OVERSOLD NIFTY FORMS POSITIVE DIVERGENCE; TRAIL STOP LOSS TO 7440

OVERSOLD NIFTY FORMS POSITIVE DIVERGENCE; TRAIL STOP LOSS TO 7440

WORLD MARKETS                             

After nose-diving nearly three and a half percent in the first half, US indices recouped more than half of the losses in the second half with Dow, S & P 500 and Nasdaq closing lower by 1.6%, 1.2% and 0.1% respectively. S & P 500 ended at its lowest level since April 2014.

Energy led the losers after Nymex oil sank $1.91 or 6.71% to $26.55 a barrel, its lowest since May 2003 after data from the American Petroleum Institute showed higher-than-expected build up of U.S. crude inventories. Brent fell 91 cents to $27.87 a barrel.

In economic news, the December U.S. CPI showed a 0.1% decline. Ex-food and energy, the index rose 0.1% after rising 0.2% for three straight months. Building permits fell 3.9% in December. Housing starts fell 2.5% but the seasonally adjusted annual pace remained above a 1 million.

Gold rose $17 to $1106 an ounce.

European markets plunged 2.8%-4.8% with miners leading on the way down. London's FTSE finished off 3.5%, with the index having entered "bear market" territory during yesterday's trade after it fell more than 20% from its records highs in April.

Earlier, Nikkei fell close to 4%, entering bear market territory as it has fallen more than 20% from its peak in June last year.

AT HOME

After plunging nearly two and a half percent, benchmark recouped a third of the losses in last hour or so to end lower by 1.7%, closing at 20-month low. Sensex settled at 24062, down 418 points while Nifty lost 126 points to finish at 7309. BSE mid-cap and small-cap indices lost 2% each. All the BSE sectoral indices ended in red with Realty and Energy indices leading the tally, down 3.5% and 3.1% respectively.

FIIs net sold stocks and index futures worth Rs 1325 cr and 87 cr respectively but net bought stock futures worth Rs 647 cr. DIIs were net buyers to the tune of Rs 1383 cr.

Rupee depreciated 31 paise to end at 67.95/$, the lowest level in more than 28 months.

Axis Bank's third quarter profit and net interest income surpassed expectations but asset quality worsened. Profit increased 14.5% y-o-y to Rs 2,175.30 crore, driven by other income and net interest income despite higher provisions. NII rose 16% to Rs 4162 cr. Net interest margin declined to 3.79% from 3.85% q-o-q. Provisions for bad loans shot up 40.5% y-o-y to Rs 713 cr. Gross NPA ratio climbed 30 bps q-o-q to 1.68% and Net NPA ratio rose 27 bps to 0.75%.

Ultratech Cement reported a 37% percent growth in its consolidated net profit to Rs 545.92 crore for the quarter ended December 2015 on lower operating costs and higher sales. Total income rose 4% to Rs 6188 cr.

OUTLOOK

Today morning, barring a 1% lower Shanghai, other Asian markets are trading with gains of 0.5%-1.5% and SGX Nifty is suggesting about 40 points higher opening for our market.

In yesterday's report we had mentioned that upon sustained trading below 7350, next major downside target to eye would be 7100, where the 50% retracement level of the entire 5119-9119 upmove.

The benchmark broke 7350 in the initial trade itself and plunged all the way to 7241, but recovered in last hour of trade to end at 7309.

While Nifty closed at a fresh low yesterday, RSI on the daily chart made a higher bottom, which suggests that yesterday's fall is having lesser strength. While it would be premature to conclude that a final bottom has been made, one should certainly book some profit in short positions and trail the stop loss in remaining ones to 7440, which is now the immediate hurdle on the hourly chart.

A sustained trading above 7440 would open up the further upside till about 7605-7620, where multiple tops were made last week.