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Indian markets could open flat to mildly higher, in line with largely positive Asian markets today and higher Dow index in US markets on Wednesday- HDFC Securities

The Dow industrials and S&P 500 finished in record territory for a second straight day on Wednesday, after a report on consumer inflation mostly matched expectations, but the broader market faced some headwinds as healthcare and growth shares were sold. Stocks finished mostly higher on Wednesday after a new reading on consumer inflation offered some evidence to calm fears about high costs of living in the U.S. during the pandemic.

The Labor Department reported the July consumer-price index rose 5.4% in July from a year earlier, as price measures of food, energy, shelter and new vehicles rose, while costs of used cars, airfare and auto insurance retreated. The reading was about in line with data on June and slightly lower than some predictions for 5.5%. The government said the July CPI increased 0.5% for the month, matching expectations.

Data To Watch today 5:30pm: India June Industrial Production y/ y; est. 13.8%, prior 29.3% 5:30pm: India July Consumer Price Inflation y/y; est. 5.72%, prior 6.26%.

Asian stocks were largely up early Thursday after U.S. shares climbed on signs of moderating inflation that reduced concerns about an imminent paring back of Federal Reserve stimulus.

Indian benchmark indices had another rollercoaster day on Aug 11 even as the indices recovered from the morning lows to end almost flat. At close Nifty was up 2 points or 0.01% to 16282. Nifty has closed in the band of 16238-16280 for the sixth session after seeing some downward volatility earlier in the day. Advance decline ratio continues to be negative but has improved compared to the previous day. The broader markets may have made a short term bottom and this may enable the Nifty to rise mildly in the near term.

Daily Technical View on Nifty

Observation: Markets ended with marginal gains on Wednesday after a positive opening. The Nifty finally gained 2.15 points or 0.01% to close at 16,282.25. Broad market indices like the BSE Mid Cap and Small Cap indices lost more, 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, but selling pressure soon emerged and pushed the index lower into negative territory. A recovery in the afternoon session helped the index to close marginally in the green. This indicates that the Nifty continues to consolidate in a range for the near term. Levels to watch for further directional cues are the 16162-16360 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 very near term. Levels to watch for further directional cues are the 16162-16360 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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