Premarket analysis: 31 July 2020
Worst month for dollar in a decade- Helps FIIs' fund flow in to emerging markets
DIIs moderated their selling in cash for second day yesterday
Developed markets performed badly yesterday
Worries about India’s economic recovery
Spike in corona virus infections
Global Markets: -Negative
European and US markets closed in red a day after Federal reserve’s dovish comments met market expectations. This is probably due to traders selling the news and cashing out. FOMC comments on interest rates staying lower for longer, also strengthened the case for continuation of funds flow into risker emerging markets and high yield bonds.
Risk assets: High yield bonds performed well despite US, European equity markets falling sharply. The Emerging market equity ETFs were in red while the Local government bonds index for emerging Asia continued to fall. Oil and Industrial metals also fell sharply.
Safe heaven assets: Dollar index slide further. Reuters reported that July is likely to be the worst month for dollar index in a decade. Japanese yen and gold strengthened in line with profit booking in equity indices. Volatility indices were up.
ASIA this morning: - Mixed
Both Japanese and Australian markets are deeply in red while Korean, Taiwanese equity indices are slightly in red. The Chinese markets are doing well after China reported better PMI, indicating expanding economic activity in both manufacturing and non-manufacturing activities. This is official purchasing managers index. Widely followed Markit PMI data is not yet out for China.
SGX Nifty is trading about 30 points above the nifty futures’ yesterday close.
RBI will release forex reserve and bank lending, deposit data today after market hours
HDFC reported its result as per expectation during market hours yesterday. After market hours, Reliance industries reported higher profit and lower turnover. The higher profit was on account of one-time profit from fresh investment of British Petroleum.
Another heavy weight SBI will report the results today.
India: - Breakout did not sustain
Negative news on local economy and continued DIIs selling sent Nifty below 11150 yesterday which is a bearish sign. DIIs however moderated their selling in cash segment. Global liquidity is helping Foreign funds continuous flow into Indian markets. FIIs bought in cash market and hold long position in derivatives segment. DIIs and proprietary traders’ position in derivatives have not changed and they continued to hold net short position.
How will Nifty perform today?
The market is likely to react to Reliance results today on opening. The results although are in line with expectations, could cause some profit booking in RIL counter. The profit booking in global markets could also add pressure on the market.
NIFTY -Technical Bias: Still Positive
Nifty price action:
Nifty's breakout above 11250 has failed and the index is back in the consolidation range. If momentum takes Nifty below 11050, it would be negative and could take the Nifty down towards 10800.
Unless DIIs change their mind and start buying, breaking above 11250 does not look like a possibility today. However, the indices are in the tight range for quite sometime now. Therefore, break down from 11050 and consolidation at lower levels is a possibility.
Support resistance levels remain same as yesterday
Support: Immediate support exists at 11050
Resistance: 11250 K.
Traders may look for opportunity to trade on downside.