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Indian markets could open sharply lower, following deep negative Asian markets today and sharply lower US markets on Thursday.- HDFC Securities 

US stock-market benchmarks finished sharply lower on Thursday, after a surge in bond yields inspired a bout of fierce selling in equities amid concerns over tighter borrowing conditions down the road. Investors also fretted higher bond rates could sap the relative attractiveness of buying stocks to the benefit of fixedincome investments. Nasdaq index posted its largest daily percentage fall in four months.

On Thursday, the 10-year Treasury note yield rose 13 basis points to 1.51%, around its highest levels in a year, hitting thresholds that investors say have started to weigh on equities and corporate debt. The bond-market selloff was spurred inflation fears as fiscal stimulus and economic reopenings combined to induce intensifying price pressures.

Rising rates were extending a rotation out of tech and into other areas that might perform better in an improving economic environment.

The U.S. 10-year Treasury yield on Thursday rose above the estimated 1.48% S&P 500 dividend yield, reaching as high as 1.614% before paring. It was last at 1.5026%.

In other economic data, sales of durable goods rose 1.4% in January, with core capital goods orders advancing 0.5% last month. Separately, an updated reading of U.S. fourth-quarter gross domestic product was raised slightly to 4.1% from 4% from the first estimate. Weekly jobless claims declined by 111,000 to 730,000, a three-month low, the Labor Department said. Claims were expected to total 845,000 in the latest week.

Data for India's gross domestic product due on Feb.26 is expected to show a return to year-on-year growth, albeit of a small magnitude. According to median estimates of 10 economists polled by Bloomberg, GDP is estimated to grow 0.5% in the third quarter of the current financial year.

Fiscal consolidation in India remains weak and will be a key credit challenge given its large debt burden and low medium-term gross domestic product growth, according to Moody’s Investors Services.

Asian stocks skidded to one-month lows on Friday as a rout in global bond markets sent yields flying and spooked investors amid fears the heavy losses suffered could trigger distressed selling in other assets.

Indian benchmark equity indices ended higher for the second straight session on February 25. At close, the Nifty was up 115.40 points or 0.77% at 15,097.40.

Daily Technical View on Nifty

Observation 

Markets ended with healthy gains on Thursday after a gap up opening. The index traded in a range for the rest of the trading session. The Nifty finally gained 115.35 points or 0.77% to close at 15,097.35.

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

Zooming into the Nifty 15 min charts, we observe that the Nifty opened with an up gap and then traded in a range for the rest of the session.

While the very near term trend remains positive, the Nifty closing below the 20 period SMA on the 15 min intra charts is a cause for concern. It will be important that the Nifty holds above the 50 period MA in the very near term for the uptrend to continue.

Upside acceleration is likely to happen once Thursday’s highs of 15177 is crossed.

On the daily chart, we can see that the Nifty is holding above the previous intermediate highs of 14754. We can therefore see the change of polarity principle at work. Previous resistances are now acting as support.

The Nifty also remains above an upward sloping 20 and 50 day SMA. Short term momentum indicators like the 14-day RSI too have bounced back and are currently trading above their 9-day EMA

The Nifty could therefore again attempt to move towards its life highs of 15432. Downside supports to watch for resumption of weakness are now at 14723- 14635.

Conclusion:

The 1-2 day trend of the Nifty remains up with the Nifty moving up further after reversing the downtrend on Wednesday. Upside acceleration is likely to happen once Thursday’s highs of 15177 is crossed.

Our 7-day view on the market too remains bullish with the Nifty holding above the previous intermediate highs of 14754 and also trading above a rising 20 and 50 day SMA. The Nifty could again attempt to move towards its life highs of 15432.

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