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

A gauge of global equities posted its seventh consecutive month of gains and a record closing high on Tuesday, but stocks and the dollar mostly ended the day little changed after U.S. and Chinese economic data suggested slower growth ahead. US stocks closed lower Tuesday, as investors looked ahead to U.S. jobs data for August coming Friday, where they might find clues as to when the Federal Reserve may begin tapering its bond purchases which have helped to support markets during the pandemic.

For August, the S&P 500, Dow and Nasdaq rose 2.9%, 1.2% and 4%, respectively. The dollar slipped to its lowest level in more than three weeks against a basket of currencies . U.S. consumer confidence fell to a six-month low in August at 113.8 (vs 125.1 in July) as soaring COVID-19 infections and rising inflation dampened the economic outlook. The Chicago purchasing managers index dropped to 66.8 in August from a previous reading of 73.4.

The price of aluminum traded on the London Metal Exchange hit its highest point since May 2011, with three-month aluminum touching $2,726.50 a metric ton before settling around $2,650. Chile’s central bank said on Tuesday it would raise its benchmark interest rate to 1.5% from 0.75%, as a rapid COVID-19 vaccination program helps the world’s top copper producer resume economic activity and inflation ticks upward. The bank began to withdraw monetary stimulus last month, lifting the rate to 0.75% after an extended period of maintaining it at 0.5%, its lowest point since the outbreak of the pandemic and associated lockdowns.

China's factory activity slipped into contraction in August for the first time in nearly 1-1/2 years as COVID-19 containment measures, supply bottlenecks and high raw material prices weighed on output in a blow to the economy. The Caixin/Markit Manufacturing Purchasing Managers' Index (PMI) fell to 49.2 last month (vs 50.2 forecast), from 50.3 in July. South Korea's factory activity grew at a slower pace in August, as output contracted for the first time in 12 months. The IHS Markit purchasing managers' index (PMI) for August stood at 51.2, falling from 53.0 in July.

The Indian central government's fiscal deficit stood at Rs 3.21 lakh crore or 21.3 percent of the budget estimates at the end of July. India's real gross domestic product (GDP) grew by 20.1 percent in the April-June quarter of the fiscal year 2021-22, a record quarterly print on the back of a low base last year. The biggest year-on-year rise was in the construction sector at 68.3 percent. Manufacturing, which fell 36 percent in April-June last year, bounced back to grow by 49.6 percent.

The Apr-July fiscal deficit figures for India at Rs 3.21 lakh crore or 21.3 percent of the budget estimates appear much better than the previous financial year, when it soared to 103.1 percent of the estimate, mainly on account of a jump in expenditure to deal with the COVID-19 pandemic. Total receipts stood at Rs 6.83 lakh crore or 34.6 percent of corresponding BE 2021-22 up to July 2021. The total receipts were 10.4 percent of the BE of 2019-20 in the same period of the last financial year. Total expenditure was Rs 10.04 lakh crore or 28.8 percent of the corresponding BE 2021-22. The expenditure was 34.7 percent of BE of 2019-20 in the same period last fiscal.

Asian shares gave up some of their recent gains in cautious trading on Wednesday while the dollar inched back from threeweek lows, as worries about slowing global growth in several markets returned to weigh on traders' minds. Data to Watch 10:30am: Markit India Manufacturing PMI for August, prior 55.3.

Nifty gained for the third consecutive day on Aug 31 and closed above 17000 for the first time ever. At close, the Nifty was 201 points or 1.19% higher at 17132. Nifty sliced through 17000 without much effort. A flat advance decline ratio on such a day denotes traders flocking to largecaps and taking profits out of mid and smallcaps. Nifty could now face resistance at 17250 while 16951 could provide support.

Daily Technical View on Nifty

Observation: Markets surged higher on Tuesday. The Nifty finally gained 201.2 points or 1.19% to close at 17,132.2. It was the first ever closing above the 17000 level for the Nifty. Broad market indices like the BSE Mid Cap and Small Cap indices gained less, thereby under 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 then gradually rose through the day to close at yet another new life high. With the 20 period MA continuing to provide support to the index, we expect it to move higher to new life highs in the very near term. Crucial supports to watch for weakness are at 16883.

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. However, we remain open to the possibility of the Nifty correcting towards the 16565 support levels in the coming sessions. Our bearish bets are off if the Nifty manages to take out the 17154 levels

Conclusion: With the 20 period MA on the 15 min chart continuing to provide support to the Nifty, we expect the index to move higher to new life highs in the very near term. Crucial supports to watch for weakness are at 16883.

On the larger daily timeframe, Nifty has recently 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. However, we remain open to the possibility of the Nifty correcting towards the 16565 levels in the coming sessions. Our bearish bets are off if the Nifty manages to take out the 17154 levels.

Nifty – Daily Timeframe chart

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