Premarket analysis: 01 July 2020
Global markets closed in green yesterday
Purchasing manager’s index shows rebound in economic activity
FIIs net selling in cash market increases
Cautious mood among Institutional investors
Global Markets: -Sideways coil
US and European markets are still stuck in consolidation range although they closed in green yesterday. Risk assets such as High yield bonds, Emerging market ETF traded in US and EM currencies were on sideways wind. US dollar index and Japanese yen consolidated. Industrial metal copper continued to claim up on the back of China’s economic recovery and stimulus hopes. However, Gold which is a safe haven continued to shoot up mirroring cautiousness among investors.
Manufacturing Purchasing managers index points to slowdown in contraction of economies in the month of June. Only a reading above 50 will mean the economic activity is growing again
ASIAN Markets this morning: - Mixed
Asian markets started the quarter quietly. Markets are mixed and directional less this morning. They are well within the consolidation range. SGX Nifty is trading almost flat compared yesterday’s July futures’ close at NSE.
Fiscal deficit numbers and infrastructure output numbers released yesterday were not inspiring. India achieved current account surplus after almost 13 years. This is not good news either because, current account surplus was on account lower imports which happens when economy shrinks.
Purchasing manager’s Index for India will be out by 10.30 AM which will offer hints about how manufacturing fared in June. Market expectation is 37.5 Vs previous reading of 30.8
India: -Economy is still in danger
There are no indications yet that economy has bottomed out in India. Institutional investors and FIIs have been pointing out that the emerging markets like India does not have sufficient room to offer stimulus to fire up the economy. Hence the views of institutional investors points to their worry that economic recovery could be delayed in India
How will Nifty perform today?
Gold claiming higher and heavy selling by FIIs hints that the cautious mood is taking hold. DIIs so far has offered sufficient support to the markets that has stopped it from falling further for now. Since markets had been on sideways coil for about a week now, its time for it to break out of the range in either direction.
There are no heavy weights declaring results today.
NIFTY -Technical Bias:
Price Action & Pattern:
Nifty looks ready to break out of the range. My bias for now is towards downside. Unless FIIs moderate their selling in cash market, the index is likely to drift down towards, the wedge bottom of 10K. Higher levels at around 10430 is likely to see profit booking. However, break out above and close above 10430 will mean profit booking has moderated and markets are turning bullish.
Charts with clear price action:
MCX Gold has broken out of range and claiming up which is likely to continue for a while considering the cautious mood in global markets.
Pull backs could be used to go short till decisive break above 10500.