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Indian markets could open mildly lower, following largely negative Asian markets today and mixed US markets on Tuesday - HDFC Securities 

The Dow industrials eked out a record gain, but the other main equity benchmarks limped lower, as progress toward President Joe Biden’s $1.9 trillion coronavirus relief package and data showing falling COVID-19 cases, failed to help stocks definitively overcome unease centered on a steady rise in government bond yields. The bond market, meanwhile, was under pressure. The 10- year Treasury note yield climbed to a one-year high of 1.30%, from 1.199% Friday.

The energy sector, meanwhile, was the top gainer in the S&P 500 as a deep freeze swept across much of the middle of the U.S., sending prices of natural gas soaring and giving a lift to oil prices.

The New York Fed’s Empire State business conditions index rose 8.6 points to 12.1 in February. This is the highest level of activity since July. Economists had expected a reading of 5.9.

Ratings agency S&P Global Ratings said Tuesday that India is on track to recover from a pandemic-led economic contraction by next year. South Asia’s largest economy could grow 10% in fiscal 2022, the ratings agency predicted in a report.

Stocks in Asia-Pacific were lower in Wednesday trade following an overnight dip for the S&P 500 as investors grew concerned over rising bond yields.

Indian benchmark equity indices snapped a three day winning streak on February 16 and closed flat. At close, the Nifty was down 1.20 points or 0.01% at 15,313.50.

Nifty formed a near doji like pattern after a rise suggesting tug of war between bulls/bears. Advance decline ration continues to be negative suggesting widespread profit taking. Sector specific moves continue in the markets with Metals being in the limelight on Feb 16. 15242 on the Nifty is now a crucial level below which the correction could accelerate. On upmoves, 15432 could offer some resistance.

NBFCs' stressed assets may touch Rs 1.5-1.8 lakh crore by March-end: Stressed assets of non-banking financial companies (NBFCs) are likely to touch Rs 1.5-1.8 lakh crore or 6-7.5 percent of their assets under management (AUM) by the end of this fiscal. However, the one-time COVID-19 restructuring window, and the micro, small and medium enterprises (MSME) restructuring scheme of the Reserve Bank of India (RBI) will limit the reported gross non-performing assets (GNPA), Crisil Ratings said.

Observation:

Markets ended on a flat note on Tuesday after a volatile session. The index had initially opened with a strong upgap but selling soon emerged and pulled the index into negative territory. A recovery in the last one hour of trade helped the index to close with marginal losses. The Nifty finally shed 1.25 points or 0.01% to close at 15,313.45.

Broad market indices like the BSE Mid Cap and Small Cap indices gained more, thereby out performing the Sensex/Nifty. Market breadth was negative on the BSE/NSE.

Zooming into the Nifty 15 min charts, we observe that the Nifty opened with a strong up gap thereby indicating that the bulls were having an upper hand. But selling soon emerged and pulled the index lower.

The support of 15275 was broken in the process and while there was a pullback in the late afternoon, the index finally closed below the 20 and 50 period moving average on the 15 min intra chart. This is a negative signal and the Nifty could therefore test the trend line support at 15120 on the intra chart in the very near term.

On the daily chart, we can observe that the Nifty remains in a comfortable uptrend and well above its 20 day and 50 day SMA. Short term momentum indicators like the 14-day RSI too are in uptrend and at 71.4 has entered into overbought territory, though not extremely overbought. While we remain open to corrections in the near term, we expect the index to make new life highs in the coming sessions

It is important that the Nifty does not move below the support of 14977 on any corrections for the short term uptrend to remain intact.

Conclusion:

The 1-2 day trend of the Nifty is now down with the Nifty breaking the support of 15275 and closing below the 20 and 50 period MA on the intra chart. Nifty is likely to test the 15120 levels in the very near term. Our 7-day view on the market continues to remain bullish as the Nifty remains in a strong uptrend on the daily chart. Our bullish bets for the next 7 sessions would be off if the Nifty moves lower and closes below the 14977 levels.

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