, the 61.8% retracement level of the recent 10930-10700 fall, would be the immediate hurdle on the way up, with the stop-loss of which, trading shorts can be held on to.

Bajaj Finance and Escorts will report their quarterly earnings today.