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Indian markets could open mildly higher, in line with mixed Asian markets today and positive US markets on Thursday - HDFC Securities

US stocks ended higher Thursday, buoyed by upbeat economic data, as investors shook off worries that a pickup in inflation could force the Federal Reserve to begin reining in its accommodative monetary policy sooner than expected. Bond yields halted their advance and retreated (1.63% vs 1.69%). Sectors particularly benefitting from lower rates responded with the largest gains

First-time applications for U.S. unemployment benefits fell to a pandemic low last week, the government reported Thursday. Initial jobless claims fell 34,000 to 444,000 (vs 452000 forecast) in the week ended May 15. Meanwhile, the Conference Board Leading Economic Index saw a second consecutive solid gain in April, a sign the economy’s recovery from the pandemic is gathering momentum. Separately, a Philadelphia Fed gauge of regional factory activity declined in May to 31.5 (vs 43 forecast), pulling back from a 50-year high of 50.2 in April.

Colombia's peso and stocks tumbled on Thursday after the Andean country lost one of its three investment-grade ratings. The Indian Govt on Thursday slashed subsidy on sugar exports from Rs 6,000 per tonne to Rs 4,000 per tonne with immediate effect in view of firm global prices. Sugar mills were mandated to export 6 million tonne of sugar in the current year. So far, 5.7 million tonne of the sweetener has been contracted for export.

Asian stocks climbed early Friday after technology companies led a Wall Street rebound on economic optimism and easing concern about the possibility of reduced U.S. stimulus. Indian benchmark equity indices ended lower for the second consecutive session on May 20. At close, the Nifty was down 124.20 points or 0.83% at 14,906.

Nifty fell on May 20 amidst lower than average volumes with advance decline ratio becoming equal. In the process, the upgap formed on May 18 has been filled, nullifying the sharp bullishness. However, nervousness out of recent data on inflation and cryptocurrency sell-off seems to have tapered off or already in the price. 14824-15009 is the near term band for the Nifty.

Daily Technical View on Nifty

Observation:

Markets corrected on Thursday for the second consecutive session. The Nifty finally lost 124.1 points or 0.83% to close at 14,906.05. Broad market indices like the BSE Small Cap index gained, thereby out performing the Sensex/Nifty. Market breadth was positive on the BSE/NSE. Sectorally, the top gainers were the BSE Realty, Capital Goods and CD indices. The top losers were the BSE Metal, Oil and Gas and Bankex indices.

Zooming into the 15 minute chart, we can see that the Nifty opened on a weak note and proceeded to move lower through the trading session. In the process, the Nifty tested our target of 14967 and also touched the 200 period MA on the 15 minute chart before bouncing back towards the close.

We expect the Nifty to bounce back in the very near term as it resumes its 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 up with the index bouncing back from the 200 period MA on the 15 min chart. 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 weakness therefore seems like a short term correction and can be utilized to build long positions on a selective basis. We expect the Nifty 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 14591.

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