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Indian markets could open flat to mildly higher in line with flat Asian markets today and despite negative US markets on Friday - HDFC Securities

U.S. stock benchmarks suffered withering losses on Friday as stock and commodity markets plunged, after scientists detected a new COVID variant in South Africa that could be to blame for a recent sharp surge in cases, especially in Europe. Little is known of the variant, detected in South Africa, Botswana and Hong Kong, but scientists say it has an unusual combination of mutations, may be able to evade immune responses and could be more transmissible. U.S. markets were closed for Thanksgiving on Thursday and ended at 1 p.m. Eastern Time on Friday, three hours earlier than usual.

Dow index logged the worst daily drop since Oct. 28, 2020. The decline for the S&P 500, Dow and Nasdaq Composite posted their worst Black Friday performance since 1950. The 10-year Treasury note retreated by more than 10 basis points to fall to around 1.54%, versus 1.644% on Wednesday.

Bitcoin fell sharply alongside other assets on Friday, hitting a seven-week low and officially entering bear market territory. The world’s biggest cryptocurrency sank nearly 8% in the last 24 hours to $54,321, according to Coin Metrics data. Oil posted its worst day of the year on Friday, tumbling to the lowest level in more than two months as the new Covid-19 strain sparked fears about a demand slowdown just as supply increases. U.S. oil settled 13.06%, or $10.24, lower at $68.15 per barrel, falling below the key $70 level. It was the contract’s worst day since April 2020. Both contracts registered their fifth straight week of losses for the longest weekly losing streak since March 2020.

Bullion has erased its November rally and is almost back to where it started the month as investors weighed the potential of the Federal Reserve removing policy support at a faster pace to keep inflation in check, with the possible impact of the omicron strain on the global recovery. The Nov. 22-25 poll of 44 economists put the median year-on-year India GDP growth forecast at 8.4% in the July-September period. The Indian economy expanded 1.6% and 20.1% in the Jan-March and April-June quarters, respectively. The report will be released at 1200 GMT on Nov. 30.

Profits at China's industrial firms grew at a faster pace in October, the statistics bureau said on Saturday, providing a buffer for a faltering economy battered by soaring raw material prices. Profits in October rose 24.6% from a year earlier to 818.7 billion yuan ($128.1 billion), the official data showed, quickening from a 16.3% gain reported in September. Asian markets regained a little composure on Monday as investors settled in for a few weeks of uncertainty on whether the Omicron variant would really derail economic recoveries and the tightening plans of some central banks. Uncertainty about a new emerging coronavirus strain could continue to spook markets

Nifty crashed almost 3% on Nov 26 due to the fresh scare about the new strain of Covid Virus identified in South Africa. At close Nifty was down 2.91% or 509.8 points at 17026.5. On a weekly basis, Nifty fell a massive 4.16%, the highest since Jan 2021. Nifty keeps facing selling pressure on every rise and is making new lows. Advance decline ratio is deeply in the negative. Nifty now has support from 16722 while 17269-17326 band could be the resistance.

Daily Technical View on Nifty

Display of sharp downside momentum..

Observation: After showing minor pullback rally on Thursday, Nifty witnessed bloodbath on Friday and tanked down by 509 points. A long negative candle was formed on the daily chart with gap down opening. Technically, this action indicates a sharp downside breakout in the market after a minor upside bounce. This also reflects a strength of a down trend compared to minor recent upside bounce. This signal chances of more weakness in the coming weeks. The negative chart pattern like lower high and lower low was formed on the daily chart and the present downward correction could be a part of new lower low formation. Still there is no confirmation of any lower bottom formation at the lows.

A long bear candle was formed on Nifty weekly chart and the key lower supports of 20week EMA and ascending trend line have been broken on the downside as per weekly close. The 20w EMA was instrumental in offering support and subsequent bounce back for the Nifty in the past. Hence, its downside breakout could have further negative implication on the market ahead.

Conclusion: The near term trend of Nifty continues to be down. The overall negative chart pattern as per smaller and larger timeframe chart and a decisive downside breakout of the crucial supports indicate more weakness for next week. The next downside target to be watched for Nifty is at 16500 levels. Eventually the Nifty is expected to reach down to a long term support of 16000 in one month. Any pullback rally from here could find strong resistance around 17250-17390 levels.

Nifty – Daily Timeframe chart

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