NIFTY ONCE AGAIN BOUNCES BACK FROM 7960 SUPPORT; FED IN FOCUS

NIFTY ONCE AGAIN BOUNCES BACK FROM 7960 SUPPORT; FED IN FOCUS

WORLD MARKETS                             

US indices gained about six tenth of a percent yesterday, recovering from two days of declines, ahead of the conclusion of two-day Fed meeting.

Economic data releases continued to show moderate growth. May housing starts showed a 11.1% decline, missing expectations, while building permits increased 11.8% month-over-month.

US 10-year Treasury yield was at 2.31% and 10-year German bund yield traded around 0.8%. Nymex oil rose 45 cents or 0.8% to $60 a barrel.

European markets, after opening sharply lower, recovered to end with gains of upto half a percent. Greek ATHEX Composite however ended more than 4.5% lower.

Greek Prime Minister Tsipras told lawmakers of his Syriza party yesterday they will continue to work for a solution but their public mandate is to end austerity, while Greek officials want a deal that ends talk of "Grexit" once and for all. Media reports suggested that Athens has submitted proposals and is waiting for a response from lenders.

Euro zone finance ministers are next due to discuss the Greek crisis on Thursday.

AT HOME

After falling nearly eight tenth of a percent, benchmark indices soared about a percent and fifth from the bottom of the day to end higher by four tenth of a percent, extending the winning streak to third straight day. Sensex settled at 26687, up 100 points while Nifty gained 33 points to finish at 8047. BSE mid-cap and small-cap indices gained 0.8% and 0.3% respectively. Except a 0.2% and 0.1% cut in BSE Oil & Gas and FMCG indices respectively, all the sectoral indices ended higher with Consumer Durable and Auto indices leading the tally, putting on 1.2% and 1.1% respectively.

India's trade deficit for May came in at a three-month low at USD 10.41 bn, marginally lower than USD 10.99 bn in April. Imports fell to USD 32.75 bn from 33.05 bn. Exports stood at 22.34 bn as against 22.05 bn in April.

FIIs net sold stocks and index futures worth Rs 522 cr and 564 cr respectively but net bought stock futures worth Rs 274 cr. DIIs were net buyers to the tune of Rs 645 cr.

Rupee depreciated 8 paise to end at 64.24/$, marking a 21-month low.

OUTLOOK

Today morning Asian markets are trading mixed with modest changes and SGX Nifty is suggesting about 30 points higher opening for our market.

We have been mentioning for quite some time that 7960, which is the bottom made in December 2014 and where the lower band of bollinger on the weekly chart is placed, is the important support, a close below which would mark a breakdown on the weekly chart and next meaningful support to eye in that case would be 7600, the 20-month moving average.

Nifty, for past four trading sessions, after dipping below 7960 intraday, has been bouncing back to close above it, reinforcing the importance of that level.

In yesterday's report we had also mentioned that immediate support on the hourly chart is placed around 8070, a sustained trading above which can take Nifty to 8160-8190 region, where the previous two tops on hourly chart are placed.

After a gap up opening today, Nifty would be closer to that level. One can wait for the crossover of the high made in the first hour for the confirmation and can go long upon happening that with the stop loss of 8020.

Key events to watch out today would be outcome of the Federal Open Market Committee's two-day meeting as well as the European Central Bank's policy review. Fed is expected to adjust its economic and interest rate forecasts and possibly tweak its statement, while continuing to emphasize that rate hikes are dependent on economic data. The ECB meanwhile, could announce a change to Emergency Liquidity Assistance to Greece.