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Indian markets could open higher, in line with gains made by the Asian and US markets over the past two days - HDFC Securities

U.S. stocks rebounded Tuesday, recovering much of the ground lost in the previous session when rising worries over the spread of the delta variant of the coronavirus and fears of peak economic growth triggered a selloff that left major benchmarks at nearly one-month lows. The recovery Tuesday reflected ideas that Monday’s selloff was overdone, though concerns over high valuations in the stock market persist. Investors bought the dip. The yield on the 10-year note rose 2.7 basis points to 1.208% Tuesday, after falling Monday to its lowest since mid-February. It further rose to 1.293% on Wednesday.

U.S. stocks closed higher for a second day Wednesday, as healthy corporate earnings reports helped support a rebound from a plunge on Monday on fears that the spread of the delta variant of the coronavirus in many countries would slow the economic recovery from the pandemic. Strong earnings reports from tech giant IBM, Coca-Cola, Johnson & Johnson and others reminded investors that business and the economy are still improving.

The People’s Bank of China (PBOC) set the midpoint at 6.4651 yuan per dollar prior to the market open, 184 pips or 0.28%, stronger than the previous fix of 6.4835. It was the firmest since July 15. And the strengthened official guidance rate has pushed China’s trade-weighted yuan basket index to 98.77, the highest since March 15, 2016, up 4.15% so far this year.

Second-quarter reporting season has hit full-stride, with 56 of the companies in the S&P 500 having posted results. Of those, 91% have beaten consensus, according to Refinitiv. Analysts now see annual S&P earnings growth of 72.9% for the April-June period, a significant improvement over the 54% growth seen at the beginning of the quarter.

Asian stocks climbed early Thursday after solid company earnings boosted Wall Street, easing concerns about peak economic growth and coronavirus flareups.

Indian markets fell for the third consecutive session on July 20. After making an intra day low at 1205, Nifty recovered some of the losses, but still ended 0.76% lower. Advance decline ratio was the lowest in 3 months.

Patchy Monsoon Rain in India and subdued Q1FY22 corporate results raised fresh concerns on the economic growth and market valuation. Nifty could remain in the 15520-15825 band for the next 1-2 sessions. After the three day fall, a bounce is due whose sustainability will be keenly watched.

Daily Technical View on Nifty

Down trend continuation pattern..

Observation: The sharp weakness continued in Nifty for back to back session on Tuesday and the market closed the day lower by 120 points. After opening on a down gap of 48 points, Nifty slipped into further weakness in the early-mid part of the session.

Upside recovery of mid part was not sustained and the Nifty declined and finally closed near the lows. The opening downside gap remains unfilled.

A long bearish candle was formed with minor lower shadow. This signal a down trend continuation pattern. The failed upside breakout pattern has already been confirmed with decline of Monday and this is having negative implication in the market by breaking a lower end of month old consolidation at 15635 levels.

The formation of back to back unfilled opening downside gaps signal bearish bias and Monday's huge down gap seems to have confirmed the bearish break away gap.

Normally, such bearish breakaway gaps are formed near the important top reversals. Hence, a recent all time high of 15962 could now be considered as an important top reversal pattern.

Having closed on the edge of the initial support at 15635 levels towards the close of Tuesday, the odds of further weakness is high in coming sessions and that could open more declines in the short term.

Conclusion: The short term trend of Nifty continues to be down. The market is now shifting gears on the way down to move below the strong supports one after another.

The next lower levels to be watched around 15500- 15450 levels in the next few sessions. Any upside bounce from here could encounter resistance around 15700.

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