11725 IS THE NEXT SUPPORT; 11900 IMMEDIATE HURDLE

11725 IS THE NEXT SUPPORT; 11900 IMMEDIATE HURDLE

WORLD MARKETS

US indices fell 0.1%-0.2%, breaking multi-day winning streak, after stronger-than-expected U.S. nonfarm payrolls report dampened hope for easier Federal Reserve monetary policy.

The U.S. economy added 224,000 jobs in June, as against forecasted figure of 165,000 and a stunningly low figure of 75,000 in May.

Treasury yields jumped on the data. The benchmark 10-year yield traded at 2.05% and the 2-year rate rose to 1.87%. The dollar rose 0.6% against a basket of currencies while Gold futures dropped 1.4% to settle at $1,400.10 per ounce.

Brent oil rose 89 cents or 1.4% to $64.16 a barrel while WTI gained 17 cents or 0.3% to $57.51.

European markets fell 0.5%-0.7%. Geopolitical tensions in the Middle East renewed after British Royal Marines seized a large Iranian oil tanker on Thursday for trying to take oil to Syria in violation of EU sanctions. German industrial orders fell 2.2% in May, after rising slightly in March and April and as against expectation of 0.1% decline.

For the week, US indices gained 1.2%-1.9%. European markets rose 1%-1.7%. In Asia, Nikkei soared 2.2% while Shanghai and Hang Seng were up 1.1% and 0.8% respectively. Indian indices gained about a fourth of a percent. WTI crude fell 0.8% to $57.73 a barrel.

AT HOME

Benchmark indices ended with cuts of a percent and more after digesting Nirmala Sitharaman’s maiden budget, breaking four-day winning streak. Sensex settled at 39513, down 395 points while Nifty lost 135 points to finish at 11811. BSE mid-cap and small-cap indices tumbled 1.4% each.

BSE Metal and Realty indices nosedived 3.8% and 3.6% respectively, becoming top losers among the sectoral indices while FMCG index and Bankex were the top gainers, up 0.2% and 0.1% respectively. Yes Bank collapsed 8.6%, becoming top Nifty loser, followed by 4.7% lower NTPC. Indiabulls Housing and Indusind Bank were the top gainers, up 3.4% and 2.3% respectively. BSE advance-decline ratio stood at 1:2.2.

Nirmala Sitharaman’s budget tried to boost the growth while maintaining fiscal prudence, but markets slipped on the back of some announcement and concern that the revenue targets are ambitious. Here are the details;

Some key estimates/announcements included

·        FY20 gross revenue target at Rs 24.6 lk cr and net tax revenue target at Rs 16.49 lk cr; Non-tax revenue target at Rs 3.13 lk cr

·        FY20 divestment target hiked to Rs 1.05 cr from Rs 90000 cr

·        Aim to get Rs 1.06 lk cr from RBI, Banks’ dividend in FY20 of which RBI dividend is pegged at Rs 90000 cr

·        India to raise part of the gross borrowings in external markets in foreign currencies

·        2% TDS on cash withdrawal exceeding Rs 1 cr in a year from 1 bank account

·        Custom duty on gold and other precious metal increased by 2.5% to 12.5%

On the positive side

·        Fiscal deficit for FY20 has been pegged at 3.3%, lower than the 3.4% figure projected in the interim budget.

·        The budget has provided for Rs 70000 cr for PSU Bank recapitalization.

·        Annual turnover limit for 25% corporate tax raised to Rs 400 cr from Rs 250 cr

·        Additional Rs 1.5 lk deduction on interest paid for affordable housing loans till March 2020

·        Additional income tax deduction of Rs 1.5 lk on interest paid on loans for EVs

·        Government will examine opening up FDI further in aviation, media and insurance

·        Proposes to rationalize & streamline KYC norms for FPIs to make it more investors friendly without compromising integrity of cross-border cap flows

·        1.95 cr houses to be constructed under PMAY from FY20-22

·        To invest Rs 80250 cr for up gradation of roads over five years

·        Government to provide 1-time partial credit guarantee to buy pooled assets of sound NBFCs.

Some announcements which disappointed the market were

·        Mulling minimum public shareholding of 35%, up from present 25%.

·        Special additional excise duty of Rs 1/litre on Petrol and Diesel for road & infra each

·        Buyback tax of 20% extended to listed companies

·        Additional surcharge on higher earners; Effective income tax rates for those earning Rs 2-5 cr  and Rs 5 cr and above to go up by around 3% and 7% respectively.

FIIs net sold stocks, index futures and stock futures worth Rs 89 cr, 673 cr and 67 cr respectively. DIIs were net buyers to the tune of Rs 275 cr.

Rupee appreciated 7 paise to end at 68.42/$.

OUTLOOK

Today morning, Asian markets are trading with cuts of 0.9%-1.4% and SGX Nifty is suggesting about 50 points lower start for our market.

readers would recall that after Nifty took out 11850 hurdle, we had given upside targets of 11911, 12000 and 12103 and had been advising holding on to long positions with a trailing stop-loss. On Friday, we had advised trailing the stop-loss to 11860.

Nifty, after touching a high of 11981, slipped, broke 11860 support and plunged all the way to 11798 before closing at 11811 and is set to open below Friday's low today.

11725, where a trendline adjoining recent bottoms on hourly chart is placed, is the next downside support to eye. If that breaks, 11625, the bottom made in June, would be the next important support to eye.

Immediate hurdle on the hourly chart is placed around 11900, with the stop-loss of which, trading shorts should be held on to.