US BOND YIELDS, DOLLAR SURGE ON HAWKISH FED; NIFTY SET TO BREAK 8150 SUPPORT

US BOND YIELDS, DOLLAR SURGE ON HAWKISH FED; NIFTY SET TO BREAK 8150 SUPPORT

WORLD MARKETS                             

US indices fell 0.5%-0.8% yesterday, digesting the Federal Reserve's first interest rate rise this year and its hawkish rate outlook for 2017.

The Fed, as widely expected, raised rates by 25 basis points on Wednesday, its second rate increases in a decade. It also said it saw three rate hikes in 2017, higher than two hikes projected back in September, due to improving economic conditions. In a news conference following the Fed's announcement, Chair Janet Yellen said President-elect Donald Trump's plans to stimulate the economy with government spending figured into the central bank's expectations for three rate hikes next year.

U.S. Treasuries gave up gains following the announcement, with the two-year note yield rising to 1.2673% and the benchmark 10-year yield advancing to 2.5525%. Dollar index surged 1.1% to 102.20, hitting a 14-year high. Gold fell 1.2% to $1143 an ounce, a ten-month low.

US crude fell 3.7% to $51.04 per barrel. Brent slipped 3.3% to $53.80.

In economic news, the Producer Price Index rose 0.4% in November, above the expected 0.1% increase. November retail sales rose less than expected as households cut back on purchases of motor vehicles. Industrial production fell 0.4%. Business inventories posted their largest decline in 11 months, falling 0.2%.

European markets fell 0.3%-1.2%. Eurozone industrial production fell 0.1% in October, though the numbers were up by 0.6% on the year. Moody's updated its outlook on Italian banks from "stable" to "negative" on Tuesday on increasing capital needs and a weakening in confidence in the system.

AT HOME

Sensex and Nifty ended lower by 0.4% and 0.5% respectively after a choppy trade. Sensex lost 95 points to settle at 26603 while Nifty finished at 8182, down 39 points. BSE mid-cap and small-cap indices tumbled 0.8% each. Except a 0.6% and 0.5% rise in IT and Realty indices respectively, all the BSE sectoral indices ended in red with Metal and Telecom indices leading the losses, down 1.7% and 1.2% respectively.

FIIs net sold stocks and index futures worth Rs 632 cr and 80 cr respectively but net bought stock futures worth Rs 112 cr. DIIs were net buyers to the tune of Rs 211 cr.

Rupee appreciated 11 paise to end at 67.43/$.

Coal India plunged after the company reported 77% dip in consolidated net profit for the September quarter on account of higher costs.

OUTLOOK

Today morning, except a 0.3% higher Nikkei, other Asian market are trading with cuts of 0.2%-0.9% and SGX Nifty is suggesting about 35 points lower start for our market.

After today's negative start, Nifty will be back in the vicinity of 8150 which has been the support for last couple of days. Also you have got 20-DMA around 8120. This makes 8150-8120 an immediate support area. Below 8120, next support will come at 8057, the immediate previous bottom on the daily chart made in early December.

Meanwhile 8230, the top made yesterday, would act as the immediate hurdle.

Traders can initiate short positions once Nifty breaks the low made in first hour, keeping a stop-loss of 8230.