IGI Logo

Indian markets could open flat to mildly higher, in line with mixed Asian markets today and despite weak Dow Jones index in the US on Wednesday..…* - HDFC Securities

U.S. stocks finished a bruising session down, but off session lows, after the release of minutes from the Federal Reserve’s April policy meeting underscored an emerging debate at the central bank over inflation risks and when to start discussing a pullback of its asset purchases.

Also Wednesday, the European Central Bank joined the chorus of global central banks warning about potential bubbles in financial assets due to massive government support programs designed to offset the economic shocks of the pandemic

The release of Fed meeting minutes showed debate emerging within the central bank over whether rising inflation will be more than “transitory” Minutes also showed some members of the rate-setting Federal Open Market Committee were open in April to the possibility of starting discussions around when to taper the Fed’s near $120 billion a month asset purchases, particularly if the economy continues to make rapid progress as COVID-19 cases decline and more of the U.S. population gets vaccinated

Investors also focused on a new ECB report warning about potential “abrupt asset price corrections,” after the recent rally in financial assets. It also warned about higher levels of corporate debt throughout the region and possibility of considerably higher insolvency rates once the massive stimulus is withdrawn.

A sharp selloff across crypto assets also attracted attention. The downturn in crypto also may reflect weakening bullish sentiment for speculative assets.

Oil prices were also under pressure, with crude and Brent futures dropping nearly 3% each. Those losses came after data from the American Petroleum Institute showed an unexpected rise in U.S. crude supplies, and reports of potential progress on Iranian nuclear talks

In India, the union government has decided to increase the fertilizer subsidy outlay for the year by 14,775 crore.This will take the fertilizer subsidy outlay for 2021-22 to Rs 94,305 crore from a budgeted outlay of Rs 79,530 crore.A decision was taken to increase the subsidy for diammonium phosphate (DAP) fertilizer from Rs 500 to Rs 1200 per bag, an increase of 140 per cent. Thus, despite the rise in international market prices of DAP, it has been decided to continue selling it at the older price of Rs 1200 and the central government has decided to bear all the burden of price hike.

Stocks in Asia-Pacific were mixed in Thursday morning trade. Japan’s exports rose 38% in April as compared with a year ago, higher than an expected 30.9% increase predicted by economists in a Reuters poll. China kept its benchmark lending rate for corporate and household loans unchanged for the 13th straight month at its May fixing on Thursday, in line with market expectations. The one-year loan prime rate (LPR) was kept at 3.85%. The five-year LPR remained at 4.65%.

Indian benchmark equity indices gave up some of the previous session gains and the Nifty ended 0.52 percent lower at 15030 on May 19.

Nifty made a double top – the same as the previous day and later fell to enter the upgap area. Lower volume on May 19 suggests absence of enthusiasm on the part of traders at these levels especially in the face of the negative inflation and commodity price data and release of US Fed minutes. 14938-14967 will be the support for the Nifty while 15137 will act as a resistance.

Daily Technical View on Nifty

Observation: Markets corrected on Wednesday after two sessions of gains. The Nifty finally lost 77.95 points or 0.52% to close at 15,030.15. 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.

Sectorally, the top gainers were the BSE Realty, Power and Healthcare indices. The top losers were the BSE Telecom, Metal, Auto and Bankex indices.

Zooming into the 15 minute chart, we can see that the Nifty opened on a shaky note and proceeded to move higher before selling pressure emerged and pushed the index into negative territory

In the process, the Nifty broke the previous swing low of 15043 and thereby entered into a short term downtrend for the very near term. We expect the Nifty to test the previous swing high of 14967 in the very near term before resuming the intermediate uptrend.

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 Nifty has also recently made higher bottoms at 14416 and 14591 and continues to trade above the 20 and 50 day SMA, which gives further evidence of an uptrend.

Conclusion: The 1-2 day trend of the Nifty is now down with the index breaking the recent swing low of 15043.

On the larger daily timeframe, an upward sloping trend line continues to support the index with the Nifty also making higher bottoms at 14416 and 14591 and continuing to trade above the 20 and 50 day SMA, which gives further evidence of an uptrend.

The recent breakout above the recent swing high of 15044 indicates that the Nifty looks set to move higher towards the lifetime highs of 15432 in the coming sessions

Our bullish bets are off if the Nifty moves below the lows of 14826.

To Read Complete Report & Disclaimer Click Here

Please refer disclaimer at https://www.hdfcsec.com/article/disclaimer-1795

SEBI Registration number is INZ000171337

Views express by all participants are for information & academic purpose only. Kindly read disclaimer before referring below views. Click Here For Disclaimer