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Indian markets could open flat, despite largely positive Asian markets today and despite negative US markets on Thursday - HDFC Securities

U.S. stock indexes fell slightly on Thursday, snapping a five day win streak for the S&P 500 index, after investors weighed data on second quarter economic growth and weekly jobless benefit claims, a day ahead of a speech by Federal Reserve Chairman Jerome Powell.

The pause comes after the S&P 500 index on Wednesday notched its 51st record high of 2021, matching the highest number of new records at this point in the year since 1995. A pair of deadly bombings outside of Afghanistan’s Kabul airport may have also affected risk tolerance and contributed to some selling pressure US Fed Chair Powell will speak at 10 a.m. Eastern Friday at a Jackson Hole symposium of global central bankers that is being held virtually, and could provide some guideposts for the timing and pace of the Fed’s plans to scale back on crisis-era policy accommodations.

Dallas Fed President Robert Kaplan, who is not currently a voting member of the Federal Open Markets Committee, said he believes the progress of economic recovery warrants tapering of the Fed's asset purchases to commence in October or shortly thereafter. India’s central bank is in no hurry to reverse course on record low interest rates despite mounting worries around inflation, Reserve Bank of India Governor Shaktikanta Das told CNBC.

Profit growth at China’s industrial firms in July grew at its slowest clip this year, as elevated raw material prices and supply chain constraints from extreme weather as well as sporadic coronavirus cases weighed on the manufacturing sector. Industrial firms’ profits increased 16.4% on an annual basis in July to 703.67 billion yuan ($108.51 billion), compared to a 20% gain in June.

Asia-Pacific markets recovered in early trade on Friday as investors remained cautious ahead of the Federal Reserve’s annual Jackson Hole symposium where Fed Chair Jerome Powell is due to speak. Geopolitical events in Afghanistan also added to the nervousness.

Nifty erased the morning gains and ended another day without much change on Aug 26. Nifty opened flat and remained in an 80 points band through the day and after zigzagging ended the day 2 points or 0.02% higher at 16638.

Nifty has once again started to form flat closes day after day, like it did in Aug 05-11 period. However post Aug 11, the Nifty broke upwards of the range closes. Advance decline ratio fell compared to the previous day but is still at 1:1, suggesting some deterioration in the broader market sentiments. As long as Nifty is not able to post healthy day on day gain, the broader market will struggle to bounce up. 16712-16603 is the band for Nifty for the near term and any breach either way could take the Nifty in that direction.

Daily Technical View on Nifty

Observation: Markets ended with marginal gains on Thursday. The Nifty finally gained 2.2 points or 0.01% to close at 16,636.9.

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.

Zooming into the 15 minute chart, we can see that the Nifty opened on a positive note and rose further in the morning session. Selling pressure however emerged from the highs and pulled the index lower to end with marginal gains. On the Nifty 15 min chart , we can also see that the index has made lower tops over the last two sessions. This indicates that the bears could have an upper hand for the very near term.

We expect the Nifty to consolidate and test the 16592-16585 supports in the very near term. These levels correspond to previous swing highs. On the daily chart, the Nifty 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. The index also continues to trade above the 20 and 50 day SMA, which gives further evidence of an uptrend.

And recently, Nifty has broken out of the 15451-15962 trading range, which is an encouraging signal for the uptrend to continue. Upside target implications are at 17000. However, we remain open to the possibility of the Nifty correcting towards the 16376 support levels in the coming sessions. Our bearish bets are off if the Nifty manages to take out the 16713 levels.

Conclusion: With the Nifty making lower tops over the last two sessions on the 15 min chart, the bears could have an upper hand for the very near term. We expect the Nifty to consolidate and test the 16592-16585 supports in the very near term. These levels correspond to previous swing highs.

On the larger daily timeframe, Nifty has broken out of the 15451-15962 trading range and also trades above the 20 and 50 day SMA, which gives further evidence of the uptrend to continue towards the 17000 levels.

However, we remain open to the possibility of the Nifty correcting towards the 16376 levels in the coming sessions. Our bearish bets are off if the Nifty manages to take out the 16713 levels.

Nifty – Daily Timeframe chart

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