NIFTY CUTS LOSSES ON “FISCALLY PRUDENT” BUDGET; 7090 IS THE IMMEDIATE HURDLE

NIFTY CUTS LOSSES ON “FISCALLY PRUDENT” BUDGET; 7090 IS THE IMMEDIATE HURDLE

WORLD MARKETS                             

US indices reversed gains made in morning session to end lower by about three fourth of a percent

This was despite a rise in Nymex oil which settled up 97 cents or 3% at $33.75 a barrel. Brent rose 87 cents or 2.5% to $35.97.

Chicago PMI came in at 47.6 in February, missing expectations and dropping from 55.6 in January. Pending home sales fell 2.5% in January, versus expectations for a slight gain.

Earlier Shanghai Composite ended lower by 3%. After China's market closed, the People's Bank of China cut the reserve requirement ratio (RRR), the amount of cash the country's bank have to hold, by 0.5%. The cut was the first since October and the fifth since last February.

European markets, except a 0.2% lower DAX and flat FTSE, gained 0.8%-1.3%. Basic resources sector rallied the most following PBOC move. Eurozone inflation fell to negative 0.2% in February, boosting expectations of more policy easing when the ECB meets on March 10.

Gold rose $14 to $1234 an ounce.

For the month, S&P500 and Nasdaq lost 0.4% and 1.2% respectively in their third straight month of decline. Dow managed to gain 0.4%. Nymex oil gained 0.4% for February, its first positive month since October. Gold gained 11%.

AT HOME

After gyrating between a massive 4% intraday range on account of Union Budget, benchmark indices ended lower by about six tenth of a percent. Sensex settled at 23002, down 152 points while Nifty lost 43 points to finish at 6987. BSE mid-cap and small-cap indices ended little changed. BSE IT and Teck indices tumbled 2.1% and 2% respectively, becoming top losers among the sectoral indices while Bankex and Finance indices were the top gainers, up 1.1% and 0.9% respectively.

Presenting his second full-fledged budget, Arun Jaitley adhered to fiscal consolidation roadmap by proposing to keep the deficit at 3.5% of GDP in 2016-17. Total government expenditure in next fiscal would be Rs 19.78 lakh cr out of which plan expenditure would be up 15.3% at Rs 5.5 lakh cr while non-plan expenditure is estimated at Rs 14.28 lakh cr. FY17 food subsidy has been pegged at Rs 1.35 lakh cr while petroleum subsidy is expected at Rs 26900 cr.

FM reduced the Long Term Capital Gain period for unlisted companies to 2 years from 3 years but made no changes for the listed companies which was a positive from stock market perspective.

A 0.5% Krishi Kalyan Cess has been imposed on all taxable services effective June 1, 2016. However this was less than the 2% hike expected in the service tax.

On the flip side, Rs. 25000 cr were provided for the recapitalisation of public sector banks which fell short of market expectation. Corporate tax was cut to 29% for companies with turnover less than Rs 5 cr. which too fell short of expectation. Also dividend income of Rs 10 lakh or more will now attract a 10% tax and the surcharge on people earning more than Rs 1 cr has been upped to 15% from 12%.

FY17 strategic sale has been expected at Rs 20500 cr while the divestment target has been set at Rs 36000 cr.

Other key announcements include reduction in cess on crude from Rs 4500/MT to 20% ad valorem, raising the cess on coal, lignite and peat from current Rs 200 a tonne to Rs 400 per tonne. Also 1% infra cess on small petrol/LPG/CNG cars, 2.5% tax on sub-4 metre diesel cars and 4% tax on higher capacity sedans, MPVs and SUVs has been proposed.

While making no change in personal Income Tax slabs, FM announced deduction for additional interests of Rs 50,000 per annum for loans up to Rs 35 lakh sanctioned in 2016-17 for first time home buyers, where house costs does not exceed Rs 50 lakh.  Jaitley also proposed to increase the limit of deduction of rent paid from Rs 24,000 per annum to Rs 60,000 spelling respite to those who don’t own any house and live in rented accommodation. For those earning less than Rs 5 lakh per annum, FM announced to raise the ceiling of tax rebate from Rs 2000 to Rs 5000 giving an additional relief of Rs 3000 in their tax liability.

