NIFTY BREAKS CRUCIAL SUPPORT

NIFTY BREAKS CRUCIAL SUPPORT

WORLD MARKETS                             

US indices plunged 1%-1.7% on Friday as uncertainty about the timing of a rate hike and Chinese economic growth continued to weigh.

The August nonfarm payrolls report showed that 173,000 jobs were created, missing expectations of 220,000. The unemployment rate fell more than expected to 5.1%, while average hourly wages increased more than expected by 0.3%, for a 2.2% gain over the past 12 months.

Richmond Federal Reserve President Jeffrey Lacker—a known hawk—said the labor market no longer warrants zero rates.

Nymex oil settled down 70 cents, or 1.5%, at $46.05 a barrel. Gold fell $3 to $1121 an ounce.

European markets tumbled 2.2%-3.2%.

The Nikkei closed down 2.15%. The Hang Seng declined 0.4%. Chinese stocks were closed for a second straight day for a public holiday.

For the week, US indices lost 3%-3.4%. European markets fell 2.4%-5%.

AT HOME

Thursday's recovery proved short-lived as benchmark indices plunged 2.2% on Friday to close at the fresh 13-month low. Sensex finished at 25202, down 563 points while Nifty lost 168 points to end at 7655. BSE mid-cap and small-cap indices lost 1.9% and 2.5% respectively. All the BSE sectoral indices ended in red with Realty and Power indices taking the biggest hit, falling 3.3% and 3% respectively.

FIIs net sold stocks and index futures worth Rs 1287 cr and 356 cr respectively but net bought stock futures worth Rs 490 cr. DIIs were net buyers to the tune of Rs 1129 cr.

Rupee depreciated 22 paise to end at 66.46/$.

OUTLOOK

Over the weekend, People's Bank of China (PBoC) Governor Zhou Xiaochuan told the G-20 meeting in Turkey that China's stock market has almost completed its correction after a bubble formed in the first half of the year.

Chinese stock markets have reopened today after a four-day weekend and are up about a percent. Other Asian markets are trading mixed with modest changes. SGX Nifty is suggesting about 25 points lower start for our market.

Nifty on Friday plunged 168 points to close at 7655, marking the lowest close in 13 months. More importantly, the benchmark closed below the lower band of weekly bollinger for the first time since the current bull phase started in August 2013 from the bottom of 5119. This is not a good sign for the medium term trend.

A breach of 7626, the low made last week, can result in second round of panic selling. Next major support would come only around 7100 where the 34-month average as well as the 50% retracement level of the entire 5119-9119 upmove are placed.

Immediate resistance on the hourly chart is placed around 7820, with the stop loss of which trading shorts should be held on to.

U.S. stock markets are closed today for the Labor Day holiday.