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Indian markets could open flat to mildly higher, despite the mixed Asian markets today and mixed US markets on Tuesday..​​​​​- HDFC Securities

U.S. stocks ended mostly higher Tuesday, with the Dow Jones Industrial Average and S&P 500 index each logging a record close, as the Senate passed a $1 trillion infrastructure bills and investors awaited data due this week on inflation. Stocks pushed mostly higher though the delta variant of coronavirus and its potential impact on global economic growth remained in focus.

The gains come as the Senate on Tuesday voted 69-30 to approve a bipartisan infrastructure bill, sending the $1 trillion measure to the House of Representatives for its approval. The bill, known as the Infrastructure Investment and Jobs Act, calls for $550 billion in new public-works spending above what already was expected in future federal investments, including $110 billion for roads, bridges and other projects, as well as $66 billion for rail, $65 billion for broadband internet and $55 billion for water systems.

A fight looms, however, over a $3.5 trillion, Democratic-backed package of additional spending that House Democrats have said must first be passed under budget reconciliation before considering the infrastructure package.

U.S. productivity grew 2.3% in the second quarter after a revised 4.3% rise the previous three months. The rapid spread of the Delta variant has pushed COVID-19 cases and hospitalizations in the US to a six-month high, with cases averaging 100,000 for three days in a row - up 35% over the past week.

Stocks in Asia-Pacific were mixed in early trade on Wednesday, as Wall Street sailed to record highs on the back of a $1 trillion infrastructure plan passed by the U.S. Senate. Indian benchmark indices surged up in late trade to end marginally in the positive on Aug 10. Nifty finally closed 22 points or 0.13% higher at 16280.

Nifty has closed in a narrow band of 16238-16280 over the last five sessions suggesting a tug of war between bulls and bears as far as index heavyweights are concerned although the broader market continues to bleed. We expect the Nifty to breakout upwards of this band (though mildly) before seeing a larger correction.

Daily Technical View on Nifty

Observation: Markets ended with marginal gains on Tuesday after witnessing a roller coaster ride. The Nifty finally gained 21.85 points or 0.13% to close at 16,280.1. Broad market indices like the BSE Mid Cap and Small Cap indices ended lower, thereby under performing the Sensex/Nifty. Market breadth was negative on the BSE/NSE.

Zooming into the 60 minute chart, we can see that the Nifty opened on a positive note and climbed higher in the morning session. Selling pressure emerged in the afternoon session and pulled the index lower into negative territory. The previous session’s low was held and the index recovered in the last one hour of trade to close with modest gains.

This indicates that the Nifty continues to consolidate in a range for the near term. Levels to watch for further directional cues are the 16179-16360 trading range. However, given that the index has bounced from the lower end of the trading range, it could move higher in the very near term. 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 last week, 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 16500. Crucial supports to watch for a short term trend reversal are at 16105.

Conclusion: The Nifty continues to consolidate in a range for the near term. Levels to watch for further directional cues are the 16179-16360 trading range. However, given that the index has bounced from the lower end of the trading range, it could move higher in the very near term.

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 16500 levels. Short term trend reversal levels are at 16105.

Nifty – Daily Timeframe chart

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