EQUITIES SET TO PLUNGE ON TRUMP LEAD, BLACK MONEY CLAMP DOWN

EQUITIES SET TO PLUNGE ON TRUMP LEAD, BLACK MONEY CLAMP DOWN

WORLD MARKETS                             

US indices gained 0.4%-0.5% awaiting the results of the U.S. presidential election.

Dollar index rose 0.13%. Gold fell $5 to $1274 per ounce.

Oil erased earlier losses to settle 0.2% up at $44.98 per barrel.

European markets added 0.2%-0.5%. Germany's Industrial Output dropped by 1.8% compared to the previous month. Preliminary figures also showed German exports contracting in September by 0.7%.

AT HOME

After falling about a fifth of a percent, benchmark indices climbed three fourth of a percent from the bottom of the day to end about half a percent higher. Sensex added 132 points to settle at 27591 while Nifty finished at 8544, up 46 points. BSE mid-cap and small-cap indices rose 0.4% and 0.2% respectively. BSE Auto and Industrial indices gained 1.7% and 1.5% respectively, becoming top gainers among the sectoral indices while Healthcare index tumbled 1.2%, becoming top loser, followed by 0.2% each cut in Teck and FMCG indices.

FIIs net bought stocks and stock futures worth Rs 87 cr and 546 cr respectively but net sold index futures worth Rs 302 cr. DIIs were net buyers to the tune of Rs 294 cr.

Rupee appreciated 12 paise to end at 66.62/$.

BHEL reported better-than-expected profit of Rs 109 cr against loss of Rs 181 cr in same period last fiscal. Revenue rose 12% y-o-y to Rs 6664 cr. EBIDTA stood at Rs 155 cr against loss of Rs 438cr with margin at 2.3%.

In a major surprise development, government scrapped Rs 500 and Rs 1,000 notes from yesterday midnight as part of the strategy to clamp down on India’s bustling parallel cash economy. New Rs 500 and Rs 2,000 notes will be issued shortly.

The move, while bring volatility in the short term and might result in reduced consumption, will be beneficial in the long term as more money will start flowing through official channel, which will benefit banking and financial services sectors. Real Estate prices are also expected to correct.

The sector, which gets hit hard, is real estate, which would have impact on other related sectors like cement and industries related to home improvement. Other sectors would include jewelry, Auto, liquor, casino, restaurant, consumer staple to name a few. Microfinace and NBFC, who cater to small ticket deposits, which are mainly in cash, would be temporarily negatively impacted.

OUTLOOK

Counting of votes for US Presidential election is underway. As per latest results, Trump is ahead of Hillary by 129-104. 270 is the magic number. Asian markets are down 0.5%-2%, Dow futures is down more than 2% and SGX Nifty is suggesting a whooping 250 points lower start for our market.

Readers would recall that after Nifty broke important 8500 support, we have been working with the downside target of 34 week moving average, which is currently placed around 8325. In yesterday's report we had mentioned that the immediate resistance on the hourly chart is placed around 8560, with the stop-loss of which short positions should be held on to.

Yesterday, the benchmark, after touching a low of 8480, rebounded in late noon trade to end at 8543 but a big gap down opening today would take it close to 8325 mark.

8325 continues to be major downside target to eye. If that also gives way, 8150, the 20 month moving average as well as the 38.2% retracement level of the 3825-8970 upmove, would be the next major support to eye. After today gap-down opening, immediate resistance on hourly chart would move to 8500, which should serve as the revised stop-loss for trading shorts.