NIFTY TESTS CRUCIAL 8700 SUPPORT; 8860 IS THE IMMEDIATE HURDLE

NIFTY TESTS CRUCIAL 8700 SUPPORT; 8860 IS THE IMMEDIATE HURDLE

WORLD MARKETS                             

US indices plunged 1.1%-1.5% yesterday, giving away all the gains made in the previous session, amid a spike in volatility and lower oil prices.

Energy stocks fell the most as US crude fell 3% to $44.90 and Brent slipped 2.5% to $47.10 after International Energy Agency (IEA) said that it may take longer for oil prices to re-balance, citing a faster-than-expected slowdown in global oil demand growth.

The CBOE Volatility Index (VIX) rose about 23% to 18.61.

U.S. Treasuries slipped, with the two-year note yield near 0.79% and the 10-year note yield around 1.71%.

Dollar index rose to 95.58 from 95.15. Gold fell $2 to $1324 per ounce.

US indices had soared 1.3%-1.7% on Monday after Lael Brainard, a Fed governor, said it would be wise to keep rates low despite continuous economic progress and Dennis Lockhart, Atlanta Fed president, said in a separate speech that a "serious discussion" on raising rates is warranted at the central bank's upcoming meeting.

European markets fell 0.4%-1.7% yesterday.

AT HOME

After a big gap down opening benchmark indices shed some more weight through rest of the session to finally end with deep cuts of more than a percent and half, registering the biggest daily fall since 24th June 2016. Sensex slumped 444 points to settle at 28354 while Nifty finished at 8716, down 151 points. BSE mid-cap and small-cap indices tumbled 3% and 2.4% respectively. Except a 0.9% and 0.3% higher IT and Teck indices respectively, all the BSE sectoral indices ended in red with Realty and Metal indices leading the tally, down 5.2% and 4.3% respectively.

FIIs net sold stocks, index futures and stock futures worth Rs 594 cr, 598 cr and 922 cr respectively. DIIs were net sellers to the tune of Rs 13 cr.

Rupee depreciated 24 paise to end at 66.92/$.

August CPI fell sharply to 5.05% y-o-y from 6.07% in July, thanks to a sharp fall in food inflation, which slowed to 5.91% from 8.35%. Separately, July index of industrial production came in at negative 2.4%, compared to 1.95% (revised) in June and an expectation of 1.37%, driven mainly by weakness in capital goods.

Tata Steel reported a consolidated loss of Rs 3183 cr for June quarter compared with Rs 317 cr in same period last fiscal, dented by discontinued operations. However, pre-exceptional underlying profit before tax stood at Rs 1080 cr against loss of Rs 234 cr in preceding quarter. Revenue fell 5.8% to Rs 26406 cr. Operational performance was very strong, with consolidated EBIDTA rising 21.4% to Rs 3270 cr due to improved operating performance across India, Europe and South East Asia. EBIDTA margin expanded 520 bps q-o-q and 280 bps y-o-y to 12.4%. Standalone profit shot up 35.3% to Rs 575 cr and revenue grew by 1.5% to Rs 10324 cr.

OUTLOOK

Today morning Asian markets are trading mixed and SGX Nifty is suggesting a marginally higher start for our market.

After Nifty breached immediate support of 8870 on Friday, on Monday, we had said that the benchmark was likely to test 8730-8690 zone where 8730 was the upper level of the erstwhile 8540-8730 consolidation phase while 20 DMA and 34-DMA were placed around 8720 and 8690 respectively.

The benchmark plunged to 8699 on Monday before closing at 8716, testing the support area mentioned above.

8700, the Monday's low, also roughly coincides with the 61.8% retracement level of the 8544-8969 upmove as well as the 34-DMA, and therefore is an important support to eye. A sustained trading below 8700 would open up the possibility of the retest of the 8544 bottom.

8860, the upper level of the gap created by the big gap-down opening on Monday, is the immediate hurdle to eye above which 8969, would be the next hurdle to eye.