FIIs net sold stocks worth Rs 2018 cr but net bought index futures and stock futures worth rs 668 cr and 629 cr respectively. DIIs were net buyers to the tune of Rs 784 cr.

Rupee appreciated 20 paise to end at 68.425/$.

OMC cut petrol price by Rs. 3/litre while hiked diesel price by Rs 1.47/litre.

OUTLOOK

Today morning Asian markets are trading mixed with changes of upto half a percent and SGX Nifty is suggesting about 50 points higher opening for our market.

Yesterday, after making a fresh 52-week low of 6826, Nifty rebounded sharply to 7095 but fell from there to end at 6987.

Yesterday was the last day of February and that's why 6826, the low made yesterday, which is also the monthly low, is a very important support to eye. Also, Nifty has closed below the lower band of monthly bollinger, which last happened in December 2011 when Nifty had made a low of 4531. The nearest support to eye if 6826 is broken would be 6650, where the 61.8% retracement level of the entire 5119-9119 upmove is placed.

On the way up 7090, the 61.8% retracement level of the recent 7252-6826 fall, which also coincided with the top made yesterday, is the immediate hurdle, upon sustained trading above which 7252 would be the next target to eye.

Traders are advised to wait for the sustained crossover of 7090 for taking long position in Nifty.

CAN JAITLEY’S LOW EXPECTATION BUDGET SPRING A SURPRISE?

CAN JAITLEY’S LOW EXPECTATION BUDGET SPRING A SURPRISE?

WORLD MARKETS                             

After a positive start on Friday, Dow and S & P 500 saw a sustained downward move through the session to end lower by 0.3% and 0.2% respectively as oil reversed earlier gains and inflation data increased expectations for a rate hike in the coming year. Nasdeq managed to gain 0.2%.

Fed's preferred inflation measure, the core personal consumption expenditures price index, which excludes food and energy, rose 1.7% in January, the largest since July 2014. The second revision on fourth-quarter gross domestic product showed a growth of 1%, higher than the initially reported 0.7% figure.

Nymex oil April future, after reaching near $35 level, retreated to end lower by 29 cents at $32.78 a barrel.

Dollar index rose 0.9%. Pound sterling fell below $1.3900 to hit lowest level since March 2009. Gold fell $18 to $1220 an ounce.

European markets, buoyed by a recovery in mining stocks and oil prices, soared 1.4%-2.2%. Also boosting the sentiment were comments from the PBOB head that the central bank still has policy tools available to combat any downside risks to the economy, highlighting potential further easing.

For the week however, US indices ended with gains of 1.5%-1.9%. European markets gained 1.3%-3.4%. Nymex oil rose 3.4% while Brent climbed 6.3%.

AT HOME

On Friday, after a gap up opening, benchmark indices gave away most of the gains in the morning trade, only to recoup most of the lost ground in the noon trade to end higher by eight tenth of a percent, breaking three-day losing streak. Sensex gained 178 points to settle at 23154 while Nifty ended at 7030, up 59 points. BSE mid-cap index gained 0.3% while the small-cap index lost 0.4%. BSE Metal index and Bankex gained 1.7% and 1.5% respectively, becoming top gainers among the sectoral indices while Telecom and Healthcare indices lost 0.7% and 0.3% respectively.

FIIs net sold stocks worth Rs 695 cr but net bought index futures and stock futures worth Rs 734 cr and 668 cr respectively. DIIs were net buyers to the tune of Rs 784 cr.

Rupee appreciated 9 paise to end at 68.62/$.

For the week, Sensex and Nifty lost 2.3% and 2.5% respectively.

Economic Survey for 2015-16, which was tabled in the Parliament today, projected a 7-7.5% GDP growth in next fiscal as against the 7.6% growth expected in current fiscal. It also said that the fiscal deficit target of 3.9% for 2015-16 seems achievable but containing it in 2016-17 will be a challenge on account of additional outgo towards 7th Pay Commission, One Rank One Pension and a slowing global economy.

OUTLOOK

Today morning, Shanghai and Hang Seng are down more than 3% and 1% respectively. Other Asian markets are flat to modestly higher and SGX Nifty is suggesting about 30 points lower opening for our market.

