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Indian markets could open flat to mildly higher, in line with positive Asian markets today and despite mixed US markets on Wednesday - HDFC Securities

U.S. stock indexes had a mixed finish Wednesday, after the Federal Reserve said it would keep interest rates steady near zero and retain its full range of tools to support the economic recovery during the pandemic. Investors also were focused on results streaming in from the busiest week of corporate earnings reports for the second quarter.

Stocks mostly got a boost after the Federal Reserve opted not to tighten monetary policy following a two-day meeting, reiterating that the path of recovery will depend on the virus. Powell said the topic of timing of tapering continues to be studied by the central bank and reiterated that any future decisions will remain data dependent. Powell also said the U.S. job market still had "some ground to cover" before it would be time to pull back from the economic support.

The U.S. trade deficit in goods rose 3.5% in June to record $91.2 billion, and advanced U.S. wholesale inventories climbed 0.8%, while retail inventories increased by 0.3% last month. Oil prices received a fillip after data showed U.S. crude inventories fell more sharply than analysts had forecast, overshadowing worries that a resurgent pandemic might hit demand.

Asian shares managed an appearance of calm on Thursday as the U.S. Federal Reserve signalled it was in no rush to taper stimulus, though the mood was fragile as investors waited to see if Beijing could stem the recent bloodletting in Chinese shares.

Indian benchmark equity indices saw the sharpest recovery in recent times from morning lows on July 28. At close the Nifty closed 37 points or 0.24% lower at 15709.4.

Nifty broke the 15635 support but bounced back to close marginally in the negative for the day. The selling in the markets got arrested once the Hongkong and Chinese markets reversed their weak trend this morning showing signs of stability after three days of sharp weakness. Broad market however shows weakness as per the weak advance decline ratio. Nifty can now stay in the 15635-15797 band for the next 1-2 sessions.

Daily Technical View on Nifty

High volatility. Chances of upside bounce.

Observation: Nifty witnessed a high volatility of up and down moves on Wednesday and finally settled the day lower by 37 points. After opening on a positive note, the market showed sharp intraday weakness in the early-mid part of the session. A fine upside recovery has emerged from the day's low of 15513 and the market erased most of the intraday loss towards the end.

A small negative candle was formed on the daily chart with long lower shadow. This pattern signal a formation of hammer type candlestick pattern. Normally, a formation of such hammer pattern after a reasonable decline or near the crucial supports could act as an upside reversal on the confirmation. Hence, there is a possibility of an upside bounce in the next 1-2 sessions.

On the daily chart, Nifty has been moving in a sequence like three days decline during its broader range movement. Today's weakness and later upside recovery seems to have completed the negative sequence of three sessions of weakness. One may expect upside bounce from the lows, as per high low range movement. On the upper side 15900 could be an immediate resistance.

The Nifty has formed a swing low near the lower end of a broader range movement and we observe lower low formations. This signal a display of high volatility during weakness and we notice sharp upside bounces soon after such moves in the past. The crucial weekly support of 10 period EMA is intact after a false break below this support at 15630, as per weekly timeframe chart.

Conclusion: The short term trend of Nifty continues to be negative. But, the formation of hammer type pattern at crucial weekly support and sharp intraday upside recovery from a lower range are all pointing towards an upside bounce in the market in the next 1-2 sessions. The expected upside is likely to test the upper resistance of 15860-15900 levels in the near term.

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