PLUNGING OIL TAKES US EQUITIES TO ONE MONTH LOW; NIFTY AT A CRUCIAL JUNCTURE

PLUNGING OIL TAKES US EQUITIES TO ONE MONTH LOW; NIFTY AT A CRUCIAL JUNCTURE

WORLD MARKETS                             

US indices plunged between 1.5%-1.7% yesterday, with the Dow and S & P 500 suffering the worst fall in 2 months and closing at one month low, as energy stocks plunged after price of crude fell to a new five-year low, raising global growth concerns.

Nymex crude plunged 4.5% to settle at $60.94 a barrel, while Brent fell below $65 for the first time since 2009 after OPEC lowered its demand outlook for 2015 to the lowest level in 12 years and US crude inventories rose to the highest seasonal level in weekly data that started in 1982.

European markets, except a marginally higher DAX, ended with cuts between 0.4%-0.9% as Greek political fears and slumping oil prices weigh.

Tension between Ukraine and Russia remained heightened after Ukraine's military accused separatists of violating a ceasefire.

AT HOME

After a negative start, benchmark indices recovered nearly half a percent from the bottom of the day to end modestly higher. Sensex gained 34 points to settle at 27831 while Nifty finished at 8356, up 15 points. BSE mid-cap and small-cap indices surged 0.9% and 1.1% respectively. BSE Consumer Durable index and Bankex gained the most among the sectoral indices, rising 2.4% and 1% respectively while Capital Goods and IT indices lost 1% and 0.2% respectively.

FIIs net bought stocks worth Rs 5 cr but net sold index futures and stock futures worth Rs 845 cr and 426 cr respectively. DIIs were net sellers to the tune of Rs 519 cr.

Rupee fell 14 paise to end at 62.02/$.

A Parliamentary Committee yesterday recommended a composite foreign investment cap of 49% in the insurance sector and supported a government Bill to amend the Act. At present, a limit of 26% is allowed only through the FDI route.

Coal Minister Piyush Goyal yesterday, in Lok Sabha, introduced The Coal Mines (Special Provisions) Bill 2014. This bill will replace an ordinance which outlines the procedure for auction of coal blocks that were cancelled by the Supreme Court in September.

OUTLOOK

The Union cabinet yesterday allowed state-run banks to meet their high capital requirements by diluting the government's holding in them by up to 52% in a phased manner.

Today morning, Nikkei is down more than a percent on the back of worse-than-expected machinery orders and the strength in yen. Other Asian markets are trading with cuts of upto 1% and SGX Nifty is suggesting about 30 points lower opening for our market.

In yesterday's report we had mentioned that while Nifty has achieved the downside target of 8350, it continues to be in a sell mode and next support to eye is 8282, which is the 38.2% retracement level of the entire 7724-8627 upmove. 8282 continues to be the next support to eye.

On the way up, 8430, the erstwhile support would continue to be the immediate resistance.

Having said that, Nifty is at a very crucial juncture on its daily chart. Yesterday, it bounced back from the lower band of bollinger placed around 8300. A close below this technical indicator will turn the view on the daily chart negative. Therefore, traders are advised to book profit in short positions for the time being and wait for the breach of this important support on closing basis before initiating fresh shorts.