10700 IS THE NEXT SUPPORT; TRAIL STOP-LOSS TO 11060

10700 IS THE NEXT SUPPORT; TRAIL STOP-LOSS TO 11060

WORLD MARKETS

US indices nosedived 2.9%-3.5%, suffering worst percentage drop this year, after China retaliated against Trump’s latest move of imposing fresh tariffs on Chinese imports. Nasdaq and S & P 500 fell for the sixth consecutive day while Dow fell for the fifth straight day.

China, which has historically controlled its currency, the yuan, allowed it to fall to its lowest level against the dollar in more than a decade. The onshore yuan broke above 7 per U.S. dollar and traded around 7.05. China also suspended the purchases of U.S. agricultural products and threatened to slap tariffs on the farm goods purchased after Aug. 3.

Following that, the U.S. Treasury Department designated China as currency manipulator, a historic move that no White House had exercised since the Clinton administration.

The benchmark 10-year Treasury yield fell to 1.74% and reached its lowest level since November 2016. Spot gold rose 1.4% at $1,460.60 per ounce.

Brent oil fell $2.08, or 3.36%, to settle at $59.81 a barrel while U.S. West Texas Intermediate (WTI) crude futures fell 97 cents, or 1.74%, to $54.69.

European markets fell 1.3%-2.5%.

AT HOME

After plunging 2% in the morning trade, benchmark indices recouped some of the losses in noon trade to end lower by a percent and fifth. Sensex slumped 418 points to settle at 36700 while Nifty finished at 10862, down 134 points. BSE mid-cap and small-cap indices fell 1.3% and 1.7% respectively. BSE Utilities index tumbled 2.7% each, becoming top losers among the sectoral indices, followed by 2.6% lower Energy and Power indices. Telecom index was the top gainer, up 1.6%, followed by 0.7% higher Teck and IT indices.

FIIs net sold stocks and index futures worth Rs 2017 cr and 1156 cr respectively but net bought stock futures worth Rs 1222 cr. DIIs were net buyers to the tune of Rs 1871 cr.

Rupee plunged 115 paise to close at 70.74/$.

In a historic announcement, Union Home Minister Amit Shah today announced the government’s proposal to revoke Article 370 of the Indian Constitution, which provided “special status” to the state. A separate Union Territory will be created for Jammu & Kashmir with legislature while Ladakh region is also being given the status of a Union Territory without legislature.

India's July Nikkei Services PMI rose to 53.8 from 49.6 in June. Composite PMI rose to 53.9 from 50.8.

OUTLOOK

Today morning, Asian markets are trading with cuts of 1.6%-2.6% and SGX Nifty is suggesting about 70 points lower start for our market.

After Nifty broke 20-month moving average support of 11000, we have been working with next downside targets of 11800 and 11700, which are the 61.8% and 67% retracement levels of the entire 10004-12103 upmove.

Nifty yesterday plunged all the way to 10782 before closing at 10862, achieving 10800 target and vindicating our view. The benchmark is set to open below 10800 today.

10700, the 67% retracement level of the 10004-12103 upmove, continues to be the next support to eye. If 10700 also gives way, 10400, where 34-month moving average is placed, would be the next crucial support.

Immediate resistance on the hourly chart has moved lower to 11060, with the stop-loss of which, trading shorts should be held on to.