11220 CONTINUES TO BE NEXT SUPPORT; 11435 IMMEDIATE HURDLE

11220 CONTINUES TO BE NEXT SUPPORT; 11435 IMMEDIATE HURDLE

WORLD MARKETS

After falling nearly a percent and half in the initial trade, US indices rebounded sharply to end with gains of 0.1%-0.4% after US President Trump said conversations with China over trade will continue and his relationship with President Xi Jinping remains strong.

Comments from Treasury Secretary Steven Mnuchin that China trade talks were “constructive.” and reports saying that Chinese Vice Premier Liu He said the talks went “fairly well,” also boosted the sentiment.

The initial fall was also on account of a Trump tweet saying there’s “absolutely no rush” on a trade agreement with China. This came after he slapped higher tariffs — from 10% to 25% — on $200 billion worth of Chinese goods.

US crude fell 4 cents to $61.66 a barrel while Brent rose 23 cents to $70.62.

European markets, except a 0.1% lower FTSE, gained 0.2%-0.7%. UK's first quarter GDP grew at 0.5%, it's highest since 2017.

For the week, US indices fell 2.1%-3%, European markets saw cuts of 2.4%-4% and Asian markets tumbled 3.7%-5%. WTI ended the week down about half a percent while Brent ended the week slightly lower.

AT HOME

Benchmark indices ended lower by about a fourth of a percent after a choppy session, extending the losing streak to eight consecutive day and closing at two-month low. Sensex slipped 95 points to settle at 37462 while Nifty finished at 11278, down 23 points. BSE mid-cap and small-cap indices however gained 0.2% each. BSE Metal and IT indices tumbled 1.5% and 1.1% respectively, becoming top losers among the sectoral indices while Consumer Durable index was the top gainer, up 1.5%, followed by 0.8% higher telecom index.

FIIs net sold stocks and index futures worth Rs 1245 cr and 1296 cr respectively but net bought stock futures worth Rs 362 cr. DIIs were net buyers to the tune of Rs 1057 cr.

Rupee appreciated 3 paise to end at 69.91/$.

Tata Steel tumbled 6.2% after reports said that Thyssenkrupp is expecting the joint venture with Tata Steel to fail.

For the week, Sensex and Nifty plunged 3.8% and 3.7% respectively, suffering the largest weekly cut in seven months.

March Index of Industrial Production hit a 23-month low, contracting 0.1% as against growth of 0.1% in February.

SBI's net profit and NII missed estimates but asset quality improved. The bank reported a profit of Rs 838 cr for the quarter ended March 31, 2019 as against a loss of Rs 7718 cr in the same quarter last year. NII rose 14.9% to Rs 22954 cr. Gross NPA ratio improved 118 bps q-o-q to 7.53% while net NPA ratio fell to 3.01% from 3.95%. Slippages came in at Rs 7961 cr. Provision coverage ratio improved to 78.73% from 74.6% q-o-q.

L & T's revenue meet street estimates while margin and net profit was a slight miss though FY20 guidance was positive. Revenue rose 10.5% to Rs 44934 cr, EBITDA was up 3.5% at Rs 5600 cr, margin contracted 80 bps to 12.5% and net profit was 7.9% at Rs 3418 cr. The company expects FY20 revenue growth of 12-15% and order intake growth of 10-12% and margins to be maintained at similar levels.

Eicher Motor's revenue and profit beat estimate while margin was a miss. Revenue fell 1.1% to Rs 2500 cr, EBITDA slipped 14% to Rs 685 cr, margin contracted 410 bps to 27.4% while net profit rose 18% to Rs 545 cr.

OUTLOOK

Today, Hang Seng is shut while Shanghai and Nikkei are trading with cuts of 1.1% and 0.6% respectively. SGX Nifty is suggesting about 50 points lower start for our market.

At the risk of repeating, we have been negative on Nifty ever since 11550 support was taken out and have been advising holding on to short positions with a trailing stop-loss. After 11370 target was achieved, we had given next target of 11220.

Nifty, on Friday, touched a low of 11251 before closing at 11278 and is set to open below 11250 today.

11220, the 50% retracement level of the entire 10585-11856 upmove, continues to be immediate support to eye. If that gets breached 11070, the 61.8% retracement level of this upmove, would be the next downside target/support.

Immediate hurdle on the hourly chart has moved lower to 11435, with the stop-loss of which, trading shorts should be held on to.

ITC and HDFC will report their quarterly earnings today.