BRACE FOR A BIG GAP-DOWN

BRACE FOR A BIG GAP-DOWN

WORLD MARKETS

After plunging nearly 4% intraday, US indices rebounded sharply in last hour of trade to end with cuts of 1%-1.9% on Friday

The U.S. economy added 273,000 jobs in February, beating expectations of 175,000 new payrolls. The unemployment rate also fell back to 3.5%, matching its lowest level in more than 50 years.

Global cases of the coronavirus infections surpassed 100,000 with at least 3,383 deaths around the world. In the U.S., at least 12 people have died of the disease. California has declared a state of emergency, while the number of infections in New York reached 33.

Oil plunged nearly 10% to multi-year lows after OPEC’s allies rejected additional production cuts proposed by OPEC on Thursday. The current production cuts will be in place until the end of March as planned, but it’s uncertain if they will extend beyond this month. WTI crude slid 10.1%, or $4.62, to  $41.28, marking its worst day since Nov. 28, 2014 and closing at the lowest level since Aug. 2016. Brent crude slid 9.4% to settle at $45.27 per barrel, after hitting lowest level since June 2017.

The benchmark 10-year US treasury yield tumbled below 0.7% for the first time ever.

European markets plunged 3.4%-4.1%.  Italian retail sales came in flat month-on-month in January after an increase in December. French trade balance came in at -5.89 billion euros in January versus a revised -3.72 billion in December. German industrial orders surpassed expectations to post a monthly climb of 5.5% in January.

For the week, Dow ended higher by 1.8%, while S & P 500 and Nasdaq rose 0.6% and 0.1% respectively. Main European markets ended with cuts of 1.8%-2.9%. In Asia, Nifty and Nikkei fell 1.9% each while Shanghai soared 5.4% and Hang Seng was flat. WTI crude lost 8.2% to settle at $41.57/$.

AT HOME

After plunging nearly 4% at the open on the back of weak global and domestic cues, Sensex and Nifty recouped some of the losses through the session to end lower by 2.3% and 2.5% respectively. Sensex settled at 37576, down 839 points while Nifty lost 279 points to finish at 10990. Both the indices ended at the lowest level since 19th September 2019. BSE mid-cap and small-cap indices fell 2.4% and 1.9% respectively.

All the BSE sectoral indices ended in red with Metal index and Bankex leading the losses, down 4.4% and 3.5% respectively.

FIIs net sold stocks and index futures worth Rs 3595 cr and 2982 cr respectively but net bought stock futures worth Rs 763 cr. DIIs were net buyers to the tune of Rs 2544 cr.

Rupee depreciated 37 paise to end at 73.72/$.

For the week, Sensex and Nifty fell 1.9% each, extending the losing streak to third straight week and closing at six-month low.

OUTLOOK

After OPEC talks collapsed Friday, Saudi Arabia on Saturday slashed official crude selling prices for April, in a sudden U-turn from previous attempts to support the oil market.

Owing to this, Brent crude futures are down 25%, trading around $34 per barrel while WTI crude is off 26% at around $31 per barrel. US futures are down nearly 4% and the yield on the benchmark 10-year US treasury note briefly dropped below 0.5%, before recovering slightly.

Asian markets are trading with cuts of 2%-5.4% and SGX Nifty is suggesting about 300 points lower start for our market.

In Friday's report we had reiterated the view that, 10975, where 34-month moving average was placed, continued to be crucial support, below which, 10637, the bottom made in August 2019, would be the next major support to eye.

Nifty, on Friday, after touching a low of 10827, rebounded to end at 10989 but is set to open near 10700 today.

10637, the bottom made in August 2019, would now be the support to eye after today's gap down opening. If 10637 gives way, 10300-10150 would be the next support zone, as 10300 is where lower band of Bollinger on monthly chart is placed while 10150 is where a trendline adjoining bottoms made in March and October 2018 lands support.

11035, the erstwhile support and the top made on Friday, would now act as immediate hurdle, with the stop-loss of which, trading shorts can be held on to.