Finance Minister Arun Jaitley will present Union budget for FY17 in the Parliament today. Key number to watch out, as usual, would be fiscal deficit, which is expected to be kept at 3.5% of GDP, which in absolute terms will be around Rs 5.26 lac cr, down from last year's 5.5 lac cr. Net borrowings are expected at around Rs 4.8 lc cr. Gross borrowing figure 6.4-6.8 lac cr. Tax revenue growth is expected between 15-18% leading to revenue of Rs. 11-11.5 lc cr.

Stock market will keenly watch out for any changes in Long Term Capital Gains Tax, STT (Securities Transaction Tax) and DDT (Dividend Distribution Tax). There is fear that

On the PSU Bank space, bank recapitalization to the tune of Rs 30000-35000 cr is expected. Also any announcement on Stressed Assets Fund, Asset Reconstruction Company and bankruptcy code would be positive for banking space.

There is also expectation that 5% custom duty on crude oil might be reimposed which would be positive for ONGC and Cairn but negative for OMCs. Any reduction in cess on crude oil would be positive for ONGC and Oil India.

Other possible focus areas include reviving agriculture sector, launch of a mega healthcare scheme, statement of intent on new land leading policy and details on medium term fiscal roadmap.

Individual or sector specific announcement might include introduction of Green Tax, increase in import tariffs on ferrous/non-ferrous metal, increased allocation under Pradahn Mantri Sinchai Yojna.

For the individual tax payer, tax exemption limit might be raised from current Rs. 2.5 lac to 3.0 lac and housing interest exemption limit might be raised. Corporate tax rate might be cut from 30% to 29% and is expected to be accompanied with a roadmap on eliminating most of the incentives. Service tax might be raised from 14% to 16%.

Technically, as mentioned in Friday's report, 6960-7120 continues to be immediate range, a breach of which, on either side, is required for fresh direction. A breach of 6960 can take Nifty back to 6870 bottom made on 12th February. If 6870 is also taken out then 6650, the 68.2% retracement level of the entire 5119-9119 upmove, would be the next major target to eye.

On the flip side, a sustained trading above 7120 would generate a buy on the hourly chart and can take Nifty to around 7250, where the immediate previous top on the daily chart is placed.

NIFTY PLUNGES TO 6961; ACHIEVES ANOTHER DOWNSIDE TARGET

NIFTY PLUNGES TO 6961; ACHIEVES ANOTHER DOWNSIDE TARGET

WORLD MARKETS                             

After a flattish start, US indices saw a sustained northward move through the session to end with gains of 0.9%-1.3% as oil prices gained.

Nymex oil, after falling as much as 3%, reversed to close higher by 3% at $33.07 a barrel. Brent settled at $35.29 a barrel, up 2.6%. The gains came after a media report that the Venezuelan oil minister said his country, Saudi Arabia, Russia, and Qatar had settled on meeting in March.

US January orders for durable goods jumped 4.9%, beating expectations with the largest increase since March and reversing December's revised 4.6% dip.

Earlier Shanghai Composite plunged more than 6% as surging money-market rates signaled tighter liquidity and the offshore yuan declined for a fifth day.

European markets, on the back of positive set of corporate earnings, rose 1.8%-2.5%. Data showed that the inflation rate in the euro zone in January was 0.3% year-on-year, rather than a preliminary reading of 0.4%. On the flip side, U.K.'s fourth-quarter GDP was revised upwards to 0.5% quarter-on-quarter, from a preliminary reading of 0.4%.

AT HOME

Bears continued to dominate as Sensex and Nifty lost 0.5% and 0.7% in today's trade, extending the losing streak to third straight day and with Nifty closing at fresh 52-week low. In absolute terms, Sensex lost 113 points to settle at 22976 while Nifty ended at 6971, down 48 points. BSE mid-cap and small-cap indices fell 1.1% and 0.9% respectively. BSE Utilities and Power indices tumbled 2.5% and 2.2% respectively, becoming top losers among the sectoral indices while Metal and Telecom indices gained 0.4% and 0.2% respectively.

FIIs net sold stocks and index futures worth Rs 1466 cr and 2435 cr respectively but net bought stock futures worth Rs 469 cr. DIIs were net buyers to the tune of Rs 807 cr.

Rupee depreciated 17 paise to end at 68.73/$.

Sensex and Nifty lost 6% each in the February series.

