7916-7900 IS THE CRUCIAL SUPPORT; 8080 IMMEDIATE HURDLE

7916-7900 IS THE CRUCIAL SUPPORT; 8080 IMMEDIATE HURDLE

WORLD MARKETS                             

US indices added 0.1%-0.3% on Friday ahead of Christmas holiday.

In economic news, consumer sentiment for December came in at 98.2, above the expected read of 98.0. New home sales rose 5.2% last month, more than expected.

The U.S. dollar fell marginally against a basket of currencies. U.S. Treasuries traded mixed, with the two-year note yield rising to 1.20% and the benchmark 10-year note yield slipping to 2.54%.

European markets, except a marginally lower DAX, ended with modest gains. Italy approved a state bailout for Banca Monte dei Paschi di Siena, the world's oldest bank and the country's third-largest lender.

Deutsche Bank rose 3.4% after it agreed to pay $7.2 billion to settle an investigation led by the U.S.'s Department of Justice into alleged mis-selling of mortgage securities (MBS).

For the week, US indices gained 0.3%-0.5% during the week, with the Dow extending the winning streak to seventh straight week. European markets too edged up, gaining 0.1%-0.8%. In Asia Nikkei managed to gain 0.1% but Hang Seng plunged 2% and Shanghai Composite was down 0.4%.

AT HOME

After falling about half a percent in the first hour, benchmark indices recouped all the losses and some more through rest of the session to end with modest gains, breaking seven-day losing streak. Sensex settled at 26041, up 61 points while Nifty added 7 points to finish at 7986. BSE mid-cap and small-cap indices lost 0.4% and 0.04% respectively. BSE Capital Goods and Consumer Durable indices added 0.9% and 0.8% respectively, becoming top gainers among the sectoral indices while Realty and Healthcare indices were the top losers, down 1.1% and 0.7% respectively.

FIIs net sold stocks and index futures worth Rs 1463 cr and 654 cr respectively but net bought stock futures worth Rs 10 cr. DIIs were net buyers to the tune of Rs 1615 cr.

Rupee appreciated 17 paise to end at 67.82/$.

The finance minister Arun Jaitley-headed GST council finalised the drafts of the two main supplementary legislations—the Central GST Bill and the State GST Bill—in its meeting on Friday, although the issue of "dual control" to divide assessing powers between the Centre and the states continues to remain unresolved.  The council will again meet during January 3-4, to hammer out an agreement on the issue of dual control or "cross-empowerment”.

Cipla surged after its flagship product Sereflo received final approval from the UK health regulator.

For the week, Sensex and Nifty lost 1.7% and 1.9% respectively, extending the losing streak to second straight week and closing at the lowest level since the week ended 20th May 2016.

Addressing a gathering on Friday, Prime Minister Modi said, "Those who profit from financial markets must make a fair contribution to nation-building through taxes". This raised concerns that capital gains on long term profits might be brought in the upcoming budget. Finance Minster Jaitley however later clarified that "This interpretation is absolutely erroneous; the Prime Minister has made no such statement directly or indirectly,".

OUTLOOK

Today morning Asian markets are trading mixed with modest changes and SGX Nifty is suggesting about 50 points lower start for our market.

Readers would recall that we have been negative on Nifty ever since 20-DMA support of 8120 was taken out. We were working with an initial target of 8057, which was the bottom made in early December, below which we had said that the benchmark could retest 7916 bottom made in November.

Nifty on Friday touched a low of 7942, coming in very close to 7916 target, before closing at 7986.

7916-7900 continues to be important downside support to eye. As we have been mentioning 7900 is the 50% retracement level of the entire 6825-8970 upmove and upon a decisive breach of 7900, next meaningful support will come only around 7650, which is the 61.8% retracement level of of the aforementioned upmove.

Immediate hurdle on the hourly chart has moved lower to 8080, with the stop-loss of which trading shorts should be held on to.

U.S. markets will be closed today in observance of the Christmas holiday.