“RISK-OFF” TRADE AGGRAVATES

“RISK-OFF” TRADE AGGRAVATES

WORLD MARKETS                             

Dow and S & P 500 plunged 2.1% each while Nasdaq nosedived 2.8% yesterday, with the S&P 500 erasing gains for the year and ending at a more than six-month low, on the back of continued uncertainty about the timing of a rate hike and global growth concerns led by the slowdown in China.

Initial jobless claims came in at 277,000, but remained consistent with an improving labor market trend that could support a rate hike this year.

Existing home sales rose to an eight-year high, while leading indicators declined 0.2% in July. The Philadelphia Fed index for August came in at 8.3.

Hit by sharp declines in crude prices, the oil-producing nation of Kazakhstan introduced a freely floating exchange rate for the tenge, which subsequently lost more than a quarter of its value. The State Bank of Vietnam devalued the dong by 1% against the dollar —its third adjustment so far this year.

Gold surged $25 to a more than one-month high of $1153 an ounce on safe-haven buying. Nymex oil rose 34 cents to $41.14 a barrel. Brent however fell more than a percent to $46.62 a barrel.

Earlier, the Shanghai Composite plunged 3.4% as investors failed to gain confidence in government support measures.

European markets tumbled 0.6%-2.6% with Italy and Germany leading the tally. Greece's benchmark Athens Composite index closed down 3.5%, as rumors began to circulate that Greek Prime Minister Alexis Tsipras would shortly call an election, to be scheduled in September.

AT HOME

After trading slightly below the zero line in the morning trade, benchmark indices nosedived in the noon trade to end with steep cuts. Sensex plunged 1.2% or 324 points to settle at 27608 while Nifty finished at 8373, down 1.4% or 122 points. BSE mid-cap and small-cap indices tumbled 2% each.

Except a 1.3% and 0.4% rise in BSE FMCG and Healthcare indices, all the sectoral indices ended in red with Realty and Metal indices leading the tally, down 4.1% and 2.4% respectively.

FIIs net sold stocks and index futures worth Rs 1007 cr and 1771 cr respectively but net bought stock futures worth Rs 343 cr. DIIs were net buyers to the tune of Rs 568 cr.

Rupee depreciated 28 paise to end at fresh 2-year low of 65.54/$.

OUTLOOK

China's August Caixin flash manufacturing PMI has come in at 47.4, slowing from July's 47.8 level and marking the lowest reading in 6.5 years.

Asian markets are trading with deep cuts of 1%-2% and SGX Nifty is suggesting about 75 points lower opening for our market.

After consolidating in 8530-8430 range for three days, Nifty yesterday broke down and plunged 122 points to end at 8373.

A gap down opening today will take the benchmark closer to 8300, in the vicinity of multiple bottoms made in last month or so as well as the lower band of bollinger on the daily chart, are placed. This makes 8300 an important support area.

8210, the 61.8% retracement level of the entire 7940-8655 upmove, would be the next support if 8300 breaks.

8430, the erstwhile support area, would now act as the immediate hurdle, with should serve as the stop loss for trading shorts.