Premarket analysis: 30 July 2020
Federal Reserve pledged endless money printing
Global liquidity is running out of assets to buy
DIIs are facing withdrawal pressure
Worries about India’s economic recovery
Some of the heavy weights are missing market expectations on quarterly results
Global Markets: -Positive
Federal reserve essentially pledged endless money printing and zero interest rates as long as virus pandemic posses risk to the economy. Now the ensuing global liquidity will have to find assets. This is going to lift all kind of risk assets further. FED has also flagged uncertainty on economy due to virus.
Risk assets: Risk assets will benefit most as money that is being printed will chase higher returns that risk assets are offering. Obviously, the emerging market currencies and ETFs traded in US ended higher. However Indian Rupee futures traded in US performed badly yesterday. Copper was flat while industrial metal index was up more than a percentage.
Safe heaven assets: Dollar index continued its downward journey after FOMC comments and Japanese Yen fell as well. No stopping of Gold’s bull run that continued its relentless up move. Volatility indices are down. India VIX rose yesterday because markets were whipsawing.
ASIA this morning: - Green
FEDs FOMC comments have buoyed Asian markets which are trading in green. Chinese markets are an exception that are trading in red. This could be due to political tension between US and China. SGX Nifty is trading flat.
There are no significant economic data release scheduled today
Maruti missed estimates that reported higher than expected loss. This is first time Maruti reporting a quarterly loss after it was listed.
Reliance and HDFC will declare their quarterly numbers today.
India: - Expiry and quarterly result related volatility
Indian markets are facing negative news on local economy while global liquidity is trying to find assets that offer decent returns. Hence FIIs are likely to continue to deploy the excess liquidity that they may have. DIIs are need of cash to meet the withdrawals for mutual funds. Therefore they will continue to sell in cash segment. Only retail clients and FIIs are holding long position in derivative segment while proprietary traders and DIIs seems to have increased their short position in the market.
How will Nifty perform today?
Two opposing factors of global liquidity and sluggish Indian economy are likely to keep the markets on sideways and volatile phase for a while. Today, two heavy weights are declaring quarterly results in addition to monthly derivatives expiry. Therefore, market could whipsaw and chop the intraday traders on both sides.
NIFTY -Technical Bias: Still Positive
Nifty price action:
Nifty could not sustain the break out that fell back below 11250 yesterday. Nifty 50 stock volumes were lower on account low volumes from DIIs and FIIs. The retail investors seem to be still bullish. Technically 11050 level is important on the downside while Nifty breaking and closing above 11280 again will be bullish.
Support: Immediate support exists at 11050
Resistance: 11280/300 K.
Traders need to wait for the results of heavy weights and decide on the further trade. It is better to sit out on the days like today.