CRUDE CLIMBS 7% TO ERASE 2015 LOSSES; NIFTY EXTENDS CORRECTION AS EXPECTED

CRUDE CLIMBS 7% TO ERASE 2015 LOSSES; NIFTY EXTENDS CORRECTION AS EXPECTED

WORLD MARKETS                             

US indices surged between 1.1%-1.8%, extending gains to second day, boosted by a surge in oil prices and alleviation of concerns in the euro zone.

Oil extended the past few days' gains to settle up $3.48, a 7% surge, to $53.05 a barrel, the highest settlement of 2015. BP's announcement that it would cut capital expenditure by 13% to $20 billion in 2015, adding to reductions planned by other major energy companies, fueled the perception that the global glut in oil supply may be overcome faster than thought. Brent gained $3 to $58 a barrel. Nymex crude is now up 22% from its intraday low of $43.58 last Thursday.

Media reports on Monday suggested that Greece's Finance Minister Yanis Varoufakis unveiled proposals to end the confrontation with its creditors by swapping outstanding debt for new growth-linked bonds. Yesterday, Varoufakis met with his Italian counterpart in Rome. Greek stocks rose 11% yesterday.

Back in the US, factory orders for December posted a greater-than-expected decline of 3.4%. January auto sales topped expectations.

European markets gained between 0.6%-2.6% with Spain and Italy leading the tally thanks to a rally in the energy and basic resources sectors and a degree of relief over Greece's latest plans to renegotiate its debt.

Mining stocks with exposure to Australia surged higher after the Reserve Bank of Australia yesterday cut rates for the first time since August 2013 as it attempts to support an economy hit by falling commodity prices.

AT HOME

After a positive start, benchmark indices saw bouts of selling through the session and finally ended lower by nearly half a percent, extending the losing streak to third straight day. Sensex settled at 2900, down 122 points while Nifty lost 41 points to finish at 8757. BSE mid-cap and small-cap indices lost 0.3% each. BSE Bankex plunged 2.6%, becoming top loser among the sectoral indices, followed by 1.4% cut in the Realty index. Oil & Gas and FMCG indices were the top gainers, putting on 2% and 1.1% respectively.

RBI, in its sixth bi-monthly policy review, left key rates unchanged as expected while announcing a 50 bps cut in SLR to 21.5%. Governor Raja said that the RBI will wait for data like upcoming GDP numbers, inflation numbers and the Union Budget for future actions.

FIIs net sold stocks, index futures and stock futures worth Rs 264 cr, 474 cr and 1550 cr respectively. DIIs were net sellers to the tune of Rs 137 cr.

Rupee appreciated 13 paise to end at 61.665/$.

PNB plunged 8.3% after reporting worse than expected earnings and deterioration in the asset quality. Net profit rose just 2.5% y-o-y to Rs 774.6 cr. NII remained almost flat at Rs 4233 cr. Gross NPAs rose 32 bps sequentially to 5.97% while Net NPAs climbed 56 bps to 3.82%.

Lupin reported 26.3% rise in consolidated net profit at Rs 601 cr on account of robust sales and improved operational efficiencies.

Hero MotoCorp reported lesser-than-expected 11% net profit growth at Rs 583 cr on revenues of Rs 6839 cr.

Oil marketing companies cut petrol and diesel prices by Rs 2.42 and 2.25 per liter, marking the 10th straight cut since oil price started turning lower in mid 2014.

OUTLOOK

China's HSBC services PMI for January has come in at 51.8, slowing down from 53.4 month-on-month and touching a six-month low.

Nikkei is up nearly 2%, Other Asian markets are up in the vicinity of half a percent and SGX Nifty is suggesting about 50 points higher opening for our market.

Ever since Nifty achieved big target of 9000, we have been vouching for some consolidation/correction in the backdrop of big surge seen in January and the benchmark getting resisted by an upward sloping trendline adjoining recent tops on weekly chart.

We have been working with the downside target of around 8640 where the trendline adjoining recent bottoms on the daily chart as well as the 38.2% retracement level of the 8065-8997 upmove are placed.

Nifty touched a low of 8726 yesterday before closing at 8756, moving towards this target.

The trendline support mentioned above has now moved up to 8720 which makes 8720-8640 a broad support area.

On the way up, immediate resistance on the hourly chart is placed around 8850 followed by 61.8% retracement level of recent 8997-8726 fall placed at 8893. This makes 8850-8900 immediate resistance area. Traders can square off short positions if Nifty sustains above 8850.

India's HSBC Services PMI for January will be released today. In December, index stood at 51.1, down from 52.6 in November.

Aurobindo Pharma, Bharti Airtel, Tata Power and Wockhardt will report their quarterly earnings today.