Premarket analysis: 07 August 2020
US markets continues to rally
Continued FIIs support
DIIs continue to sell
RBI’s focus is shifting on inflation fight
Global Markets: -Paused for breath
European markets paused and were on sideways col while US markets continued to go higher.
Risk assets: Local government bonds of emerging Asian countries paused after a considerable sell off for sometime now. High yield bonds also paused after considerable rally. There is an expectation that the funds rotation from bonds to equities are taking place. The other risk assets such as emerging market ETFs traded in US and currencies continued to do well. Copper and industrial metal index were positive.
Safe heaven assets: Dollar index has stopped falling and is on sideways coil. Japanese yen strengthened slightly. Volatility indices were down.
ASIA this morning: - Negative
Most of the Asian markets are trading in red after a week of pull back rally. Equity indices are still trading near swing tops. SGX Nifty is trading almost flat.
RBI held the policy rates steady against wide spread expectations of cutting rates by 25Bps. The RBI governor’s address focused considerably on containing the raising inflation. It seems on the face of raising inflation, RBI is running out of options to stimulate economy. RBI will release forex reserve position and bank lending data this evening. However RBI governor had already mentioned that the forex reserves had hit all time high in yesterday’s press conference
Mahindra and Mahindra, Bata India are some of the heavy weights that will declare results today.
India: - FIIs are still buying
Indian markets are continued to receive buying support from FIIs while DIIs keep booking profits. FIIs have reduced their long position in the index derivative while DIIS and proprietary traders continue to hold short positions. The broader set up in the market is still the same. DIIs selling and creating cash cushion to meet withdrawals while FIIs are trying to find opportunity for the excess liquidity floating around.
How will Nifty perform today?
Asian markets and SGX nifty indicate that market is likely to open in negative territory today and go on sideways with both FIIs and DIIs taking opposing position.
NIFTY -Technical Bias: Sideways
Nifty price action:
Nifty is back in the consolidation zone, therefore a break above 11300 is required to sustain the up move and break below 11050 is required for the index to go down further. The momentum is up because Nifty has sharply recovered from the fall and is consolidating. This could mean the index is gaining strength for further up move.
Bank nifty's set up looks more decisive and a sharp move on either direction is possible. Although the price action looks biased to the downside, traders should also pay attention to continued FIIs buying, therefore down ward momentum will gain only if BN sustains below 21250 otherwise the chances of Bank nifty going up is higher.
Markets are likely to continue to be in sideways coil. Hence range bound strategies are appropriate. Traders need to watch out for break on either side and adjust spreads accordingly.