FED met the market expectations and remained dovish
Dollar Index accelerating in its fall
Emerging market currency index continued to go higher
DIIs profit booking stopped
S&P maintained the credit rating at lowest investment grade
US & European markets ended lower
FII net sold in cash market first time in many days
Global Markets: Profit booking
US markets were down in spite of dovish Fed decision and message. European markets also ended lower yesterday. The European and US futures are down this morning in the Asia trading session. Federal Reserve committed to keep print money, keep rates close to zero, was down beat on economic forecast. This is what markets expected. There is also a possibility that markets are of the view that there are no more near-term trigger for the markets to continue upward. Therefore, the down move is probably due to profit booking taking advantage of favorable news from Fed.
Emerging market currencies and industrial metals continued to go up while dollar index is accelerating in its fall. Gold is up due to dollar weakness. US High yield bond index fell in line with stocks. Bonds values are raising.
ASIAN Markets this morning: - Mostly Negative
Asian markets are trading mostly in negative territory as profit booking in the developed markets subdued the sentiments in emerging markets as well. SGX Nifty is trading flat compared to yesterday’s Nifty close.
FED policy decision was in line with market expectations. Fed committed to keep printing money as long as the joblessness comes down to comfortable level.
India: What about Nifty?
The Indian markets were the beneficiary of the risk rally in the global markets. These developed global markets are now entering profit booking phase. We are aware that there are no positive local triggers in India for the economy or markets. A small positive is that global rating agency S&P maintained India’s credit rating at lowest investment grade. Now both Moody’s and S&P carry similar level of rating for India.
However, the continued raise of emerging market currencies and RBI’s fight to stem the appreciation of the Indian Rupee points to currency-carry trade. Whereby the foreign institutional investors borrow at low rates in developed market currencies and invest in comparatively higher yields in emerging market assets. This could accelerate because Fed, ECB and JCB have conveyed to market that the interest rates will stay near zero for longer period in developed markets.
How about Nifty today?
The profit booking mood may keep the Nifty on sideways for a while probably in the morning session. The evening session will largely depend on whether FIIs continue with their buying or pass for a while. DIIs may stop the profit booking and wait for markets go up.
EID Parry and Indian Bank will declare quarterly results today.
NIFTY -Technical Bias:
Price Action & Pattern:
Dovish Fed is good news for emerging market assets, the profit booking in developed markets may cause temporary bearishness. However, there are no reason for Nifty to go below 9950/9000. Today Nifty could be affected by weekly-expiry related volatility. Overall, it is likely to form a base for further up move.
Pull backs may be used to enter in to a bullish spread. Volatility will likely fall from here on. So spreads that will benefit from falling volatility could also be done.