Premarket analysis: 14 August 2020
Global markets are consolidating with positive bias
FIIs keep going and keep buying
Incoming data on economy and virus infections are bad for India
DIIs continue to sell
Global Markets: -Consolidation
European and US markets ended the day yesterday slightly in red and consolidated at higher levels. Economic rebound and ample liquidity provided by central banks of developed markets are supporting relent less rally of equity markets.
Risk assets: Most of the category of risk assets such as high yield bonds, EM bonds and equity ETFs went sideways on consolidation
Safe heaven assets: Dollar index and Japanese yen were lower. Gold pulled back somewhat from steep fall earlier in the week.
ASIA this morning: - In Green
Most of the Asian equity indices are trading in green at the moment. European and US equity futures are trading slightly in green as well in the Asian session. SGX Nifty opened in red this morning but recovered quickly. It is trading slightly in green at the moment.
Consumer price inflation numbers released yesterday was higher than expected. It was 6.9% Vs 6.15% expectation Vs previous reading of 6.09%. Wholesale price Index and forex reserve position will be released today. WPI is expected to be negative 1% which is an improvement over the previous reading of -1.81%
India: - Consolidation
DIIs net selling every day to the tune of Rs500- 1000 crores has put a cap on rally in Indian markets. Their selling pattern points to continued selling as they could be aiming to have sufficient cash cushion to meet withdrawal pressure from mutual fund unit holders. However, FIIs and retail investors are offering support to the indices. They have been net buyers consistently for a while now.
FIIs who were holding long position in index derivatives until recently, had flipped to short position a couple of days back and continued to hold net short position as on yesterday. FIIs are however holding long position in stock derivatives segment. DIIs and Proprietary traders are net short in both index and stock derivatives segment.
How will Nifty perform today?
The usual intraday whipsaw caused by FIIs and DIIs offsetting each other in cash market is likely to continue. Since market is on sideways coil for more than four days now, I expect a moderate trend for a day or two for technical reasons. That could happen either today or early next week. However, there are no sufficient trigger or change in narrative for markets to sharply move. Any sell off is likely to be bought by FIIS and any up move is likely to be used to book profits by DIIs.
Nifty price action:
Nifty is likely to be in the range of 11150 and 11350 . Since markets are coiling on sideways for a while now, it is likely to have a day or two of moderately trending days which could see Nifty either go to 11450 or 11050.
Support: 11150 and then 11050
Resistance: 11350 and then 11450
Bank Nifty Price Action:
Bank nifty is perfectly is trapped in the middle of a rectangle pattern. This offers a good opportunity to do spreads that will benefit between the upper lower edges of the rectangle. However Bank Nifty being a beast, traders need to be watchful of sharp moves on either direction and adjust the legs accordingly.
Spreads that will benefit from sideways market are appropriate.