PROFIT BOOKING AS EXPECTED; OUTLOOK POSITIVE THOUGH

PROFIT BOOKING AS EXPECTED; OUTLOOK POSITIVE THOUGH

WORLD MARKETS

Equities, bond yields and crude tumbled yesterday on worries that the US-China trade war is slowing the economy. US indices nosedived 1.1%-1.6%.

IHS Markit said on Thursday that U.S. manufacturing activity grew at its slowest pace since September 2009 this month. Panasonic, Vodafone, BT Group and chip designer Arm Holding announced discontinuation of business relation with Huawei to comply with the US blacklisting of the company.

US oil plunged $3.51 or 5.7% to $57.91 a barrel while Brent tumbled $3.35 or 4.7% to $67.64 on the back of prolonged U.S.-China trade war and disappointing US manufacturing data.

The US 10-year yield fell to its lowest since October 2017.

European markets tumbled 1.4%-2.1%.

AT HOME

After climbing nearly 2.5% on the back evident NDA victory in the general election, benchmark indices saw a dramatic reversal to end lower by seven tenth of a percent. Sensex settled at 38811, down 299 points while Nifty lost 80 points to finish at 11657. BSE mid-cap and small-cap indices fell 0.2% and 0.1% respectively. BSE FMCG and Metal indices fell 1.8% and 1.6% respectively, becoming top losers among the sectoral indices while Telecom and Industrials indices were the top gainers, up 1% and 0.7% respectively.

FIIs net bought stocks worth Rs 1352 cr but net sold index futures and stock futures worth Rs 1414 cr and 372 cr respectively. DIIs were net sellers to the tune of Rs 594 cr.

Rupee depreciated 35 paise to end at 70.01/$.

It was a resounding victory for the BJP led NDA, which won 353 seats in 542 seats Lok Sabha, UPA won 92 seats and Others won 97 seats. BJP, on its own, crossed 300 mark to win 303 seats.

OUTLOOK

Today morning, Nikkei is down half a percent while Hang Seng and Shanghai are up half a percent each. SGX Nifty is suggesting about 50 points higher start for our market.

In yesterday's report we had clearly mentioned that market has already factored in a clean NDA victory and 300 to 330-340 seats would be a "Neutral" scenario in terms of market reaction. We had also said that above 11883, 12000-12080 would be the next resistance zone. As expected, after touching a high of 12041, profit booking set in and Nifty plunged all the way to 11614 before closing at 11657.

The benchmark is set to open above 11700 today.

Usually, the top/bottoms made on the big event day are crucial levels to eye. Hence, 12041, the top made yesterday, would be the important resistance going forward, a crossover of which would be required for a fresh upmove. If that happen, 12500 would be the next major target.

34-DMA, placed around 11575, would be the important immediate support to watch below which 11426, the lower end of the gap created by Monday's gap up opening, would be the next support to eye.

In our study of past three elections, markets have always given positive return in a one-year period post election result. Hence, now that the big event is out of the way, and that too with a positive outcome, we think this time as well, Nifty should follow the precedent, barring any unforeseen developments.

In the immediate future, markets would watch out for the portfolio allocation in the new government and vision/agenda of the new ministers.