11070 IS THE NEXT TARGET; TRAIL STOP-LOSS TO 11350

11070 IS THE NEXT TARGET; TRAIL STOP-LOSS TO 11350

WORLD MARKETS

Dow and S & P 500 plunged 2.4% each while Nasdaq nosedived 3.4% after China decided to raise tariffs on some U.S. goods in the ongoing trade war.

China will hike tariffs on $60 billion worth of U.S. imports, starting on June 1. The goods targeted include a broad range of agricultural products. This comes after Trump raised tariffs on Chinese imports last week.

Trump tweeted yesterday that China will be “hurt very badly if you don’t make a trade deal,” noting that companies would be forced to leave the country without an agreement.

Bonds rose on safe haven buying and the benchmark 10-year Treasury yield fell to 2.39% while the 2-year rate dipped to 2.17%.

US oil fell 1%, or 62 cents to $61.04 while Brent fell 42 cents to $70.20.

European markets fell 0.6%-1.5%.

AT HOME

Sensex and Nifty nosedived 1% and 1.2% respectively, extending the losing streak to ninth consecutive day and closing at fresh two-month low. Sensex settled at 37090, down 372 points while Nifty lost 130 points to finish at 11148. BSE mid-cap and small-cap indices nosedived 1.8% and 2.2% respectively. Except a 0.1% higher IT index, all the BSE sectoral indices ended in red with Healthcare and Capital Goods indices leading the losses, down 3.5% and 2.5% respectively.

FIIs net sold stocks and index futures worth Rs 1056 cr and 138 cr respectively but net bought stock futures worth Rs 186 cr. DIIs were net buyers to the tune of Rs 1058 cr.

Rupee plunged 62 paise to end at 70.53/$, suffering the worst fall since April 5.

India's April CPI inched up to a six-month high of 2.92% from 2.86% in March. Core CPI however eased to 4.6% from 5%.

HDFC reported better-than-expected Net profit and NII numbers. Net profit surged 26.8% y-o-y to Rs 2861 cr while NII rose 6% to Rs 3183 cr. Gross NPA ratio improved to 1.18% from 1.22% q-o-q. Net interest margin fell to 3.3% from 3.5% while loan growth stood at 12.1%.

ITC's Q4 net profit and revenue met estimates while EBITDA missed expectations marginally. Revenue rose 13.3% y-o-y to Rs 11992 cr, EBITDA was up 10.3% at Rs 4752 cr, margin contracted 100 bps to 38.1% while net profit climbed 18.7% to Rs 3482 cr.

OUTLOOK

Today morning, Hang Seng and Nikkei are down 2% and 1.3% respectively while Shanghai is off 0.2%. SGX Nifty is suggesting about 40 points lower start for our market.

As you would agree, we have been negative on Nifty ever since 11550 support was taken out and have been advising holding on to short positions with a trailing stop-loss. After 11370 target was achieved, we had given next targets of 11220, followed by 11070.

Nifty yesterday achieved 11220 and went further lower to touch a low of 11125 before closing at 11148 and is set to open near 11100 today.

11070, the 61.8% retracement level of the entire 10585-11856 upmove, continues to be next downside target to eye. Below 11070, 67% retracement level of this upmove, placed at 11005, would be the next important support.

Immediate resistance on the hourly chart has moved lower to 11350, with the stop-loss of which, trading shorts should be held on to.