A BIG GAP-DOWN AWAITS

 

A BIG GAP-DOWN AWAITS

 

WORLD MARKETS

 

US indices nosedived 3%-4% on Friday after Fed Chairman Powell said in his Jackson Hole speech the central bank won’t back off in its fight against rapid inflation.

 

The U.S. economy will need tight monetary policy “for some time” before inflation is under control, which means slower growth, a weaker job market and “some pain” for households and businesses, Powell said.

 

Personal consumption expenditures price index — the Fed’s preferred inflation gauge — rose 6.3% y-o-y, down from a gain of 6.8% in June. U.S. consumer sentiment improved further in August and households’ near-term inflation expectations fell to an eight-month low.

 

US 10-year treasury yield inched up 1 bps to 3.043%. Dollar index, after touching a low of 107.58, rebounded to end 0.4% higher at 108.83. Gold slipped 1.2% to $1737 per ounce.

 

Brent crude futures rose $1.65 to settle at $100.99 a barrel and WTI crude futures rose 54 cents to settle at $93.06 a barrel.

 

European markets fell 0.7%-2.3%.

 

For the week, US indices fell 4%-4.4%, extending the losing streak to second consecutive week.

 

AT HOME

 

After rising nearly a percent in the initial trade, benchmark indices gave away most of the gains through the session to end just marginally higher. Sensex settled at 58833, up 59 points while Nifty added 36 points to finish at 17558. Nifty mid-cap and small-cap indices gained 0.6% and 0.7% respectively. BSE Metal and Consumer Durables indices climbed 1.6% and 1.5% respectively, becoming top gainers among the sectoral indices while Realty and FMCG indices were the top losers, down 0.4% and 0.2% respectively.

 

FIIs net sold stocks worth Rs 51 cr but net bought index futures and stock futures worth Rs 1020 cr and 604 cr respectively. DIIs were net buyers to the tune of Rs 454 cr.

 

Rupee appreciated 1 paise to end at 79.87/$.

 

For the week, Sensex and Nifty fell 1.4% and 1.1% respectively, snapping a 5-week winning streak.

 

OUTLOOK

 

Today morning, Asian markets are trading with cuts of 0.5%-2.8% with Nikkei leading the losses. SGX Nifty is suggesting nearly 350 points lower start for our market.

 

In Friday's report we had said that 17800 continued to be important immediate hurdle, a crossover of which was required for confirming a "Buy" on hourly chart. We had also said that 17345, the low made Tuesday, continued to be immediate support.

 

Nifty, after touching a high of 17685, slipped to end at 17558 and is set to open near 17200 today.

 

34-DMA, placed around 17050, would be the next downside level to eye after today's big gap-down opening; 17726, the top made last week, would work as immediate hurdle.

 

37950, the low made last week, is the support for Banknifty, upon breach of which, 34-DMA, placed around 37400, would be next downside level to eye; 39471, the top made last week, would work as immediate hurdle.