10987 NEXT UPSIDE TARGET/RESISTANCE; 10700 IMMEDIATE SUPPORT

10987 NEXT UPSIDE TARGET/RESISTANCE; 10700 IMMEDIATE SUPPORT

WORLD MARKETS

Dow fell 0.1% while S & P 500 and Nasdaq gained 0.9% and 1.4% respectively driven by better-than-expected earnings including Facebook and General Electric.

Facebook surged 10.8% after the company's quarterly results topped expectations. GE jumped 11.6% on stronger-than-forecast revenue. UPS and Charter Communications also reported good numbers. On the flip side, Microsoft fell 1.8% after reporting weaker-than-expected revenue and quarterly earnings guidance. DowDuPont fell 9.2% on the back of mixed quarterly results. Tesla dipped 0.5% on the back of weaker-than-expected earnings.

Comments from Trump that he hoped to strike a deal with China before the March deadline, also boosted the sentiment. Trump also said Chinese President Xi Jinping told him in a letter that he hopes both sides will be able to meet each other halfway on a trade agreement before the deadline.

US crude fell 44 cents to $53.79 a barrel while Brent rose 24 cents to $61.89.

In Europe, FTSE and CAC gained 0.4% each while DAX was down 0.1%. Euro zone GDP grew at 0.2% on the quarter and of 1.2% on the year in the final quarter of 2018, its lowest pace of growth in four years.

The S&P 500 jumped 7.87% in January, its best January performance since 1987, and its biggest monthly gain since October 2015. The Dow rose 7.17%, its largest one-month rise since 2015 and biggest January gain in 30 years. WTI posted an 18.5% monthly gain, its biggest jump since April 2016 and its best January since the futures began trading in 1983. Brent jumped 15%.

AT HOME

Sensex and Nifty soared 1.9% and 1.7% respectively, registering biggest daily gain since 29th October 2018 and 12th December 2018 respectively. Sensex settled at 36256, up 665 points while Nifty added 179 points to finish at 10830. BSE mid-cap and small-cap indices however gained just 0.6% each. All the BSE sectoral indices ended in green with IT and Energy indices leading the tally, up 2.1% each.

FIIs net bought stocks, index futures and stock futures worth Rs 3006 cr, 2765 cr and 1161 cr respectively. DIIs were net sellers to the tune of Rs 1634 cr.

Rupee appreciated 4 paise to end at 71.07/$.

Indiabulls Housing reported better-than-expected net profit and NII numbers along with stable asset quality. Net profit, dented by Rs 330 cr provision for Supertech account, fell 14% y-o-y to Rs 986 cr while NII rose 29.7% to Rs 2026 cr. Gross NPA ratio stood at 0.79% v/s 0.77% q-o-q and net NPA ratio at 0.59% against 0.58%. The company guided for a profit growth of 15-16% in FY19 and 17-19% in FY20.

OUTLOOK

Today morning, Asian markets are trading with gains of 0.4%-0.5% and SGX Nifty is suggesting about 45 points higher start for our market.

In yesterday's report we had reiterated the view that 10800 was the immediate hurdle, upon crossover of which, 10987 would be the next upside target.

Nifty yesterday soared to touch a high of 10838 before closing at 10830 and is set to open above 10850 today.

10987, the top made last week, continues to be next upside target as well as resistance to eye.

Immediate support on the hourly chart is placed around 10700, with the stop-loss of which, trading longs can be held on to.

·        Mr. Piyush Goyal, who has been given the temporary charge of the finance ministry, will present the Interim Budget today.

·        While this is supposed to be an interim budget, to woo the voters and address the farm distress, market is expecting some populist measures.

·        The biggest among that is likely to be some sort of "Farm Package" on the lines of Telangana/Madhya Pradesh/Odisha, which is expected to cost anywhere between 0.4%-0.8% of GDP, depending on the coverage and the scheme features.

·        Now, that will spark fiscal deficit worries. Already, on the back of less than targeted collection from GST and divestment, current year's 3.3% fiscal deficit target is expected to be breached by 10-20 bps. Therefore, market will closely watch out the nature and quantum of the possible farm package and funding of the same.

·        On the positive side, any such package would clearly be positive for farm/agri related as well as consumption stocks. So whole host of sectors like farm equipment, tractor, seeds, fertiliser, automobile (two/four wheeler), FMCG, electronic appliances, consumer finance, etc., might react positively to such an announcement.

·        Another area could be tax benefits for middle class. Whether it will be a reworking of slabs or higher standard deduction, or be limited to concessions on purchase of medical insurance, remains to be seen. This will again boost consumption related stocks.

·        Any move on relaxing corporate tax rate, Long Term capital gains or DDT, will be received positively.

SBI, Dr Reddy and Titan will report their quarterly earnings today.