8540 CONTINUES TO BE CRUCIAL SUPPORT; 8700 IMMEDIATE HURDLE

8540 CONTINUES TO BE CRUCIAL SUPPORT; 8700 IMMEDIATE HURDLE

WORLD MARKETS                             

Dow rose 0.2% while S & P 500 and Nasdaq ended almost flat on Friday, digesting commentary from key Federal Reserve officials, strong bank earnings and U.S. economic data.

Fed Chair Yellen, in a speech, said the Fed might want to let inflation run hotter for a while. She pointed out that the economy has seen an unusual tendency of weak demand against strong supply, making it reasonable "to ask whether it might be possible to reverse these adverse supply-side effects by temporarily running a 'high-pressure economy,' with robust aggregate demand and a tight labor market." New York Fed President William Dudley said "I would expect this year" for the Fed to raise rates. Boston Fed President Eric Rosengren said interest rates should go up because the economy was close to reaching full employment and its 2% inflation target.

Dollar index climbed to 98.10 from 97.55, the highest level in more than seven months.

JPMorgan Chase, Wells Fargo and Citigroup all posted better-than-expected results, beating estimates on both top and bottom lines.

In economic news, U.S. retail sales rose 0.6% in September, matching expectations. Producer price index increased 0.3% after being unchanged in August. Business inventories rose 0.2% in August. October consumer sentiment came in at 87.9, well below an estimate of 92, as concerns over the U.S. presidential election weighed.

US oil settled 0.2% lower at $50.35 per barrel.

Earlier data showed that September producer prices in China unexpectedly rose for the first time in nearly five years, while consumer inflation also beat expectations for the first time in almost five years, offsetting the negative sentiment generated yesterday by poor export data from the mainland.

European markets climbed 0.5%-2% on the back of a strong rally in banks and better-than-expected inflation data from China.

For the week US indices lost 0.6%-1.5%, extending the losing streak to second consecutive week. In Europe FTSE lost -0.4% while Dax and CAC rose 0.8% and 0.5% respectively. In Asia, Shanghai climbed 2%, Nikkei closed flat but Hang Seng tumbled 2.6%.

AT HOME

Benchmark indices ended modestly higher after a range bound but choppy trading session on Friday. Sensex settled at 27674, up 31 points while Nifty added 10 points to finish at 8583. BSE mid-cap and small-cap indices gained 0.8% each. BSE Oil & Gas index soared 2.2%, becoming top gainers among the sectoral indices, followed by 1.6% rise in Energy index. Telecom and Teck indices were the top losers, giving away 0.8% and 0.7% respectively.

Rupee appreciated 23 paise to end at 66.70/$.

For the week, Sensex and Nifty lost 1.4% and 1.3% respectively.

Infosys reported better-than-expected quarterly earnings but cut the full year guidance more than estimates. Dollar revenue rose 3.4% q-o-q to USD 2587 mn while rupee revenue was up 3.14% at Rs 17310 cr. In constant currency terms, revenue rose 3.9%. Net profit grew 4.9% to Rs 3606 cr. The company reduced revenue guidance for FY17 to 8-9% from 10.5-12% earlier in constant currency terms.

Wholesale inflation eased to 3.57% in September from 3.74% in August.

Petrol price was hiked by Rs 1.34 a litre, the fifth increase in two months, and diesel by Rs 2.37 a litre on back of spike in global rates.

OUTLOOK

Today morning, Asian markets are trading with cuts of upto 0.8% and SGX Nifty is suggesting about 40 points lower start for our market.

In Friday's report we had mentioned that "8540 is the bottom of the long consolidation phase witnessed earlier in August and also coincides with the 20-week moving average and hence is an important support to eye. A decisive breach of 8540 would open up the space for a larger correction and nearest support to eye in that case would be around 8300, the top made in June this year."

Nifty, after touching a low of 8550, recovered to close at 8583 on Friday but a lower opening today would take the benchmark back in the vicinity of 8540 support.

8540 continues to be important support to eye. On the way up 8700 continues to be immediate hurdle above which 8800 would be the bigger resistance to eye.

Traders are advised to wait for the close below 8540 for taking fresh bearish view. Existing short should carry a stop-loss of 8700.

Ultratech Cement will report its quarterly earnings today.