ALL EYES ON MONETARY POLICY

ALL EYES ON MONETARY POLICY

WORLD MARKETS

Dow and S & P 500 gained 0.8% each while Nasdaq rose 0.6%, extending Tuesday's upmove. On Tuesday, Dow and S & P 500 had surged 2% each while Nasdaq climbed 2.6% after Federal Reserve Chairman Jerome Powell signaled the central bank was open to the possibility of slashing interest rates in the face of international trade disputes.

Powell said the central bank will keep an eye on current developments in the economy, and would do what it must to “sustain the expansion.”

Data from ADP and Moody’s Analytics showed private payrolls increased by just 27,000 in May, its lowest since March 2010 and as against expected figure of 173000.

White House trade advisor Peter Navarro said that U.S. levies on Mexican goods “may not have to go into effect,” depending on how talks between the two countries go. Meanwhile, several Republican lawmakers have noted their opposition to new tariffs on Mexican imports while some have hinted at the possibility of blocking such levies.

WTI crude plunged 3.4% to $51.68 and Brent tumbled 2.1% to $60.66 a barrel after data from EIA showed U.S. commercial crude inventories jumped by 6.8 million barrels in the week through May 31.

European markets, except 0.4% lower Italy, gained 0.1%-0.4%. Italy fell after the European Commission threatened disciplinary measures on the country over its rising public debt. Composite and services PMI figures for the euro area showed the U.K. economy was close to stagnation due to uncertainty over Brexit, while Germany’s services sector provided growth momentum for its cooling economy. French business activity strengthened in May.

AT HOME

Benchmark indices fell about half a percent on Tuesday, extending "one-day-up, one-day-down" phenomenon. Sensex lost 184 points to settle at 40083 while Nifty finished at 12021, down 66 points. BSE mid-cap and small-cap indices fell 0.2% each. BSE IT and Teck indices tumbled 1.6% and 1.5% respectively, becoming top losers among the sectoral indices while Capital Goods and Utilities indices were the top gainers, up 0.4% each.

FIIs net sold stocks, index futures and stock futures worth Rs 416 cr, 1153 cr and 749 cr respectively. DIIs were net sellers to the tune of Rs 355 cr.

Rupee ended unchanged at 69.25/$.

OUTLOOK

Today morning, Nikkei is up 0.1% while Hang Seng and Shanghai are down 0.1% and 0.5% respectively. SGX Nifty is trading around 12050, suggesting a marginally lower start when compared to Tuesday's close of Nifty futures.

After Nifty broke above the 12041 resistance on Monday, we had given next upside target of 12250 and had advised trailing the stop-loss to 11940 in Tuesday's report.

Nifty, on Tuesday, slipped 66 points to settle at 12021 and is set to open little changed today.

11940 continues to be immediate support on the hourly chart, with the stop-loss of which, existing longs should be held on to. 12250 continues to be upside target to eye.

Key event to watch out today would be decision of RBI's Monetary Policy Committee. While there is near consensus on a 25 bps rate cut, some are even expecting 35 or even 50 bps cut in light of benign inflation and weakening growth. Market will also watch out whether the stance of the policy is changed to "Accommodative" from "Neutral".