10975 IS THE IMMEDIATE HURDLE; 10637 IMMEDIATE SUPPORT

10975 IS THE IMMEDIATE HURDLE; 10637 IMMEDIATE SUPPORT

WORLD MARKETS

US indices nosedived 2.2%-2.9% on Friday after President Trump ordered that U.S. manufacturers find alternatives to their operations in China after China unveiled new tariffs on US goods.

China will implement new tariffs on another $75 billion worth of U.S. goods, including autos. The tariffs will range between 5% and 10% and will be implemented in two batches on Sept. 1 and Dec. 15. Following that announcement, Trump said he was ordering American companies to “immediately start looking for an alternative to China.”

Markets also digested remarks from Powell at the central bank’s Jackson Hole symposium. The Fed chief said in a speech that the Fed “will act as appropriate to sustain the expansion,” a phrase he has used several times in the recent past.

Brent crude futures fell 50 cents, or 0.8%, to $59.40 a barrel and WTI crude futures fell $1.18, or 2.1%, to settle at $54.17. Spot gold rose 2% to $1,528.53 an ounce.

European markets fell 0.5%-1.6%.

For the week, US indices fell 1%-1.8%, extending the losing streak to fourth straight week.

AT HOME

After plunging nearly a percent in first half an hour, Sensex and Nifty saw huge rebound through the session to end with gains of 0.6% and 0.8% respectively, breaking three-day losing streak. Sensex settled at 36701, up 228 points while Nifty added 88 poitns to finish at 10829. BSE mid-cap and small-cap indices gained 0.9% and 0.6% respectively. BSE Metal and Oil & Gas indices soared 3.5% and 3.4% respectively, becoming top gainers among the sectoral indices while FMCG index and Bankex were the top losers, down 0.8% and 0.3% respectively.

FIIs net sold stocks worth Rs 1737 cr but net bought index futures and stock futures worth Rs 428 cr and 427 cr respectively. DIIs were net buyers to the tune of Rs 1548 cr.

Rupee appreciated 15 paise to end at 71.66/$.

For the week, Sensex and Nifty fell 1.6% and 2% respectively, extending the losing streak to second consecutive week.

In a major and much awaited move, Finance Minister Nirmala Sithatharaman announced rolling back of the enhanced surcharge levied on capital gains along with slew of measures to stoke demand which included a rejig of its spending programme by front-loading it, addressing supply-side bottlenecks and easing bank credit rules, even as she promised to end “tax terrorism" that has left India Inc. jittery.

Major announcement include 1) Extra surcharge on any capital gain from sale of shares has been scrapped. 2) Front loading of the capital infusion of Rs 70000 cr for Public Sector Banks 3) Banks will be asked to link their loan rates to the central bank's repo rate 4) Angel Tax on start ups has been withdrawn 5) New registration fee for vehicles deferred to 2020. 6) Additional 15% depreciation for vehicles purchased from now till the end of March 2020. 7) NHB will extend additional liquidity of Rs 20000 cr to housing finance companies 8) Violation of CSR will not be treated as a criminal offence but a civil liability 9) MSME to get GST refund in 30 days 10) NBFCs will be allowed to use a bank's Aadhaar authenticated KYC data for lending to customers

OUTLOOK

Today morning, Asian markets are trading with cuts of 1.2%-3.2% but SGX Nifty is suggesting about 50 points higher start for our market.

In Friday's report we had said that "10700, the 67% retracement level of the entire 10004-12103 upmove, is the next downside target/support to eye. If that gives way, 34-month moving average, placed around 10375, would be the next crucial support to eye".

Nifty, after touching a low of 10646, rebounded sharply to end at 10842 and is set to open near 10900 today.

Immediate resistance on hourly chart is placed around 10975. Only after that is taken out, we can think of the upmove getting extended to 200-DMA placed around 11200.

Meanwhile, 10637, the low made Friday, would now act as immediate support. If that gets taken out, 34-month moving average, placed around 10375, would be the next crucial support to eye.