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Indian markets could open flat to mildly lower, in line with largely negative Asian markets today and negative Dow Jones index in US markets on Monday - HDFC Securities

U.S. stock indexes relinquished solid gains Monday and stocks ended mostly lower as persistent concerns about the spread of the delta variant of the coronavirus that causes COVID-19 created an excuse for modest selling in the first trading day for equity markets in August.

Investors also eyed progress on an infrastructure bill, merger activity and concerns about the pace and timing of the Fed’s plans to roll back easy-money policies.

Meanwhile, a manufacturing survey from the Institute for Supply Management falls to 59.5 in July from 60.6, with the index falling to a 6-month low due to broad supply shortages. The softer-thanexpected data also sent U.S. bond yields to their lowest since July 20 (briefly touching 1.15%). The closely followed report comes after IHS Markit’s final reading for manufacturing PMIs in July was 63.4 versus an initial read of 63.1. A reading of 50 or above indicates improving conditions. A separate report on U.S. construction spending was up 0.1% in June.

Owing to an uptick in global orders, India's merchandise exports shot up in July, rising by a major 47.9 percent as compared to July, 2020. Impressively, exports also rose by 34.06 percent as compared to July, 2019, before the pandemic struck. In July, imports saw an equally large rise, going up by a huge 46.4 percent to $59.38 billion. Similar to exports, as the low base wears off, the jumps in import growth have moderated.

Rainfall across India during August-September is most likely to be normal with a tendency to be in the positive side of the normal, the India Meteorological Department said in a media statement. Asian stocks slipped on Tuesday, as the Delta coronavirus variant spread in key markets in the region and put Chinese authorities on high alert, rattling investor confidence.

Indian equity benchmarks pushed further up in the last hour of trade on Aug 02 after opening gap up. It finally closed near the high of the day gaining 0.77% or 122 points to close at 15885.

Nifty has opened the week on a strong note with sharply higher advance decline ratio. A follow through upmove is likely over the next few days after a small pause and Nifty could remain with an upward bias in the 15817-15962 band.

Daily Technical View on Nifty

Observation: Market resumed its uptrend after taking a breather on Friday. The Nifty finally gained 122.2 points or 0.78% to close at 15,885.2.

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. Zooming into the 60 minute chart, we can see that the Nifty opened with an up gap and then traded in a range. Healthy buying in the last 45 minutes of trade helped the index to surge higher and close near the highs of the day.

The short term trend therefore remains up with the Nifty surging higher after breaking out of a downward sloping trend line on the 60 minute chart. The Nifty also trades above the 20 period MA and 50 period MA on the 60 min chart. Further upsides are likely once the immediate resistance of 15893 is taken out. Crucial supports are now at 15840.

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 over the last two months, the index has been consolidating in a range between the 15451-15962 levels. A close above the 15962 would accelerate the uptrend.Crucial supports to watch for a short term trend reversal are at 15700.

Conclusion: The 1-2 day trend of the Nifty remains up with the Nifty surging higher after breaking out of a downward sloping trend line on the 60 minute chart. The Nifty also trades above the 20 period MA and 50 period MA on the 60 min chart.

On the larger daily timeframe, an upward sloping trend line continues to support the index as the index continues to trade above the 20 and 50 day SMA, which gives further evidence of an uptrend. A close above 15962 would accelerate the uptrend. Short term trend reversal levels are at 15700.

Nifty – Daily Timeframe chart

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