Premarket analysis: 11 August 2020
Global equity markets continue to go up
Foreign funds flow in to emerging market stocks
DIIs continue to sell
No real economic recovery in India
Global Markets: -Positive
US and European markets closed in green yesterday. Dow Jones and few Asian indices broke out of range and closed above the recent swing highs which is bullish. The other Asian indices seem to be poised for next leg up as well. European indices are on sideways coil on account of Euro strength.
Risk assets: High yield bonds after long up move, has been on sideways coil for few days now. The emerging market equity ETF traded in US closed flat while local government bonds of emerging Asia rose slightly. Copper and metal index did very well.
Safe heaven assets: Dollar index and Japanese yen went on sideways coil while Gold that sharply fell from record highs day-before-yesterday, spend the day yesterday on sideways consolidation.
ASIA this morning: - Green
Asian markets are trading in green this morning. US and European equities are also trading in green on top of yesterday’s gains. SGX Nifty is trading about 60 points above yesterday’s future close.
Manufacturing and industrial output are scheduled to be released today. The expectations are already muted. The Industrial production is expected to shrink by 20% in the month of Jul on top of 18% contraction last month.
Bosch and MothersonSumi are two known companies that will declare their results today.
India: - Global Sentiment is dragging markets up
There are no local triggers for bullish case in India. However, high level of liquidity and funds rotation in global markets from bonds to equities are helping Indian markets to continue to move up.
FIIs continue to pump funds in to Indian markets and hold long position in the derivatives segment. DIIs and large proprietary traders are holding short position in Index derivatives. In cash segment, DIIs continue to book profit. Month of June saw net outflow funds from equity mutual funds to the tune of Rs20 billion. The DIIs are likely to sell intermittently that will continue to cause intraday whipsaws. The selling is likely to stop only when withdrawal pressure from mutual fund holders recedes.
How will Nifty perform today?
Positive Asian market and SGX Nifty indicate a gap up opening for India markets. Nifty is likely to break above the swing high and get ready for next leg up. BN is reversing from the bottom of the range. Therefore, BN is also likely to move towards the range top.
NIFTY -Technical Bias: Still Positive
Nifty price action:
Nifty is breaks above and closes above 11300, will set the stage for next leg up that could take it towards 12k.
Bank Nifty Price action:
Bank nifty negated the break down from the strong support at around 21 k and reversing slowly. The index is likely to move towards the range top over next few day.
Bullish spreads are appropriate in the current market conditions.