A SHARP PLUNGE FROM AN EXPECTED RESISTANCE ZONE VINDICATES OUR VIEW

A SHARP PLUNGE FROM AN EXPECTED RESISTANCE ZONE VINDICATES OUR VIEW

WORLD MARKETS                             

US indices gained between 0.4%-0.7% amid gains in oil and gas plays and as investors continued to digest first-quarter financial earnings from corporate America.

Nymex oil surged $3.10 or 5.8% to $56.39 a barrel, its highest close of the year after the U.S. Energy Information Administration reported a less-than-expected increase of 1.3 million barrels in weekly inventories.

Intel climbed more than 4%. The blue chip reported earnings in line with estimates on revenue that missed, but said it expects to benefit from gains in its personal computer chips and its data center business. Bank of America posted a first-quarter profit, swinging from a surprise loss a year earlier when it took a charge of $6 billion for litigation expenses. JPMorgan Chase reported investment banking fees and core trading revenues were both up about 20% year over year.

Federal Reserve's Beige Book noted improvements in residential real estate but reported overall moderate growth.  Industrial production for March showed a greater-than-expected decline of 0.6%, following a slight gain in February. Capacity utilization also came in slightly below the previous month. Mortgage applications decreased 2.3% from the prior week as interest rates ticked up slightly. Meanwhile, the Empire Manufacturing survey showed growth in New York State unexpectedly contracted in April, weakening for a third straight month as the pace of new orders fell to a multi-year low. The National Association of Home Builders housing market index showed a sharp increase to 56 in April.

In Europe, except a flattish DAX, other markets gained between 0.3%-1.2%. The ECB announced it was holding its main interest rate at a record low of 0.05%. In his regular press conference, ECB chief Mario Draghi dismissed fears of a Greek default and a bubble in bond markets.

Greece remained in focus, with S&P downgrading its rating to "CCC+" from "B-" with a negative outlook.

AT HOME

After falling nearly half a percent from the opening high, benchmark indices recouped most of the losses in the noon trade but plunged sharply in last half an hour to end lower by about nine tenth of a percent. Sensex lost 245 points to settle at 28800 while Nifty finished at 8750, down 84 points. BSE mid-cap and small-cap indices lost 0.5% and 0.3% respectively. Except a 0.2% each rise in BSE FMCG and Oil & Gas indices, all the sectoral indices ended in red with Healthcare and Auto indices leading the tally, giving away 1.5% each.

FIIs net bought stocks and index futures worth Rs 108 cr and 783 cr respectively but net sold stock futures worth Rs 20 cr. DIIs were net sellers to the tune of Rs 60 cr.

Rupee appreciated 14 paise to end at 62.36/$.

Wholesale price index based inflation for March fell to a new low of -2.33%, the fourth successive month of deflating prices, as against the February's reading of -2.06%.

Oil marketing companies cut petrol and diesel price by Rs 0.80/litre and 1.30/litre respectively.

OUTLOOK

Today morning, Nikkei is down about four tenth of a percent, other Asian markets are trading flat to modestly higher and SGX Nifty is suggesting about 20 points higher opening for our market.

In yesterday's report we had mentioned that Nifty has achieved the major target of 8800, which was the 61.8% retracement level of the 9119-8269 fall and was approaching a stiff resistance in the form of upper band of bollinger placed around 8860. We had therefore advised booking partial profit in long positions and raising stop loss in remaining ones to 8730.

The benchmark, after touching a high of 8845 in the opening trade, plunged to 8722 before closing at 8750, vindicating our view.

A sustained trading below 8722, the low made yesterday, would generate a sell on the hourly chart and would pave the way for the further fall till about 8620, which is the 38.2% retracement level of the 8265-8845 upmove.

On the way up, one should wait for the crossover of 8850 for building fresh longs.

TCS and Indusind Bank will report their quarterly earnings today. TCS is expected to report a sequential dollar revenue growth of 0.2% to USD 3940 mn. Rupee revenue is seen declining 0.1% to Rs 24456 cr. Operating profit is seen falling 1.2% to Rs 6540 cr and EBIT margin are seen at 26.74%, down from 27.04%. Net profit may fall 0.6% to Rs 5410 cr.