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Indian markets could open sharply higher, in line with positive Asian markets today and despite mildly negative US markets on Monday.- HDFC Securities

U.S. stocks closed modestly lower Monday, but off the session lows, extending a slump for equities after all three main benchmarks notched their worst week in about three months amid fears of rising inflation. Stocks ended lower to kick off the week as tech heavyweights saw a fresh round of selling.

Optimism around an economic recovery in the U.S. and Europe helped to lift oil futures to a more than two-year high of $66.27 a barrel for June West Texas Intermediate crude. Inflation fears also weighed on the market and investors were looking toward Wednesday’s release of minutes from the Federal Reserve’s most recent meeting to help gauge the central bank’s tolerance for pricing pressures in the recovery phase of the COVID pandemic.

The Empire State Manufacturing Survey, produced by the New York Fed, showed the prices paid index rose to a record 83.5, the highest since the data series began in 2001. Japan’s economy shrank at an annualized rate of 5.1% in January to March, government data showed Tuesday. On a seasonally adjusted basis, gross domestic product in January-March fell 1.3% quarter-on-quarter, slightly lower than expectations in a Reuters poll for a 1.2% decline.

Gold touched a more than three-month high, buoyed by signs that money managers and exchange-traded fund investors are turning more positive on the precious metal. Prices have rebounded from lows in March as the dollar retreated and the Federal Reserve signaled it will keep interest rates low, even with signs of rising inflation.

Chile’s markets plunged on Monday after voters propelled leftist and independent groups to victory in an election over who will draft a planned new constitution, a major blow to the centerright ruling coalition that fared far worse than expected.

Asian stocks opened firmer Tuesday as investors weighed a pickup in virus cases in the region against the pace of economic growth as economies reopen.

Indian benchmark equity indices rose on May 17 aided by upmove in Banks, and Auto stocks. At close, the Nifty was up 245.40 points or 1.67% at 14923.20. This was the best single day gain in the index in more than a month.

Nifty rose sharply on May 17 and ended almost at the intra day high. The next stop on the upside is 14966-15044 band. A breach of this band could lead to a challenge to the all time highs of the Nifty (15432). On falls 14824-14850 band could provide support. A healthy advance decline ratio suggests return of confidence of traders in the broader markets.

Daily Technical View on Nifty

Observation

Markets rallied sharply on Monday after three sessions of losses. The index opened on a positive note and proceeded to move higher through the session. The Nifty finally gained 245.35 points or 1.67% to close at 14,923.15. Broad market indices like the BSE Mid Cap and Small Cap indices gained less, thereby under performing the Sensex/Nifty. Market breadth was positive on the BSE/NSE.

Sectorally, the top gainers were the BSE Bankex, Metal, Auto and Power indices. The top losers were the BSE Telecom and Healthcare indices. Zooming into the 15 minute chart, we can see that the Nifty opened with an upgap and continued to move higher through the trading session. In the process, the index also broke above the previous swing high of 14781, implying that the very near term trend has turned up.

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 made a higher bottom at 14416 which gives further evidence of an uptrend.

Monday’s upmove from the 20 and 50 day SMA also indicates that the uptrend looks set to continue.

Conclusion: The 1-2 day trend of the Nifty is now up with the index breaking above the previous swing high of 14781. On the larger daily timeframe, an upward sloping trend line continues to support the index with the Nifty also making a higher bottom at 14416 which gives further evidence of an uptrend. Monday’s upmove from the 20 and 50 day SMA also indicates that the uptrend looks set to continue. Our bullish bets are off if the Nifty moves below the lows of 14591.

Nifty – Daily Timeframe chart

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