Railway Minister Suresh Prabhu, in the Railway budget 2016-17 presented in the Parliament yesterday, increased plan outlay to Rs 1.21 lakh crore from Rs 1 lakh crore in the previous budget. Passenger tariffs and freight rates were left unchanged. He is targeting an operating ratio of 92%, worsening from current year's 90%, which itself was a miss from the targeted 89%.

He fell short of achieving revenue targets set in last year’s budget. As against a gross traffic receipts target of Rs 1.83 lakh cr, only Rs 1.67 lakh cr was achieved. Passenger traffic revenue stood at Rs 45384 cr as against expectation of Rs 50175 cr. Freight revenues were Rs 1.13 lakh cr, far lower than the estimated Rs 1.21 lakh cr.

For current year, he set gross revenue target of Rs 1.85 lakh cr, up 10% y-o-y. Key announcements included 3 freight corridors, establishing of 2 locomotive factories, redevelopment of 400 stations via PPP mode and 3-new high-speed trains. At least 20 projects via EPC route would be implemented in FY17. For funding these, Rs 21000 crore would be raised through IRFC bonds and Rs 18000 cr would be raised in partnership with NTPC. Institutional finance of Rs 20985 cr would also be sought.

OUTLOOK

Today morning, except a flattish Shanghai, other Asian markets are trading with gains of 0.5%-1% and SGX Nifty is suggesting about 70 points higher opening for our market.

Readers would recall that we had advise going short on Nifty on a sustained trading below 7140 for targets of  7060 and 7015, which were the 50% and 61.8% retracement levels of the recent 6869-7252 upmove. In yesterday's report we had mentioned that below 7015, Nifty can fall to 6960, which is the immediate previous bottom on the daily chart.

The benchmark touched a low of 6961 before closing at 6970, achieving the target mentioned above and vindicating our view.

Nifty is set to open with an upward gap today. However, the bias would continue to be negative until immediate hurdle on the hourly chart, placed around 7120, is taken out. 6960 on the way down, is the immediate support, a breach of which can take Nifty back to 6870 bottom.

Traders should await crossover of 6960-7120 levels for taking a fresh position on Nifty.

Chief Economic Advisor Arvind Subramanianm will present Economic Survey today.

NIFTY ACHIEVES DOWNSIDE TARGET OF 7015

NIFTY ACHIEVES DOWNSIDE TARGET OF 7015

WORLD MARKETS                             

US indices, after falling nearly a percent and half in the initial trade, saw a sustained northward move through rest of the session to end with gains of 0.3%-0.9% as the oil prices rebounded.

After falling more than 4%, Nymex oil reversed to settle up 0.9% at $32.15 a barrel. Brent gained $1.14 or 3.4% to $34.41 a barrel. The bounce back came as data showed U.S. gasoline demand over the past four weeks rose more than 5% compared to a year ago. Also supporting was data from Energy Information Administration that crude inventories showed a much smaller build, than a previous industry report.  

Economic data was weak. New home sales for January hit 494,000, below the expected 520,000, while the Markit Flash February report on services PMI came in at 49.8, down sharply from 53.2 in January and a touch below the key 50.0 level.

European markets lost 1.6%-3.1%

Gold rose $16.50 to settle at $1239 an ounce.

AT HOME

Bear rampage continued as benchmark indices nosedived a percent and third, extending the losing streak to second day. Sensex settled at 23089, down 321 points while Nifty lost 91 points to finish at 7019. BSE mid-cap and small-cap indices lost 0.8% and 1.2% respectively. Except a 0.2% rise in BSE Oil & Gas index, all the sectoral indices ended in red, with Metal and Industrial indices leading the tally, down 2.6% and 1.8% respectively.

FIIs net sold stocks and index futures worth Rs 731 cr and 491 cr respectively but net bought stock futures worth Rs 351 cr. DIIs were net buyers to the tune of Rs 606 cr.

Rupee appreciated 1 paise to end at 68.56/$.

OUTLOOK

Today morning Shanghai and Hang Seng are down about half a percent, other Asian markets are trading with modest gains and SGX Nifty is suggesting a flattish start for our market.

In yesterday's report we had mentioned that by sustaining below 7140, Nifty has generated sell on the hourly chart and that 7060 and 7015, the 50% and 61.8% retracement levels of the recent 6869-7252 pullback, would be the downside targets to eye.

