NIFTY TUMBLES FROM 12041 HURDLE; REBOUNDS FROM 11830 SUPPORT

NIFTY TUMBLES FROM 12041 HURDLE; REBOUNDS FROM 11830 SUPPORT

WORLD MARKETS

US indices nosedived 1.3%-1.5% on Friday after a surprise decision from US President Trump to impose tariffs on all imports from Mexico and persisting trade war worries with China.

On Thursday evening, Trump tweeted the U.S. would impose a 5% tariff on all Mexican imports from June 10 until illegal immigration across the southern border was stopped. The White House added in a statement that tariffs would be raised if the immigration issue persisted, with the charges set to increase even further if Mexico fails to take “dramatic action” to reduce or eliminate the problem.

Earlier, Data from China showed official manufacturing Purchasing Managers’ Index (PMI) for May was 49.4, versus expectation of 49.9 and sharply down from April’s reading of 50.1.

WTI crude nosedived 5.5% to $53.50 a barrel and Brent fell 3.6% to $64.47 after U.S. President Donald Trump stoked global trade tensions by threatening tariffs on Mexico, one of the largest U.S. trade partners and major supplier of crude oil.

The closely watched 10-year Treasury yield dropped to 2.13%, the lowest since 2017. It was above 2.5% at the beginning of the month.

European markets fell 0.8%-1.7%. Italy reported fourth-quarter GDP of -0.1% quarter-on-quarter and 0% over the year.

For the week, US indices tumbled 2.4%-3%, with the Dow notching its sixth straight weekly loss while the S&P 500 and Nasdaq posted their fourth straight weekly loss. European markets fell 1.6%-2.4%. In Asia, Nikkei and Hang Seng fell 2.4% and 1.7% respectively while Shanghai and Nifty rose 1.6% and 0.7% respectively.

AT HOME

Benchmark indices ended with modest cut after a choppy session, reacting to negative global cues and announcement of portfolios to newly sworn-in ministers. Sensex lost 118 points to settle at 39714 while Nifty finished at 11923, down 23 points. BSE mid-cap index rose 0.2% but small-cap index fell 0.6%. BSE Power and Metal indices tumbled 1.3% and 1.1% respectively, becoming top losers among the sectoral indices while IT and Teck indices rose 1.2% and 1.1% respectively, becoming top gainers.

FIIs net bought stocks and stock futures worth Rs 676 cr and 2431 cr respectively but net sold index futures worth Rs 405 cr. DIIs were net buyers to the tune of Rs 394 cr.

Rupee appreciated 19 paise to end at 69.67/$.

For the week, Sensex and Nifty gained 0.7% each, extending the winning streak to third consecutive week.

Much awaited portfolio allocation of new government was out and big surprise was appointment of Nirmala Sitharaman as the Finance Minister. Amit Shah got Home Ministry while Rajnath Singh became new Defence Minsiter. Nitin Gadkari retained Road, Transport and Highway Ministry and got added responsibility of MSME ministry. Piyush Goyal retained Railways and got additional responsibility of Commerce and Industry ministry.

The new Union Cabinet, headed by Prime Minister Narendra Modi, in its first meeting approved a number of schemes aimed at the rural sector and traders. It cleared the extension of benefits of the PM Kisan scheme to all landholding farmers, providing them Rs 6,000 per year. The additional outlay of this scheme will be around Rs 13,000 crore per annum, taking the total outlay of the scheme to Rs 88,000 cr. The Cabinet also approved a pension scheme for farmers and a similar scheme for traders.

Budget session of the Parliament will start on June 17 and end on July 26. New government's first budget will be presented on July 5th.

Economic data was poor. India's economic growth fell to 5.8% in January-March quarter, the lowest in 20 quarters, due to a sharp slowdown in investment and manufacturing growth as well as a contraction in agricultural production. FY19 GDP growth stood at 6.8%, its lowest in the last 5 years. Growth in the core sector of the economy fell to 2.6% in April, down from 4.9% in March.

GST collection in May fell to Rs 1 lk cr from 1.13 lk cr in April.

India's full year fiscal deficit for FY19 came in at 6.45 lakh cr, slightly above the revised estimate of Rs 6.35 lah cr.

May auto sales were disappointing too. Maruti sales fell 22% y-o-y to 1.34 lakh units. Tata Motors sales fell 26% to 40155 units. Hero Motocorp saw 7.7% dip at 6.5 lk units. Eicher Motors' Royal Enfield sales fell 17% to 62371 units. M & M auto sales fell 3% to 45421 units while farm equipment sales fell 16% to 24704 units.

President Donald Trump terminated India’s designation as a developing nation under a trade program, eliminating an exception that allowed the country to export nearly 2,000 products to the U.S. duty-free.

OUTLOOK

Today morning, Nikkei is down more than a percent, Hang Seng is down 0.1% while Shanghai is up 0.4%. SGX Nifty is suggesting about 40 points higher start for our market.

At the risk of repeating, for past many sessions, we have been mentioning that 12041 and 11614, the top and bottom made on the election result day, are important support and resistance levels to eye. In Friday's session, we had advised trailing stop-loss in long positions to 11836, which was the bottom made on Wednesday.

Nifty, on Friday, after touching a high of 12039, slipped to touch a low of 11829 before closing at 11918, hitting both the resistance and support levels mentioned above and vindicating our view.

12041 continues to be immediate resistance to eye, a decisive crossover of which is required for a fresh upmove. It that happens, 12250, followed by 12500, would be next upside targets to eye.

11829, the low made on Friday, is the immediate support, upon breach of which, 11750, the two third retracement level of the recent 11614-12039 upmove, would be the next support.

Traders are advised to hold long positions with the stop-loss of 11829.