GLOBAL ECONOMIC CONCERNS CONTINUE TO WEIGH ON EQUITIES; NEGATIVE BIAS CONTINUES ON NIFTY

GLOBAL ECONOMIC CONCERNS CONTINUE TO WEIGH ON EQUITIES; NEGATIVE BIAS CONTINUES ON NIFTY

WORLD MARKETS

Dow and S & P 500 fell 0.6% each and Nasdaq tumble 1% yesterday as relentless fall in oil stoked concern over the global economy.

The fresh declines came as OPEC said it would not cut oil output despite fears of a glut, and a UAE official opposed holding an emergency meeting of the producer group to fix prices. Nymex oil dropped 3.3% to $55.91 a barrel, its lowest closing level since May 2009. Brent fell 65 cents to $61.20.

Economic data was mixed. US industrial production rose 1.3% in November vs expectation of a 0.6% rise. Home builder sentiment fell a point in December after a large jump last month. New York state manufacturing activity shrank in December.

European markets fell between 2%-2.8%.

Russia hiked its key interest rate to 17% from 10.5% effective Tuesday, citing rising devaluation and inflation risks.

AT HOME

After a gap down opening, benchmark indices recouped most of the losses in the initial trade itself and traded in a narrow range through rest of the session to finally end just marginally lower. Sensex lost 31 points to settle at 27350 while Nifty finished at 8220, down 4 points. BSE mid-cap and small-cap indices lost 0.5% and 0.6% respectively. Except a 0.4% rise in BSE Bankex, all other sectoral indices ended in red with Realty and Consumer Durable indices leading the tally, giving away 2% each.

November WPI came in at zero v/s 1.77% in October on the back of a continuous decline in fuel and food prices.  Core inflation fell to 2.21% from 2.5%.

FIIs net sold stocks and stock futures worth Rs 456 cr and 889 cr respectively but net bought index futures worth Rs 179 cr. DIIs were net buyers to the tune of Rs 136 cr.

Rupee plunged 65 paise, the most in over 4 months, to end at 62.94/$, the weakest level in 10-1/2 months.

November trade deficit hit an 18-month high of $17 bn as exports grew by tepid 7.3% to $26 bn while imports jumped 27% to $43 bn.

To revive stalled plans and help banks tide over mounting bad loans, the RBI yesterday eased norms for structuring of existing long-term project loans to infrastructure and core industries. The new guideline widens the scope of 5:25 scheme by including existing standard long-term project loans worth over Rs 500 crore to be flexibly structured and refinanced.

OUTLOOK

China's December HSBC flash PMI has come in at 49.5, lower than the estimated 49.7 figure and down from 50 in November. This is the first contraction since April.

Today morning Nikkei is down nearly 2%. Other Asian markets, except a marginally higher Shanghai, are trading with cuts of 0.5%-1%. SGX Nifty is suggesting about 60 points lower opening for our market.

In yesterday's report we had mentioned that Nifty has decisively broken important supports on the daily chart placed around 8300 and next supports to eye are 8175 and 8070, which are the 50% and 61.8% retracement levels of the 7723-8627 upmove.

Nifty yesterday saw a gap down opening and touched a low of 8152.50 from where it rebounded smartly to end at 8220. Today however, another gap down opening will take it back around the lowest level touched yesterday. Next important support to watch out continues to be 8070.

Immediate resistance on the hourly chart is placed around 8340, with the stop loss of which trading shorts should be held on to.