NIFTY REBOUNDS AFTER ACHIEVING 10558 TARGET; ALL EYES ON MPC

NIFTY REBOUNDS AFTER ACHIEVING 10558 TARGET; ALL EYES ON MPC

WORLD MARKETS

Dow ended marginally in the red while S & P 500 and Nasdaq rose 0.1% and 0.4% respectively amid a continued focus on trade tensions. Nasdaq rose to all-time high as Amazon and Netflix gained.

Media reports suggested that China reportedly agreed to purchase almost $70 billion in U.S. agriculture and energy products from the U.S. if the latter held off on imposing tariffs against Chinese imports.

White House economic advisor Larry Kudlow yesterday said that President Trump was considering separate negotiations with Canada and Mexico as NAFTA negotiations continue.

May ISM non-manufacturing index came in at 58.6, beating the expected print of 57.6.

WTI crude rose 77 cents or 1.2% to $65.52, rebounding from a near two-month low of $64.22 earlier in the session.

European markets, except a 0.1% higher DAX, lost 0.2%-1.2% with Italy being the top loser. The IHS Markit's final composite PMI for Eurozone fell to an 18-month low of 54.1.

AT HOME

Benchmark indices ended lower by three tenth of a percent after a volatile session, extending the losing streak to third consecutive day. Sensex settled 108 points lower at 34903 while Nifty finished at 10593, down 35 points. BSE mid-cap and small-cap indices saw deep cuts of 1.2% and 2.4% respectively.  Except 0.2% and 0.1% higher Energy and Oil & Gas indices respectively, all the BSE sectoral indices ended in red with Telecom and Capital Goods indices leading the tally, down 3.1% and 2% respectively.

FIIs net sold stocks, index futures and stock futures worth Rs 158 cr, 499 cr and 828 cr respectively. DIIs were net buyers to the tune of Rs 474 cr.

Rupee depreciated 3 paise to end at 67.14/$.

India's May Nikkei Services PMI came in at 49.6, down from 51.4 in April.

OUTLOOK

Today morning, Nikkei and Hang Seng are up 0.1% and 0.4% respectively but Shanghai is down 0.2%. SGX Nifty is suggesting a marginally lower start for our market.

After Nifty broke the 10640 support, we had given downside target of 10558, which was the low made last week. Yesterday Nifty touched a low of 10550 before closing at 10593, achieving this target and vindicating our view.

10550 is the immediate support to eye below which 10470, where 34-week moving average is placed, would be the next important support to eye.

10690 is the immediate resistance above which 10770, the top made last week, would be the bigger hurdle to eye.

Key event to watch out would be Monetary Policy Committee's interest rate decision. While most agree that inerest rate hike is coming owing to retail inflation, which is running above RBI's 4% target level, the views are divided over whether the same would happen today or at the next meeting. However, even if it doesn't come today, the MPC is expected to change its stance from "Neutral" to a tightening bias. Markets would watch out for cues to future interest rate hikes.