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Indian markets could open lower, in line with negative Asian markets today and negative NASDAQ index on Monday.- HDFC Securities

The Dow Jones Industrial Average snapped a 5-session win streak Monday, falling late in the session after pushing above the 35,000 milestone, with the broader market came under pressure as highprofile Big Tech shares tumbled as investors weighed how much of the economic recovery already has been priced into stocks. Strong economic growth, driven by reopenings and trillions of fiscal stimulus dollars, is prompting market participants to once again favor value, a larger dynamic since late 2020 that had paused for a short period.

Worries about accelerating inflation dragged on shares and hobbled the dollar, which struggled at a 10-week low. The breakeven rate on five-year and 10-year U.S. Treasury InflationProtected Securities (TIPS) touched their highest levels since 2011 and 2013, respectively. Inflation concerns will be in the minds of investors when the Labor Department releases its latest CPI report on Wednesday.

A shutdown to halt a ransomware attack on the Colonial Pipeline entered its fourth day, hobbling a network which transports nearly half of the East Coast's fuel supplies. Rating agency Crisil on May 10 said that India's GDP growth rate could drop to single digits or around 8.2 percent in 2021-22 (April-March) if the second wave of the COVID-19 pandemic reaches a peak number of cases by June-end. The rating agency had projected India's GDP to grow 11 percent in 2021-22 (AprilMarch) at the beginning of the current financial year. It added that in case the COVID-19 pandemic reaches a peak number of cases by May-end, the GDP growth will fall to around 9.8 percent. A World Health Organization official said Monday it is reclassifying the highly contagious triple-mutant Covid variant spreading in India as a “variant of concern,” indicating that it’s become a global health threat.

China’s factory gate prices rose 6.8% from a year earlier in April, official data showed on Tuesday, reaching the highest level since October 2017 and beating analysts’ forecast. The increase in the producer price index compared with a 6.5% rise tipped by a Reuters poll of analysts and a 4.4% rise in March. The consumer price index (CPI) rose by 0.9% from a year earlier.

Asia-Pacific stocks fell Tuesday, following a sell-off in tech stocks that weighed down major U.S. indexes overnight. Indian benchmark equity indices closed higher for the fourth straight session on May 10. Nifty opened gap up and remained largely in a 50 point band through the day. At close, the Nifty was up 119.20 points or 0.80% at 14,942.40.

Nifty has made another upgap in succession on May 10 but ended with a doji for the second consecutive session, indicating partial profit taking towards the close especially as it approached 15,000. Investors are mindful of the market fallout as state after state locks itself down in India to contain the spread of the coronavirus as infections and deaths surge and hence keep taking profits rotationally. 15044-14744 is the band for the Nifty in the near term.

Daily Technical View on Nifty

Observation

Markets rallied further on Monday to close with healthy gains for the fourth consecutive session. The Nifty finally gained 119.2 points or 0.8% to close at 14,942.35. Broad market indices like the BSE Mid Cap and Small Cap indices gained more, thereby out performing the Sensex/Nifty. Market breadth was positive on the BSE/NSE. Sectorally, the top gainers were the BSE Metal, Capital Goods, Healthcare and Power indices. The top loser was the BSE IT index.

Zooming into the 15 minute chart, we can see that the Nifty opened with an up gap in the morning and then traded in a range for the rest of the trading session. Buying in the last half an hour of trade helped the index to close near the highs of the day. The index thus managed to hold above the previous session’s low and has now made higher bottoms at 14765 and 14611. This is a positive signal for the very near term.

It will be important that the Nifty holds above the recent low of 14611 for the very near term uptrend to continue. On the daily chart, while the Nifty has recently corrected from the high of 15044, the index continues to hold above a rising trend line that has held the important lows of the last few months. This implies that the index remains in an intermediate uptrend.

With the healthy rally seen in the last few sessions, traders will need to watch if the Nifty can now continue to hold above the crucial supports of 14765 and 14611 in the very near term. Upside acceleration is likely to pick up once the immediate resistance of 15044 is taken out. These are crucial resistances as they are the previous swing highs of the Nifty.

Conclusion: The 1-2 day trend of the Nifty remains up with the index managing to hold above the previous session’s low and making higher bottoms at 14765 and 14611 levels before closing near the highs of the day. On the larger daily timeframe, an upward sloping trend line continues to support the index with the Nifty also bouncing back strongly over the last few trading sessions and holding above the recent lows of 14765-14611. We therefore stick with our view that the Nifty could move higher in the coming sessions

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