NIFTY REBOUNDS AFTER TESTING CRUCIAL SUPPORTS; 10725, 10875 HURDLES ON THE WAY UP

NIFTY REBOUNDS AFTER TESTING CRUCIAL SUPPORTS; 10725, 10875 HURDLES ON THE WAY UP

WORLD MARKETS

After witnessing wild swings through the session, US indices ended with gains of 1.7%-2.3%.

The Cboe Volatility index broke above 50 in early trading Tuesday before sliding down to 29.69. It had closed at 37.32 on Monday. The surge in volatility also triggered massive selling in other volatility instruments. The VelocityShares Daily Inverse VIX Short-Term exchange-traded note (XIV), which allows traders to bet against the VIX, lost nearly all of its value yesterday.

The benchmark 10-year yield traded around 2.75%.

Oil fell with Brent down 1.2% at $66.86 a barrel and WTI down 1%.

European markets fell 2.1%-2.6%

AT HOME

After plunging nearly three and a half percent in the initial trade, benchmark indices recouped more than half of the losses to end lower by about a percent and half. Sensex settled at 34196, down 561 points while Nifty lost 168 points to finish at 10498. BSE mid-cap and small-cap indices fell 1.7% and 2.2% respectively. All the BSE sectoral indices ended in red with IT and Consumer Durable indices leading the tally, down 2.8% and 2.7% respectively.

FIIs net sold stocks and index futures worth Rs 2326 cr and 1638 cr respectively but net bought stock futures worth Rs 1437 cr. DIIs were net buyers to the tune of Rs 1700 cr.

Rupee depreciated 18 paise to end at 64.24/$.

Hero Motocorp reported largely in-line with estimated numbers. Net profit rose 4% y-o-y to Rs 805 cr on revenues which were 15% higher at Rs 7305 cr. Ebidta rose 7% to Rs 1158 cr while operating margins fell to 15.9% from 16.9%.

Lupin nosedived after reporting 65% y-o-y fall in consolidated net profit at Rs 222 cr due to continued pricing pressure in the US and weak operational performance. Revenue fell 11.3% to Rs 3977 cr. Operating profit fell 43.5% to Rs 689 cr and margin contracted 990 bps to 17.3%.

PNB's earnings missed expectations but asset quality improved. Net profit rose 11% y-o-y to Rs 230 cr and NII rose 7% to Rs 3989 cr. Gross NPA ratio improved to 12.11% from 13.31% q-o-q and Net NPA ratio fell to 7.55% from 8.44%.

OUTLOOK

Today morning, Asian markets are trading with gains of 1%-3.3% with Nikkei on the top and SGX Nifty is suggesting about 100 points higher start for our market.

Monetary Policy Committee, at the end of two-day meeting, is likely to keep interest rates unchanged. However the tone of the policy will be important to guage the probability of future interest rate changes. Key points to watch out would be the March 2019 inflation forecast as well as opinion on MSP hike and fiscal deficit picture presented in the union budget gone by.

In yesterday's report we had mentioned that 10400 and 10200, where 20 and 34-week moving averages were placed respectively, were the important downside supports to eye. Nifty, after touching a low of 10276, rebounded sharply to close at 10498 and is set to open around 10600 today.

10725 followed by 10875, the 50% and 67% retracement levels of the recent 11171-10276 fall, are the resistance levels to eye on the way up.

10276, the bottom made yesterday, is now the important support to eye.