Premarket analysis: 21 July 2020
Positive news on economy, stimulus and vaccine
Quarterly results are turning out to be better than expected
Risk-on mood in global markets is unabated
Virus scare on economic recovery remains
Global Markets: -Up again
Developed markets ended in green yesterday. Overnight news flow has been positive. Corona virus vaccine is closer to reality and US announced fresh round of stimulus amounting to USD 1 trillion. European union is closer to agreeing on recovery fund. Additional stimulus from developed markets will ultimately flood emerging markets in search of higher returns. Understandably, the ultimate safe haven US dollar continued its down trend down, after breaking down from symmetrical triangle pattern. Other safe havens Japanese Yen and Gold against US dollar was in sideways coil mainly on account of dollar weakness. Volatility index is continuing to trend down.
ASIA this morning: - Positive
Asian markets including China’s Shanghai opened in green this morning. European and US futures are in green as well. SGX Nifty is trading more than 100 points above yesterday’s Nifty futures close.
There are no major economic data release scheduled for today.
India: -Why DIIs are still booking profit?
FIIs bought heavily on cash market yesterday while DIIs equally sold in heavy volumes. DIIs are also holding considerable short position on derivative open interest while large proprietary traders are slightly on short side. It seems that DIIs are looking to take advantage of the better than expected results season and book some profit. FIIs are firmly on long side in derivatives open interest as well
How will Nifty perform today?
Positive global mood, success on corona virus vaccine, better than expected quarterly results and additional stimulus measures from developed markets are all pointing towards continuation of bull phase in Indian markets. However, DIIs seems to be in hurry to book profit with heavy volumes. Whenever DIIs and FIIs offset each other with more than Rs.1000 Cr in the cash market, market whip saws heavily and chops intraday traders on both sides.
Quarterly result season is in full swing. Few heavy weights such as Hindustan Unilever, Axis Bank, Bajaj Fin serve, Bajaj Financials, HDFC life and Hindustan copper are declaring their results today
NIFTY -Technical Bias: Positive
Nifty price action:
In spite of DIIs booking heavy profits yesterday, Nifty held on to its gains. Momentum is strong on the upside. Seems that the pattern failure (of raising wedge pattern) will take Nifty up considerably. Next target on upside is 11200 which could be reached soon. 10800 seems to be a good intermediate support on the downside. Breach of 10740 on downside will be breakout failure. However, I feel upward momentum will continue for now.
Bull spreads and spreads that work in range of 10700 & 11200 are appropriate till index breaks below