11060 CONTINUES TO BE IMMEDIATE HURDLE; 10782 NEAREST SUPPORT

11060 CONTINUES TO BE IMMEDIATE HURDLE; 10782 NEAREST SUPPORT

WORLD MARKETS

After plunging nearly 2% in the initial trade, US indices saw a sustained northward move through the session to end flat to modestly higher as a sharp decline in bond yields stabilized to temper worries over slowing economic growth.

The 10-year Treasury yield, after briefly dipping below 1.6%, rebounded to trade around 1.71%. Recovery in Chinese Yuan, from 7.06/$ to 7.02, also helped equities. Meanwhile, the yield on the 10-year German bund briefly fell to negative 0.6%, a record low. 

Brent futures tumbled 4.4% to $56.35 a barrel while WTI settled down 4.7% at $51.09 a barrel. Gold futures for December delivery jumped 2.2% to trade at $1,522.70 per ounce.

European markets gained 0.4%-0.7%. German industrial output for June fell by 1.5% on the month, far exceeding the forecast 0.4% decline.

AT HOME

Benchmark indices fell eight tenth of a percent, giving away all the gains made yesterday. Sensex lost 286 points to settle at 36690 while Nifty finished at 10855, down 92 points. BSE mid-cap and small-cap indices fell 0.4% and 0.1% respectively. BSE Metal and Auto indices nosedived 2.7% and 2.1% respectively, becoming top losers among the sectoral indices while Healthcare index rose 0.5%, becoming top gainer, followed by 0.2% higher IT and Teck indices.

FIIs net sold stocks and index futures worth Rs 384 cr and 981 cr respectively but net bought stock futures worth Rs 607 cr. DIIs were net buyers to the tune of Rs 532 cr.

Rupee depreciated 8 paise to end at 70.89/$.

RBI's Monetary Policy Committee cut the benchmark repo rate by 35 bps to 5.4%, marking the fourth reduction in a row since Shaktikanta Das took over as the governor of the RBI in December last year. All members of the MPC unanimously voted to reduce the policy repo rate and to maintain the accommodative stance of monetary policy. 

The MPC revised downwards GDP growth for FY20 from 7% in the June policy to 6.9% in August in the range of 5.8-6.6% for the first half of FY20 and 7.3-7.5% for the second half–with risks somewhat tilted to the downside. GDP growth for the first quarter of FY21 is projected at 7.4%.

The path of CPI inflation is now projected at 3.1% for the second quarter of FY20 and 3.5-3.7% for second half of FY20, with risks evenly balanced. CPI for the first quarter of FY21 is projected at 3.6%.

Tata Steel reported in-line set of numbers for India operations but European numbers were a big miss. Revenue rose 1.1% to Rs 35947 cr, EBITDA fell 15.4% to Rs 5377 cr, margin fell 290 bps to 15% and net profit nosedived 64% to Rs 693 cr.

HCL Tech was a beat on revenue front but margin missed estimate. The company maintained its FY20 guidance. Dollar revenue rose 3.8% q-o-q to 2364 mn, rupee revenue rose 2.7% to Rs 16425 cr, EBIT fell 7.7% to Rs 2806 cr, margin contracted 180 bps to 17.1% and profit fell 13.5% to Rs 2220 cr.

OUTLOOK

China has set the yuan midpoint at 7.0039 per dollar, which is the weakest level since April 2008.

Asian markets are trading with gains of 0.4%-0.9% and SGX Nifty is suggesting a flattish start for our market.

After Tuesday's bounceback, in yesterday's report we had reiterated the view that a crossover of 11160 is required the negate the near term negative view.

Yesterday, Nifty, after touching a high of 10975, slipped to end at 10855 and is set to open flat today.

10782, the bottom made on Monday, continues to be immediate support, upon breach of which 10700, the 67% retracement level of the entire 10004-12103 upmove, would be the next important support. If 10700 also gives way, 10400, where 34-month moving average is placed, would be the next crucial support.

11060 continues to be immediate hurdle, with the stop-loss of which trading shorts can be held on to.