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Indian markets could open flat to mildly lower, in line with mildly lower Asian markets today and mixed US markets on Monday - HDFC Securities

US stocks ended at records Monday, with the S&P 500 booking its biggest daily percentage comeback since March 25, despite earlier losses tied to weaker-than-forecast Chinese economic data and the Taliban takeover of Afghanistan.

The Dow recorded its biggest daily percentage comeback since May 4 to end at a record, but the Nasdaq Composite closed lower. Investors managed to shrug off new concerns about China's economy, the coronavirus Delta variant and turmoil in Afghanistan to largely drive stocks higher.

In the U.S., the New York Fed’s Empire State business conditions index in August lost nearly all of its record-setting gains from the prior month. The headline general business conditions index fell to 18.3 in August, from 43, the regional Fed bank said Monday. Economists expected a reading of 30, according to Econoday.

Asian shares declined in early trade on Tuesday as growing anxiety over the spike in the Delta variant of COVID-19 infections and turmoil in Afghanistan eclipsed overnight strength on Wall Street.

Nifty opened flat on Aug 16 and rose gradually to make an intra day high at 1450Hrs. In the process it made another all time high and is leading the Asian markets for the day. The high low range of 109 points is the lowest in 10 days. At close, the Nifty was up 34 points or 0.21% to 16563. This was the third consecutive rise for the Nifty.

Advance decline ratio continued to be weak. This along with lower-than-recent-average volumes on Aug 16 suggests that action is concentrated in a few scrips. Nifty could continue its gradual grind upwards, while the broader market continues to see rotational profit booking.

Daily Technical View on Nifty

Observation: Markets ended with nominal gains on Monday. The Nifty finally gained 33.95 points or 0.21% to close at 16,563.05.

Broad market indices like the BSE Mid Cap and Small Cap indices ended lower, 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 traded in a range for a major part of the session. The index opened on a positive note and gradually rose through the day. In the process, the Nifty closed at a new life high.

However, selling was seen in the last half an hour of trade and led to the Nifty breaking its intraday supports and closing below the 20 period MA on the 15 min chart. This could lead to some weakness 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 16162.

Conclusion: While Nifty moved higher on Monday, selling was seen in the last half an hour of trade and led to the Nifty breaking its intraday supports and closing below the 20 period MA on the 15 min chart. This could lead to some weakness 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 16162.

Nifty – Daily Timeframe chart

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