A BIG-GAP DOWN AWAITS

 

A BIG-GAP DOWN AWAITS

 

WORLD MARKETS

 

US indices tumbled 0.8%-0.9% on Friday as inflation fears and a worse-than-expected consumer sentiment reading overshadowed strong retail sales numbers and better-than-expected earnings reports.

 

Retail sales unexpectedly rose 0.6% in June, as against expectation of a 0.4% decline. University of Michigan's consumer sentiment index for the first half of July fell sharply to 80.8 from 85.5 last month and worse than estimates of an increase. Inflation expectations rose, with consumers believing prices will increase 4.8% next year, the highest level since August 2008.

 

During his second congressional testimony of the week on monetary policy on Thursday, Powell reiterated the view that higher inflation looked to be transitory, and he also acknowledged that price pressures were well above the central bank’s target.

 

The yield on the benchmark 10-year Treasury note was little changed at about 1.302%. Dollar index inched up 0.1% to 92.675. Spot gold dropped 0.8% to $1,814.11 per ounce.

 

Brent crude ended 28 cents, or 0.4%, higher at $73.77 per barrel while WTI rose 39 cents, or 0.54%, to $72.01 per barrel.

 

European markets fell 0.1%-0.6%. The U.K. reported 51,870 new coronavirus cases Friday, marking the first time since mid-January that daily infections have risen above 50,000. Euro zone consumer prices rose 1.9% annually after a 2% climb in May, marking the first slowdown since September 2020.

 

Earlier, the Bank of Japan kept its monetary policy unchanged and downgraded its real GDP forecast for 2021 to 3.8% growth, compared with the 4% growth projection made in April.

 

For the week, US indices fell 0.5%-1.9%, snaping 3-week win streaks.

 

Dollar index rose 0.6% for its  largest weekly gain in a month. Gold inched up 0.3%.

 

Brent fell 3.8% fall while WTI plunged 5.1% decline for their biggest weekly drop since March after Saudi Arabia and the UAE reached a compromise this week, paving the way for OPEC+ producers to finalise a deal to increase production.

 

AT HOME

 

Benchmark indices ended marginally in the red, snapping 3-day winning streak. Sensex settled at 53140, down 19 points while Nifty lost 1 point to finish at 15923. Nifty mid-cap and small-cap indices however climbed 0.4% and 1.1% respectively to hit fresh record highs. BSE Telecom and Realty indices rose 2.5% and 1.3% respectively, becoming top gainers among the sectoral indices while IT and Teck indices were the top losers, down 1% and 0.7% respectively.

 

FIIs net sold stocks and index futures worth Rs 466 cr and 1109 cr respectively but net bought stock futures worth Rs 501 cr. DIIs were net buyers to the tune of Rs 666 cr.

 

Rupee depreciated 2 paise to end at 74.56/$.

 

For the week, Sensex and Nifty gained 1.4% and 1.5% respectively, snapping 2-week losing streak.

 

HDFC Bank's NII and PAT missed estimates. NII growth slipped into single digit for the first time ever while NIM, at 4.1%, hit multi quarter low. Slippages surged 55% q-o-q to Rs 7300 cr. Gross NPA ratip rose to 5.75% from 4.97% while Net NPA ratio rose to 2.07% from 1.57%.

 

OUTLOOK

 

Today morning, Asian markets are trading with cuts of 0.6%-1.8% and SGX Nifty is suggesting arond 200 points lower start for our market.

 

In Friday's report we had said that 16200 was the next upside target to eye and had advised holding on to long positions with the stop-loss of 15780.

 

Nifty, after touching a high of 15962, eased to end at 15923. The benchmark, however, is set to open near 15750 today.

 

The low made during first hour would be the important support to eye after today's big gap-down opening. If that breaks, 15632, the low made on 9th July, would be the crucial support to eye.

 

15962, the top made last week, would now be the immediate hurdle to eye.