11620 ABOVE 11400; 11180-11080 IS THE SUPPORT ZONE

11620 ABOVE 11400; 11180-11080 IS THE SUPPORT ZONE

WORLD MARKETS

US indices fell 0.5%-0.8% on Friday on news that Chinese officials were cutting short their visit to the U.S., dampening hope around trade negotiations between the two countries.

Earlier, deputy trade negotiators from the U.S. and China resumed face-to-face talks for the first time in almost two months.

St. Louis Fed President James Bullard explained in a note why he thought the Fed should have made a deeper cut this week.

Earlier, China cut a key lending rate for the second consecutive month , following in the footsteps of the European Central Bank and the U.S. Federal Reserve.

WTI crude fell 4 cents, or 0.1% to $58.09 per barrel while Brent futures fell 12 cents to settle at $64.28.

In Europe, FTSE fell 0.2% while DAX and CAC rose 0.1% and 0.6% respectively.

For the week, US indices fell 0.5%-1.1%, breaking three-week winning streak. In Europe, FTSE fell 0.3%, DAX was flat while CAC rose 0.6%. In Asia, Nikkei rose 1.5% but Hang Seng nosedived 3.4% and Shanghai fell 0.8%. For the week, Brent rose 6.7%, its biggest gain since January while WTI rose 5.9%, notching its biggest weekly gain since a 9% surge in June.

AT HOME

Thanks to big bang announcement from FM, Sensex and Nifty soared 5.3%, registering biggest percentage gain in a decade. Sensex settled at 38014, up 1921 points while Nifty added 569 points to finish at 11274. BSE mid-cap and small-cap indices jumped 6.3% and 3.9% respectively. Except 1.1% and 0.4% lower IT and Teck indices respectively, all the BSE sectoral indices ended in green with Auto index and Bankex leading the tally, up 9.8% and 8.2% respectively.

FIIs net bought stocks, index futures and stock futures worth Rs 36 cr, 5079 cr and 1682 cr respectively. DIIs were net buyers to the tune of Rs 3001 cr.

Rupee appreciated 37 paise to end at 70.94/$.

In a surprise and big move, government, on Friday, cut corporate tax rate for companies that do not avail of any tax incentive to 22% from 30%. Companies, incorporated after 1st October, 2019 will have to pay an even lower corporate tax rate of 15%. Minimum Alternate Tax (MAT) was cut to 15% from 18.5% for companies that continues to avail exemptions and incentives. These measures will cost the exchequer Rs 1.45 lakh cr.

FM Sitharaman also announced that the government will not levy enhanced surcharge introduced in Budget on capital gain arising from the sale of equity shares and units of mutual funds where STT has been paid. The super-rich tax will also not apply on capital gains arising from the sale of any security including derivatives in hands of foreign portfolio investors (FPIs). She added that listed companies which had announced share buybacks before 5 July, the day the Union Budget brought share buybacks under the tax net, will be exempt from buyback tax.

GST Council scrapped tax on hotel rooms with tariff below Rs 1000 and cut rate on hotel rooms with tariff over Rs 7500 to 18%. The council rejected the proposal of rate reduction on biscuit while proposal on rte reduction on auto was not considered. Rate on Caffeinated drinks was hiked to 28% from 18%.

OUTLOOK

China’s Ministry of Commerce said over the weekend that economic and trade teams from the two economic powerhouses held “constructive” discussions in Washington late last week. They added that both the U.S. and China agreed to maintain in contact.

Today morning, Nikkei is shut while Hang Seng is flat and Shanghai is off 0.9%. SGX Nifty is trading around 11450, suggesting nearly 150 points higher start for our market when compared to close of Nifty future on Friday.

After the mammoth upmove on Friday, Nifty is very close to important resistance levels. 20 and 34-week moving averages are placed at 11362 and 11401 respectively while 11370 is where 50% retracement level of the entire 12103-10637 fall is placed. This makes 11360-11400 important resistance zone, a crossover of which is required for a fresh upmove. If that happens, 11620, the 67% retracement level of the entire fall, would be the next upside target.

On the way down, 11180-11080, where erstwhile tops made on daily chart are placed, would now act as the support zone.