The benchmark plunged touched a low of 7010 before closing at 7019, achieving both the targets mentioned above and vindicating our view.

Upon breach of 7009, next downside target to eye would be 6960, which is the immediate previous bottom on the daily chart. Immediate resistance on the hourly chart is placed at 7150, the bias would continue to be negative until that is taken out.

Railway minister Mr Suresh Prabhu will present Railway budget for Fiscal 2016-17 today. Budget outlay is expected to be hiked by about 25% to Rs 125000 cr. A bulk of this spending will be targeted at projects aimed to decongest the network like adding lines and safety upgrades. However, Prabhu will have to rely more on extra budgetary resources for building capacity for the railways. Passenger fares for upper class are expected to see a 5-10% hike while freight rates are expected to be unchanged. Prabhu is also expected to announce more freight corridors and high speed trains.

NIFTY BREAKS 7140 SUPPORT AFTER FAILING TO CROSS 7240 HURDLE

NIFTY BREAKS 7140 SUPPORT AFTER FAILING TO CROSS 7240 HURDLE

WORLD MARKETS                             

US indices plunged 1.1%-1.5% yesterday on the back of decline in oil price and a miss in the consumer confidence read.

Nymex oil ended $1.52 or 4.5% lower at $31.87 a barrel after Saudi Oil Minister Ali al-Naimi, at the CERAWeek energy conference, said that production cuts won't happen, although producers will hopefully meet in March to negotiate an output freeze. Media reports also suggested that Iran's oil minister Bijan Zangeneh termed the output freeze deal between Saudi Arabia and Russia was "a joke". Brent fell

41.44 or 4.2% to $33.24 a barrel.

Back in the US, Conference Board said its consumer confidence index fell to 92.2 in February, down from a downwardly revised 97.8 in January. The S&P/Case-Shiller 20-city composite home price index showed a 5.7% increase year-over-year in December. U.S. home resales unexpectedly rose in January, reaching a six-month high. Existing home sales increased 0.4% to an annual rate of 5.47 million units, the highest level since July.

European markets, led lower by energy and mining stocks, tumbled 1.2%-2%.

Gold gained $12.50 to $1223 an ounce.

AT HOME

Sensex and Nifty nosedived 1.6% and 1.7% respectively in yesterday's trade, washing away all the gains made in previous three sessions. In absolute terms, Sensex lost 379 points to settle at 23410 while Nifty ended at 7110, down 125 points. BSE mid-cap and small-cap indices lost 1.5% and 1.2% respectively. All the BSE sectoral indices ended in red with Bankex and Realty indices leading the tally, down 2.8% and 2.5% respectively.

FIIs net sold stocks worth Rs 290 cr but net bought index futures and stock futures worth Rs 216 cr and 867 cr respectively. DIIs were net buyers to the tune of Rs 258 cr.

Rupee appreciated 6 paise to end at 68.54/$.

OUTLOOK

Today morning key Asian markets are trading with cuts of upto half a percent and SGX Nifty is suggesting a flattish start for our market.

Readers would recall that ever since Nifty started recovering after making a bottom of 6869, we had been working with resistance of 7240. The benchmark went near it couple of times and on Monday went above it intraday but could not sustain there.

In yesterday's report we had mentioned that 7140 is the immediate support with the stop loss of which existing longs can be held on to.

The benchmark broke this support and fell all the way to 7090 before closing at 7110. 

With yesterday's fall, Nifty is now back in the "Sell" mode on the hourly chart. A trendline adjoining recent bottoms on the daily chart presents a support around 7090, upon breach of which 7060 and 7015, the 50% and 61.8% retracement levels of the recent 6869-7252 pullback, would be the next downside targets to eye.

Immediate hurdle on the hourly chart is placed at 7160, with the stop loss of which short positions can be held on to. Above 7160, 7240-7250 would be the next major hurdle.

RISK ON TRADE TAKES EQUITIES, OIL HIGHER; NIFTY MOVES CLOSER TO 7240 RESISTANCE

RISK ON TRADE TAKES EQUITIES, OIL HIGHER; NIFTY MOVES CLOSER TO 7240 RESISTANCE

WORLD MARKETS                             

US indices, helped by rise in oil prices and stabilization in China, soared nearly a percent and half yesterday.

