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

U.S. stocks closed lower Tuesday, ending a five-day run of record finishes for the Dow Jones Industrial Average and S&P 500 indexes, after July retail sales came in weaker than expected and concern grew about the spread of the delta variant of the coronavirus which may slow economic growth.

US retail sales fell 1.1% in July, and were down 0.4% after excluding autos. Economists polled by The Wall Street Journal had penciled in a 0.3% monthly drop in sales in July, or a 0.2% gain when autos are excluded. U.S. industrial production rose a seasonally adjusted 0.9% in July, the Federal Reserve reported Tuesday. That’s the fastest pace since March and follows a revised 0.2% gain in June.

Fund managers, meanwhile, are taking slightly more defensive positions as they grow more pessimistic on the economy and corporate profits, according to the latest monthly survey conducted by Bank of America, which was released Tuesday. Global fund managers have increased their holdings in healthcare, insurance, utilities and cash, while trimming their exposure to materials, commodities, emerging markets and energy, the survey found.

Asian shares were largely in the positive on Wednesday even as overnight declines on Wall Street reinforced worries about the economic impact of the Delta coronavirus variant sweeping through the region.

Nifty opened flat on Aug 17 and after a brief rally started to fall. Later a recovery in the European markets from the early morning lows helped this surge in Nifty. Finally it closed 0.31% or 51 points higher at 16615, another record high.

Nifty recovered smartly on Aug 17 from the intra day lows, but the broader market is yet to bounce up. Sector rotation is being seen with IT and FMCG rising while Metals and Telecom undergoing correction. Nifty could continue to rise gradually but the broader markets could take time to complete their correction.

Daily Technical View on Nifty

Observation: Markets ended with decent gains on Tuesday after a weak morning session. The Nifty finally gained 51.6 points or 0.31% to close at 16,614.6. Broad market indices like the BSE Mid Cap index gained more, thereby out performing the Sensex/Nifty. Market breadth was negative on the BSE/NSE. Zooming into the 60 minute chart, we can see that the Nifty recovered from a low of 16495 and bounced back smartly in the afternoon session to end at yet another new life high.

With the Nifty also breaking out of a range and trading above the 20 and 50 period MA on the 15 min chart, the uptrend looks set to continue 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 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. Crucial supports to watch for a short term trend reversal are at 16480.

Conclusion: With Nifty recovering from a low of 16495 and bouncing back to break out of a two day range, the uptrend looks set to continue 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 17000 levels. Short term trend reversal levels are at 16480.

Nifty – Daily Timeframe chart

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