GROWTH WORRIES PULL WORLD EQUITIES BACK; INFY, IIP IN FOCUS AT HOME

GROWTH WORRIES PULL WORLD EQUITIES BACK; INFY, IIP IN FOCUS AT HOME

WORLD MARKETS

US indices nosedived 2% yesterday, erasing all and more of the previous day's rally, on concerns over slowing growth in Europe and hawkish comments from some Fed members.

Data from Germany showed that exports dropped 5.8% in August, the largest decline since the financial crisis. Remarks from ECB President Mario Draghi also weighed. Speaking at the Brookings Institute, he reiterated that quantitative easing would not be effective without economic reforms and warned of deflation risks.

In the US, weekly jobless claims came in at 287000 vs 294000 estimate with the four-month average hitting an eight-year low. Wholesale inventories rose 0.7% in August, compared to expectations of a 0.3% gain.

European markets, except a 0.1% gain in DAX, fell between 0.6%-1.3% with Italy leading the tally after the Bank of Italy reported that bad loans at Italian banks had grown by 20% in August to a record high.

The Bank of England left its benchmark interest rate unchanged as expected, as wage growth and productivity remained surprisingly weak, lagging the country's economic recovery.

Brent crude dropped below $90 a barrel for the first time since 2012 and U.S. crude hit $85.3 a barrel, a 22-month low. Gold rose 1.6% to $1225 an ounce.

Fed Vice Chairman Stanley Fisher and San Francisco Fed President John Williams both said they expect higher interest rates by mid-2015.

                                                             

AT HOME

After a gap up opening, benchmark indices extended the upmove through the trading session to end with hefty gain of a percent and half, registering the biggest single day rise since 18th September and breaking three day losing streak. Sensex surged 390 points to settle at 26637 while Nifty finished at 7960, up 118 points. BSE mid-cap and small-cap indices climbed 1.8% and 1.6% respectively. All the BSE sectoral indices ended in green with Capital Goods and Realty indices leading the tally, putting on 3% and 2.6% respectively.

FIIs net sold stocks and stock futures worth Rs 21 cr and 71 cr respectively but net bought index futures worth Rs 566 cr.

Rupee appreciated 35 paise to end at 61.05/$.

OUTLOOK

Today morning Asian markets are trading with cuts in the vicinity of a percent and SGX Nifty is suggesting about 70 points lower opening for our market.

In yesterday's report we had mentioned that 7930 is the immediate resistance, a crossover of which is required to generate a buy on the hourly chart, which in turn can open up the space for the further upside till 8030.

The benchmark opened with a gap up yesterday, took out 7930 hurdle in the initial trade itself, moved further higher to touch a high of 7972 and finally settled at 7960.

Today however Nifty is set to open with a gap down in the vicinity of 7900. 7886-7870, the gap created by the gap up opening yesterday, would be the immediate support to eye.  On the way up 7972, the top made yesterday would be the immediate hurdle.

Traders are advised to keep a stop loss of 7870 in trading longs. Fresh longs should be built only above 7972.

Tech major Infosys will kickstart the earning season today. Dollar revenue for the September quarter is expected to rise 2.9% sequentially to $2195 mn. Rupee revenue is expected to grow by 4.2% to Rs 13307 cr and PAT is expected at Rs 2985 cr, a growth of 3.4%. EBIDTA margin is expected to improve to 25.6% from 25.1%. Markets will however focus on comments from the new CEO Vishal Sikka on strategy and capital allocation.

IIP for August too would be released today and is expected to improve to 2.4% from July's 0.5%.