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Indian markets could open higher due to healthy IT company numbers last evening despite mixed Asian markets today and flat US markets on Wednesday- HDFC Securities

U.S. stock indexes closed with modest gains Wednesday, after a reading on inflation came in near a four-decade high. Stocks were buoyed Wednesday as investors exhaled with relief after the latest reading on inflation, while running hot, wasn’t worse than anticipated. The consumer-price index posted a monthly rise of 0.5% in December, as prices rose by a near 40-year high of 7% from a year ago, while also indicating elevated U.S. inflation could persist well into 2022.

In other economic news, the latest Federal Reserve Beige Book report on economic conditions showed solid growth in the ability of businesses to pass along price gains to customers in December, a departure from recent years. The yield on the 10-year Treasury note fell 2.1 basis points to 1.724%.

India’s CPI headline inflation rose by 70bps to 5.6% in Dec-21 vs. 4.9% in Novt-21 although the print was marginally lower than consensus expectations of 5.8%. The increase in CPI was led by higher food inflation (doubled to 4% from previous month), waning of the favourable base effect and elevated core (CPI excluding food and fuel) and fuel inflation. IIP grew by 1.4% in Nov-21 vs. 4.0% in Oct-21, despite a favourable base (Nov-20 reading:-1.6%). While the slowdown was largely broad based, manufacturing, capital and consumer durables production took the major hit. Asia stocks are mixed Thursday after a U.S. inflation print intensified calls for interest-rate increases as soon as March.

Nifty rose for the fourth straight session on Jan 12 aided by positive global cues, receding Omicron threat and resumption in FPI flows. At close, Nifty was up 0.87% or 156.6 points at 18212.3. In the process the Nifty closed at its highest in 10 weeks. Nifty continues its uprun with volumes now back at normal and advance decline ratio also ending in the positive. The Nifty however shows a doji after a rise and a gap up. Breaching and sustaining above the top of Jan 12 i.e. 18228 will be crucial for the uptrend to continue. On falls, 18081 could offer support.

Daily Technical View on Nifty

Display of sharp upside momentum..

Observation: After showing upmove with range bound action on Tuesday, Nifty witnessed another decent upside on Wednesday and closed the day with handsome gains of around 156 points. A small positive candle was formed on the daily chart with gap up opening. The opening upside gap remains unfilled. Technically, this pattern indicate a continuation of sharp upside momentum in the market. The initial hurdle of 18210 (swing high of 15th Nov 21) has been broken marginally on the upside and Nifty closed just above it. This is positive indication and a sustainable move above this area is likely to pull the market towards the next important overhead resistances of around 18342 and 18600 levels. The positive chart pattern like higher highs and higher lows is intact on the daily chart and currently, the Nifty is now in line with the formation of new higher high of the sequence. Hence, there is no confirmation of any higher top reversal yet at the highs. Any downward correction from here/highs could be a buy on dips opportunity for the short term. The overall market breadth and broad market indices remains positive.

Conclusion: The short term trend of Nifty continues to be positive. There is a possibility of Nifty reaching another crucial resistances of around 18340 and 18600 levels in the next one week. The formation of unfilled opening upside gap of Wednesday could hint at another 1-2 such upside gaps in the short term. Immediate support is placed at 18090 levels.

Nifty – Daily Timeframe chart

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