NIFTY REBOUNDS SHARPLY AFTER TESTING KEY SUPPORTS

NIFTY REBOUNDS SHARPLY AFTER TESTING KEY SUPPORTS

WORLD MARKETS                             

After a flattish start, US indices saw a sustained northward move through the session to end with gains of 1.1%-1.4% as uncertainty related to Presidential election got over and Trump struck a conciliatory tone in his victory speech. Financials and Healthcare stocks topped the gains. After yesterday's upmove key indices are within 2% of their all-time intraday highs.

Earlier S & P futures were down 5% at the down limit after Trump shocked the world by beating Clinton in the race for the White House. Trump's success was only part of a larger, crushing victory for the Republican Party, which retained the House and appeared poised to maintain Senate control. Financial markets had originally priced in a victory for Hillary, along with the GOP retaining control of the House while Democrats obtained a slight majority in the Senate. In his victory speech, Trump praised Hillary and urged Americans to “come together as one united people” after a deeply divisive campaign.

Trump's victory may have wide implications on multiple fronts, including trade, taxes and foreign policy, among others. His win also puts into question the likelihood of a Federal Reserve rate hike. Market expectations for a rate hike in December briefly fell to around 50 percent, before holding around 76 percent, according to the CME Group's FedWatch tool.

Dollar index, after touching a low of 95.88, rebounded sharply to end at 98.62, the previous close being 97.97. Treasury yields surged on expectations of a rise in inflation and growth. The 10-year yield climbed above 2% to hit its highest since Jan. 15. Gold surged to $1337 initially but later cooled to end at $1276.

US oil rose 29 cents to $45.27 a barrel.

Main European markets added 1%-1.6%. The European Commission released its latest economic forecasts which said growth in the euro area will slow down in 2017 to 1.5% from 1.7% in 2016. The EU's gross domestic product rate is also seen dropping between this year and the next from 1.8% in 2016 to 1.6% in 2017.

AT HOME

After plunging more than 6% in the initial trade on the back of black money clampdown and trump victory, benchmark indices saw a stunning recovery through the session to end lower by just a percent and fourth. Sensex settled at 27253, down 339 points while Nifty lost 112 points to finish at 8432. BSE mid-cap and small-cap indices lost 1.8% and 2.7% respectively. BSE Realty index collapsed 10.2%, becoming top loser among the sectoral indices, followed by 4.2% cut in Consumer Durable index. Healthcare index and Bankex were the top gainers, up 1.5% and 0.2% respectively.

FIIs net sold stocks worth Rs 2095 cr but net bought index futures and stock future worth Rs 709 cr and 770 cr respectively. DIIs were net buyers to the tune of Rs 1116 cr.

Rupee appreciated 19 paise to end at 66.43/$.

Real estate stock fell like nine pin as the sector is expected to feel the heat of the government's move to phase out the old Rs 500 and Rs 100 notes.

Lupin's second quarter earnings missed expectations with profit rising 58% y-o-y to Rs 662 cr. Revenue rose 29% to Rs 4290 cr. EBIDTA grew 55% to Rs 1028 cr and margin expanded by 410 bps to 24%.

OUTLOOK

Today morning Nikkei is up 6%, other Asian makes are up 1%-2.5% and SGX Nifty is suggesting about 50 points higher start for our market.

At the risk of repeating, readers would recall that after Nifty broke the 8500 support we had been working with downside target of 8325 where 34-week moving average was placed and had been advising holding on to short positions with a trailing stop-loss. In yesterday's report we had mentioned that if 8325 gives way, 8150, which is the 38.2% retracement level of the entire 6825-8970 upmove as well as the 20-month moving average, would be the next major target as well as the support to eye.

The benchmark plunged to 8002 in the initial trade, achieving both the targets mentioned above, and staged a sharp rebound to end at 8432.

A higher start today would take the benchmark close to 8500 mark, which is the immediate hurdle on the hourly chart and upon crossover of which 34-DMA, placed around 8650, would be the next target to eye.

Traders would do well to wait for the crossover of 8500 for taking fresh longs.

Sun Pharma will report its quarterly earnings today.