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Indian markets could open mildly lower, in line with largely negative Asian markets today and negative US markets on Thursday - HDFC Securities

U.S. stocks closed lower on Thursday, as falling bond yields reflected investor concern that a resurgence of COVID cases in some countries may slow the global economic recovery. U.S. stock benchmarks retreated, with the weaker tone across global equities attributed, at least in part, to worries that the recovery could be slowed by persistent supply bottlenecks and the spread of the delta variant of the coronavirus that causes COVID-19. The price action across markets reflected a tug of war between fears of inflation and fears of growth peaking.

The 10-year U.S. Treasury yield was down 3.4 basis points at 1.287% after dipping below 1.25%, its lowest since February. The U.S. Labor Department said initial jobless claims rose to 373,000 from an upwardly revised 371,000 in the seven days ended July 3. Economists had looked for claims to drop to 350,000.

Money continued to flow into mutual funds in June 2021, though at a slower pace. The total assets under management of the mutual fund industry jumped to Rs 33.66 lakh crore as on June 30 from Rs 33.05 lakh crore as on May 31. The number of systematic investment plans (SIP) in various schemes of mutual funds went up to 4.02 crore in June 2021 compared to 3.88 crores in May 2021. The contribution from SIP also went up to Rs 9,155 crore in June 2021 from Rs 8818 crore in May. The equity funds got an inflow of Rs 5,988 crore in June 2021, down from Rs 10,082 crore in May.

TCS on July 8 reported a consolidated profit of Rs 9,008 crore for the quarter ended June 2021, registering a 2.6 percent sequential decline due to lower other income, and missing analysts' expectations. Numbers missed analysts' expectations on all counts. The pandemic's second wave impacted sequential growth in India and Asia Pacific, said TCS. India registered a 14.1 percent sequential decline and 25.3 percent year-on-year increase, while Asia Pacific business grew 2.4 percent QoQ and 9.3 percent YoY. China’s factory gate prices rose at a slightly slower pace in June, providing some reprieve for businesses though persistently high raw material costs are threatening to undermine the postcoronavirus economic recovery. The producer price index (PPI) increased 8.8% from a year earlier, compared with a 9.0% rise in May as prices for copper and steel fell following a government crackdown on metals prices.

China’s consumer price index for June rose 1.1% as compared with a year ago. China’s top executive body surprised investors late Wednesday by saying the central bank would stimulate the economy by cutting the amount of funds banks need to hold in reserve. This policy signal suggests the economy likely slowed in June. On Monday, the China Association of Automobile Manufacturers said passenger car sales in China likely fell 14.9% in June from a year ago.

Asian shares followed U.S. equities lower Friday on growing anxiety that the spread of Covid-19 variants could hamper the global economic recovery. Indian stock market benchmarks indices closed with steep losses on Thursday. The Nifty finally lost 151.75 points or 0.96% to close at 15,727.9. Technically, Support for the Nifty comes in at 15635, while 15900 resistance is turning out to be a tough one to crack.

Daily Technical View on Nifty

Uncertainty of bulls at highs..

Observation: After showing sustainable upside bounce from the lows, Nifty slipped into a sharp weakness amidst a weak global cues on Thursday and closed the day lower by 151 points. After opening on a slight negative note, Nifty made an attempt to show upside recovery soon after the opening. The weakness got triggered in the early part and the selling got intensified in the mid to later part of the session. Nifty finally closed the day on a minor upside recovery note.

A long negative candle was formed, that has negated the short term positive indication created after the upside bounce of Wednesday. The formation of gravestone doji of 6th of June remains intact and the intraday double top formation is also alive at 15915 levels. Nifty is now placed at the support of 20 day EMA and minor up sloping trend line support around 15720-15700 levels. A decisive move below this support is likely to bring more weakness in the short term.

Previously, the formation of long bear candle has failed to continue with sharp negative implication in the last one month, as the underlying bounced back immediately after such long negative candle formation. If sharp weakness continues in the subsequent session or a long negative candle gets formed, then all bets of short term uptrend could be off and that could open broader weakness in the market.

Conclusion: The uncertainty of bulls at the crucial hurdle of 15900 continued, as the market tumbled down sharply from near the hurdle. Although Nifty placed at the minor support of 15700-15640 levels, a sharp follow through weakness could open decline towards 15450 in the near term. Any pull back rally from here could initially find resistance at 15800 levels.

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