NIFTY ACHIEVES MAJOR DOWNSIDE TARGET

NIFTY ACHIEVES MAJOR DOWNSIDE TARGET

WORLD MARKETS                             

US indices ended with cuts in the vicinity of half a percent on Friday amid a mixed bag of earnings report. Energy sector saw best gains while financials lagged.

US personal income rose 0.1% in September, while personal consumption rose 0.1%. The Fed's preferred inflation measure, the personal consumption expenditures (PCE) price index, slipped 0.1% in September. The decline marked the first drop since January. the final read for October consumer sentiment came in at 90.0.

Nymex oil rose 53 cents or 1.15% to $46.59 a barrel. Dollar index lost about half a percent. Gold fell $6 to $1141 an ounce.

European markets ended mixed with changes of upto half a percent. Europe's unemployment came in at 10.8% in September, down from 11.5% the year before.

Earlier, Nikkei closed nearly 0.8% higher after the Bank of Japan kept monetary policy steady.

For the week, US indices gained 0.1%-0.4%. In Europe, except half a percent higher DAX, other markets lost 0.5%-1.3%. For the month, US indices gained between 8.3%-9.4%, marking their best month since October 2011.

AT HOME

After gaining about four tenth of a percent in the morning trade, benchmark indices plunged nearly a percent from the top of the day in the noon trade to end lower by about six tenth of a percent, extending the losing streak to fifth straight day and closing at the lowest level since 1st October. Sensex slipped 181 points to finish at 26656 while Nifty ended at 8066, down 46 points. BSE mid-cap and small-cap indices lost 0.1% and 0.8% respectively. Except a 0.4% each gain in Power, Consumer Durable and Healthcare indices, all the BSE sectoral indices ended in red with Capital Goods and FMCG indices leading the tally, down 2.6% and 2.3% respectively.

FIIs net sold stocks and stock futures worth Rs 1465 cr and 77 cr respectively but net bought index futures worth Rs 334 cr. DIIs were net buyers to the tune of Rs 1560 cr.

Rupee appreciated 3 paise to end at 65.265/$.

For the week, Sensex and Nifty lost 3% and 2.8% respectively.

ITC plunged 4.5% after missing street expectations with profit rising to Rs 2341 cr from Rs 2425 cr y-o-y, impacted by slow revenue growth in cigarette business. Weak revenue growth in agri, hotels and paper business also hurt bottomline. Cigarette volumes declined for the 10th straight quarter. Revenue fell 1.4% to Rs 8904 cr. Operating profit rose 2% to Rs 3560 cr and margins expanded by 130 bps to 40%.

ICICI Bank matched street expectations with profit rising 11.8% y-o-y to Rs 3030 cr. NII rose 12.8% to Rs 5252 cr. Asset quality slightly weakened with Gross NPA ratio rising to 3.77% from 3.68% and net NPA ratio rose to 1.65% from 1.58% sequentially. The bank approved sale of 9% shareholding in insurance company ICICI Lombard General Insurance Company to Fairfax Financial Holdings, the joint venture partner. This transaction, which values its insurance company at Rs 17,225 crore (USD 2.6 billion), is subject to governmental and regulatory approvals.

L & T reported 15.5% rise in consolidated net profit at Rs 996 cr, boosted by other income. Revenue rose 10.6% to Rs 23393 cr. Operating profit rose 11% to Rs 2592 cr and margins expanded by 7 bps to 11.1% which were lower than expected. The company secured fresh orders worth Rs 28,620 crore at group level during the quarter, down 28% y-o-y but up 8.5% on sequential basis. The company cut its order inflow guidance to 5-7% from 15% and revenue guidance to 12.5% from 15%. The stock fell 4.3%.

Kotak Mahindra Bank's standalone profit grew by 200% q-o-q to Rs 569.5 cr. NII surged 28% to Rs 1679 cr. Net interest margin inched up 10 bps to 4.3%. Grsoo NPA increased marginally to 2.35% from 2.31% and net NPA rose to 2.08% from 2.04%.

For the first half of the fiscal 2015-16, the fiscal deficit stood at 3.78 lakh cr, or 68.1% of full year target.  

Eicher Motor October sales soared 71% at 44522 units. M & M reported 20% surge in total sales at 51383 units. Tata Motors reported 1% uptick at 43486 units.

OUTLOOK

Over the weekend, China's official purchasing managers' index (PMI) came in at 49.8 for October, contracting for a third straight month. The reading was unchanged from the previous month but missed market expectations of 50.0, adding to fears that the world's second-biggest economy may be stalling despite the latest slew of stimulus. Data released today showed October Caixin/Markit manufacturing PMI came in at 48.3, up from 47.2 in September.

Asian markets are trading with cuts of 0.5%-1.5% with Nikkei leading the tally and SGX Nifty is suggesting about 25 points lower opening for our market.

Last week was a total vindication of our view as after getting resisted in our indicated 8320-8380 region, Nifty plunged all the way to 8044, achieving the downside target of 8030-8090 that we had set for the benchmark.

After last week's fall, Nifty is close to some crucial support levels. 34-DMA as well as the lower band of the bollinger on the daily chart are placed around 8040. Also 8030 is where the 38.2% retracement level of the entire 7540-8336 upmove is placed.

Upon breach of 8030, downside targets to eye would be 7940 and 7840, which are the 50% and 61.8% retracement levels of the 7540-8336 upmove.

Immediate hurdle on the hourly chart is placed around 8190, with the stop loss of which trading shorts should be held on to.