US crude March future gained $1.84 or 6.2% to $31.48 a barrel. Brent rose $1.75 or 5.3% to $34.76 a barrel. The International Energy Agency, in its medium-term outlook, said that U.S. shale oil production was expected to fall by 600,000 barrels per day (bpd) this year and another 200,000 bpd in 2017.

Earlier Shanghai Composite jumped more than 2% to lead gains in Asian equities.

The flash read on Markit US Manufacturing PMI for February came in at 51.0, down from the final January print of 52.4 and hitting its lowest since October 2012.

Dollar index gained about 0.8%. Gold April futures fell $21 to $1210 an ounce.

European markets gained 1.5%-3.5%. Pound sterling hit a seven-year low after popular London Mayor Boris Johnson said he would campaign for Britain to leave the European Union ahead of a June 23 referendum.

Australian mining giant BHP Billiton reported a net loss of $5.67 billion for the first half of the 2016 financial year and cut its interim dividend by 75 percent to 16 cents

AT HOME

Benchmark indices ended higher by a third of a percent after a choppy trade, extending the winning streak to fourth straight day. Sensex settled at 23789, up 80 points while Nifty added 24 points to finish at 7234. BSE mid-cap and small-cap indices gained 0.8% and 0.5% respectively. BSE Energy and Healthcare indices climbed 1.4% and 1.1% respectively, becoming top gainers among the sectoral indices while Utilities and Power indices lost 0.6% and 0.3% respectively.

FIIs net sold stocks and index futures worth Rs 657 cr and 378 cr respectively but net bought stock futures worth Rs 354 cr. DIIs were net buyers to the tune of Rs 598 cr.

Rupee fell 14 paise to end at fresh 30-month low of 68.60/$.

Effective from April 1, Cairn, PNB and Vedanta will move out of Nifty and Aurobindo, Bharti Infratel, Eicher Motors and Tata Motors DVR will move in, taking the number of stocks in Nifty benchmark index to 51.

OUTLOOK

Today morning Asian markets are trading flat to modestly higher and SGX Nifty is suggesting a flattish start for our market.

Yesterday was one more day when Nifty moved closer to 7240 but could not cross it decisively. As we have been mentioning a sustained trading above 7240 would pave the way for the further upside till about 34-DMA, which is now placed around 7380.

Immediate support on the hourly chart has moved up to 7140, with the stop loss of which existing longs can be held on to.

Budget session of Parliament starts today and is expected to be a stormy one as the opposition has said that it wants debate on JNU issue first. Railway budget will be presented on Thursday and Union Budget on Monday.

Government will offload its 5% stake in NTPC via OFS. The floor price has been set at Rs 122 per share which will fetch around Rs 5000 cr. Institutional book will open today while Retail book will be auctioned on Wednesday.

SPECIAL REPORT-HAS THE OIL BOTTOMED OUT?

HAS THE OIL BOTTOMED OUT?

 

• AS SHOWN IN THE CHART ABOVE, WTI CRUDE SAW A MASSIVE FALL FROM A HIGH OF $107 IN JUNE 2014 TO A LOW OF $42 IN MARCH 2015. FROM THERE IT RALLIED TO $63 TILL MAY 2015, ONLY TO RESUME THE DOWNTRED AND MADE A BOTTOM OF $26 IN FEBRUARY 2016 AND IS CURRENTLY TRADING AROUND $33.
• HOWEVER, AS CAN BE CLEARLY SEEN, WHILE THE UNDERLYING MADE A LOWER BOTTOM COMPARED TO THAT MADE IN MARCH 2015, RSI (RELATIVE STRENGTH INDEX) HAS MADE A HIGHER BOTTOM. THIS IS CALLED “POSITVE DIVERGENCE” AND SUGGESTS THAT THE LAST LEG OF THE FALL IS HAVING LESSER STRENGTH AND PRICES ARE NOT WILLING TO SUSTAIN AT LOWER LEVELS.
• ON THE UPSIDE, $34.80 IS THE IMMEDIATE HURDLE, ABOVE WHICH 34 WEEK MOVING AVERAGE, PLACED AROUND $41, WOULD BE THE NEXT MAJOR TARGET. UPON CROSSOVER OF $41, $57 (20 MONTH AVERAGE) AND $62 (TOP MADE IN MAY 2015) WOULD BE NEXT UPSIDE TARGETS TO EYE.