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

U.S. stocks fell Tuesday, with all three major indexes closing sharply lower, after Federal Reserve Chairman Jerome Powell told lawmakers it would be appropriate for policy makers to consider winding down monthly asset purchases more quickly than planned. Equities were already feeling pressure after Moderna Inc.’s chief executive officer predicted that current vaccines would be less effective against the new omicron variant of the coronavirus that causes COVID-19.

Federal Reserve Chairman Jerome Powell, testifying alongside Treasury Secretary Janet Yellen, told the Senate Banking Committee that it would be appropriate given the present economic backdrop to consider speeding up the tapering process, with a decision to come after reviewing the latest jobs and inflation data ahead of the central bank’s mid-December policy meeting. Powell also backed away from the Fed’s long-running characterization of inflationary pressures as “transitory,” or short-lived. “It’s probably a good time to retire that word and explain more clearly what we mean,” he said.

The Conference Board said Tuesday that its index of consumer confidence dropped to 109.5 from 111.6 in October, the lowest reading in nine months. Earlier, a reading on Chicago-area manufacturing activity, the Chicago Business Barometer, also known as the Chicago PMI, was at 61.8 in November, compared with 68.4 in the prior month.

India’s fiscal deficit for the April-September period stood at Rs 5.47 lakh crore or 36.3% of the budget estimate, according to data from the Controller General of Accounts. In the year-ago period, the government's fiscal deficit had surpassed budget estimates. While the massive 82% expansion in revenue receipts amid the measured 10% rise in total expenditure has compressed the fiscal deficit to a modest Rs. 5.5 lakh crore in April-October 2021, languishing disinvestment proceeds pose a meaningful concern.

India’s core sector output growth accelerated in October, with the Index of Eight Core Industries (ICI) expanding 7.5% on the back of appreciable increases in the production of cement, coal, refinery products and electricity. September’s growth estimate was revised to a 4.5% pace. All sectors, except crude oil, recorded positive year-on-year growth in October. Output in October was also 7.3% higher than September’s four-month-low print of the index. India’s economy continued to expand in the JulySeptember quarter, marking the fourth consecutive quarter of growth. India’s GDP grew 8.4% on-year basis against a contraction of 7.4% during the same period last year.

S&P Global Ratings on Tuesday kept India’s economic growth forecast in the fiscal year to March 2022 unchanged at 9.5 per cent but raised its predictions for the subsequent year on broadening out of the recovery. China's factory activity fell back into contraction in November as subdued demand, shrinking employment and elevated prices weighed on manufacturers, a business survey showed on Wednesday.

The Caixin/Markit Manufacturing Purchasing Managers' Index (PMI) fell to 49.9 in November from 50.6 the month before, versus analyst expectations of 50.5 in a Reuters poll. Japan's factory activity grew in November at the fastest pace in nearly four years, as manufacturers' output and orderbooks improved on a moderation in critical supply bottlenecks. The final au Jibun Bank Japan Manufacturing Purchasing Managers' Index (PMI) in November rose to 54.5 on a seasonally adjusted basis, marking its fastest pace of expansion since January 2018. Asian stocks came back positive Wednesday after Federal Reserve Chair Jerome Powell sought officials to consider a faster removal of monetary stimulus amid high inflation.

Nifty ended a highly volatile session on Nov 30 in the negative after moving in and out of positive several times during the day. At close Nifty was down 0.41% or 70.7 points at 16983. Nifty could not capitalize on the gains made in the previous session. It formed an inverted hammer like pattern on daily charts after a fall, suggesting possibility of an upward reversal as long as the lows of 16931 are protected. On the upside 17352 remains a resistance.

Daily Technical View on Nifty

Market: Observation

* Markets ended lower on Tuesday after a volatile session. The Nifty finally lost 70.75 points or 0.41% to close at 16,983.2. 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.

Nifty: 15 min chart indicates downtrend intact

* Zooming into 15 minute chart, we see that Nifty opened on a positive note and climbed higher. But selling soon emerged and pulled the index lower. Though there was a recovery in the afternoon session, the bears once again took over in the last one hour and pulled the index lower into negative territory.

* With Nifty breaking intraday support of 16987, short term trend continues to remain down.

* Immediate downside targets for the Nifty are at the recent lows of 16782. The current short term downtrend would reverse if the Nifty crosses the previous swing highs of 17325.

Nifty: Daily chart indicates weakness to continue

On daily chart, we see that Nifty remains in a downtrend despite the bounces seen in last two sessions. The 20 day SMA also continues to trade below 50 day SMA, indicating a negative moving average crossover. Weekly momentum readings like the 14-week RSI are in decline mode. While we remain open to pullback rallies, we expect the Nifty to eventually move lower in the coming sessions. A larger correction is likely once the 16782 supports are broken.

Nifty – Daily Timeframe chart

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