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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 on Tuesday- HDFC Securities

Tech-related stocks bounced back from early losses, with the Nasdaq erasing an early tumble to end with a small loss on Tuesday, while the broader market remained under pressure in a selloff attributed in part to inflation jitters. Rising commodity prices, labor constraints, supply-chain disruptions, and more fiscal stimulus potentially in the pipeline are a cocktail for faster price growth in the economy.

The National Federation of Independent Business said Tuesday its monthly survey found a record 44% of small businesses said job openings went unfilled in April. Separately, the Labor Department on Tuesday said job openings in the U.S. topped 8 million in March for the first time ever. There were 7.5 million open jobs in February.

Several Fed officials, including St. Louis Fed President James Bullard, reiterated on Tuesday that it is not yet time to talk about tapering the central bank’s program of assets purchases. The Cboe Volatility Index, a measure of fear in the markets derived by option prices on the S&P 500, jumped as high as 23.73, levels not seen in two months.

Official figures showed annual inflation in Brazil rose to 6.8% in April, the highest since 2016, driven by higher healthcare and pharmaceutical goods prices as well as a rise in food and drink costs.

US consumer price index for April will be reported on Wednesday at 8:30 a.m ET, and is expected to be the hottest in nearly 10 years. Consumer inflation data for April is expected to show the biggest year-over-year gain in nearly a decade. The anticipated 3.6% jump in the headline consumer price index in April would be the largest since Sept. 2011. CPI is expected to be up 0.2% month-over-month.

Asian shares fell for a second straight session on Wednesday to one-month lows as investors speculated surging commodity prices and growing inflationary pressure in the United States could lead to earlier rate hikes and higher bond yields globally.

The Indian benchmark equity indices broke a four-day winning streak on May 11. At close the Nifty50 was down 0.61% or 91.60 points to 14,850.75.

Nifty fell but did not close at the intra day lows. In fact Nifty was among the most outperforming indices across Asia having fallen among the least. Advance decline ratio continues to be positive suggesting broad-based buying in the markets. The fact that May 10 was the first day in recent times when the total Covid cases fell in India helped sentiments improve. 14744-14892 is the band for Nifty in the near term.

Daily Technical View on Nifty

Observation

Markets corrected on Tuesday after four consecutive sessions of gains. The index opened with a down gap and after a recovery once again dived lower. The Nifty finally lost 91.6 points or 0.61% to close at 14,850.75. 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 Oil and Gas, Power and Capital Goods indices. The top losers were the BSE Metal, Bankex, IT and Telecom indices. Zooming into the 15 minute chart, we can see that the Nifty opened with a down gap. Although it recovered, selling once again resumed in the afternoon session and pushed the index lower.

The index has however managed to hold above the recent swing low of 14765, thus remaining in a very short term 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 made a higher bottom at 14416 which gives further evidence of an uptrend. We therefore expect any corrections to find support at the 20 and 50 day SMA which are located nearby at the 14737 and 14601 levels.

Conclusion: The 1-2 day trend of the Nifty remains up with the index managing to hold above the recent swing low of 14765, thus remaining in a very short term uptrend.

On the larger daily timeframe, an upward sloping trend line continues to support the index with the Nifty also making a higher bottom at 14416 which gives further evidence of an uptrend. We therefore stick with our view that the Nifty could move higher in the coming sessions.

Nifty – Daily Timeframe chart

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