GAP-DOWN OPENING AWAITS ON RBI GOVERNOR’S EXIT; ASSEMBLY ELECTION RESULTS IN FOCUS

GAP-DOWN OPENING AWAITS ON RBI GOVERNOR’S EXIT; ASSEMBLY ELECTION RESULTS IN FOCUS

WORLD MARKETS

After falling nearly 2% in the initial trade, US indices recouped all the losses and some more to end with gains of 0.1%-0.7%. Shares of technology companies posted strong rebounds across the board.

Initial selling was attributed to a flattening yield curve and a delayed Brexit vote in the United Kingdom. The spread between the short-term 2-year Treasury note yield and its 10-year counterpart further narrowed, potentially signaling an economic slowdown is ahead.

UK Prime Minister Theresa May announced the delay of a key Brexit vote in the country's parliament. Originally, it was scheduled to be held Tuesday. Sterling slipped to one-and-a-half year low of $1.266 on the news.

Worries over the ongoing U.S.-China trade relation also weighed on sentiment. On Sunday, China summoned the U.S. ambassador to Beijing to protest Huawei CFO Meng Wanzhou's detention.

European markets fell 0.8%-1.8%

AT HOME

Benchmark indices nosedived 2%, suffering worst fall in 2-months and closing at the lowest level in a month. Sensex lost 713 points to settle at 34959 while Nifty finished at 10488, down 205 points. BSE mid-cap and small-cap indices fell 1.8% each. All the BSE sectoral indices ended in red with Realty and Telecom indices leading the losses, down 3.2% and 2.7% respectively.

FIIs net bought stocks worth Rs 116 cr but net sold index futures and stock futures worth Rs 1012 cr and 852 cr respectively. DIIs were net sellers to the tune of Rs 146 cr.

Rupee depreciated 54 paise to end at 71.34/$, the lowest close since November 20.

The Reserve Bank of India's governor, Urjit Patel, resigned with immediate effect, raising concerns over the independence of the central bank. Following the announcement, the rupee fell sharply against the dollar and is currently trading around 72.50 in NDF market as against yesterday's close of 71.34/$.

OUTLOOK

Today morning, Nikkei is down 0.4%, Hang Seng is flat while Shanghai is up 0.2%. SGX Nifty is about 150 points lower start for our market.

At the risk of repeating, we had turned our view negative since 10750 support was broken and have been advising holding on to short positions with a trailing stop-loss.

In yesterday's report we had given downside targets of 10535 followed by 10470 below 10588.

Nifty plunged all the way to 10475 before closing at 10488, nearly achieving the 10470 target above and vindicating our view.

The benchmark is slated to open around 10350 today. 10360 and 10310 are the 61.8% and 67% retracement levels of the entire 10004-10941 upmove, making 10360-10310 an important support zone. If 10310 gives way, 10004, the bottom made in late October, would be the next crucial support.

10600-10560, the gap created by yesterday's gap down opening, would now be the immediate hurdle, with the stop-loss of which, trading shorts should be held on to.

The counting of votes for five assemble elections - Rajasthan, Madhya Pradesh, Chhattisgarh, Telangana and Mizoram, will take place today. Exit polls had predicted Win for Congress in Rajasthan and tough fight in Chhattisgarh and Madhya Pradesh.

Winter session of the Parliament starts today.