Premarket analysis: 12 August 2020
Global markets entering consolidation phase
FIIs buying in sizable volume on daily basis
Industrial production data disappointed
DIIs continue to sell
No real economic recovery in India
Global Markets: -Consolidation
European markets ended the day with solid gains yesterday US markets started off on the positive note but ended in red. The profit booking started in gold spread to equity markets, after weak inflation numbers in US. However the indices are still comfortably in bullish uptrend.
Risk assets: High yield bonds, Emerging market equity ETFs and local government bonds of emerging Asia were all faced profit booking and closed slightly down yesterday. Copper and industrial metal index were down as well.
Safe heaven assets: Dollar index continued to raise for fourth day today. Gold suffered close to 5% yesterday and continues with its fall this morning. Absence of inflation in spite of record amount of money printing by Federal reserve and other central banks shows the kind of deep hole the real economy is in.
ASIA this morning: - In red
Asian markets are trading in red on account of profit booking. Japanese Nikkei is however trading in green because of falling Yen. US and European equities are also trading in red. SGX Nifty is off by more than 100 points compared to yesterday’s future close.
Manufacturing and industrial output numbers were disappointing. The were down about 20% in July. This conforms to the disappointing purchasing managers’ index released in the beginning of the month. There is no recovery in real economy.
India: - Will FIIs continue to buy?
Although there is no economic recovery seen yet in India, FIIs seems to be interested in finding opportunities where they can park their excess liquidity. The FIIs net bought more than 1.2k crore yesterday in cash market which was equally matched by DIIs net selling of about 1.4k crore. FIIs also reduced their long position in derivative segment and seems to be hedging their equity positions.
How will Nifty perform today?
In line with Asian and global cues, Nifty is likely to experience profit booking. Since DIIs are only matching the level of buying of FIIs, they are unlikely to resort to sell off and drag index down sharply. FIIs could use the opportunity to buy the dips when index retraces to around 11150.
NIFTY -Technical Bias: Still Positive
Nifty price action:
Nifty’s attempt to break out of 11300 may have to wait for couple of days as profit booking is underway in global markets.
Support: 11150 and then 11050
Resistance: 11350 and then 11450
Traders need to watch out pull back to re-enter bullish spreads