Pre market analysis: 23 June 2020
Flash Purchasing Manager’s Index for both Japan & Australia rebounded strongly for June
Global markets continue to consolidate
FIIs bought in the cash market yesterday
US Trade official comment caused volatility in Asian markets / EU-US futures this morning
Global market discussions are turning towards caution and second wave of virus
India-China border stand off is still dragging on.
Global Markets: -Consolidation
Both European and US markets continued to consolidate. Europe ended with small drop while US markets ended with small gain. Safe haven assets USD and Japanese yen are holding their gains. Gold gained and is trying to break out of the range. There were reports that the large funds are piling into gold to avoid getting caught in coming drop in equities. emerging market currencies were in sideways consolidation phase while emerging market equity ETFs that trade in US rose yesterday.
ASIAN Markets this morning: - Consolidation
Flash Purchasing Manager’s Index has started coming in. Services and manufacturing in both Japan & Australia rebounded strongly for June'20. But on trade front things are getting tricky, US trade official’s comment today morning that US China trade deal is “Dead” and subsequent retraction of that statement caused volatility in Asian markets. The indices are now back in positive territory where they started the day. European and US futures are also back in black. SGX Nifty is trading at around 10350 levels which is about 40 points above yesterday’s Nifty close.
There are no major regular economic data to be released today
India: What is in DIIs mind?
DIIs booked profit with heavy volumes yesterday while FIIs net purchase in cash market was lower. Higher levels in Nifty are witnessing profit booking after three days of up move. Heavy weights witnessed profit booking in the last of trading yesterday. While Advance decline ratio and good volumes in Nifty500, probably means retail investors are still in buying mood.
How will Nifty perform today?
The underlying market narrative continues to change and become cautious on account of trade tension and second wave of infections. Although US trade official had retracted his statement about US-China trade deal, all is not well between US and China on trade front. Therefore, institutional investors may keep booking profit at higher levels. Morning session is likely to see some buying support while afternoon sessions may see profit booking. The indices may not drop off sharply because global liquidity is still chasing better returns in the emerging markets.
Asian Paints, Bank of Baroda and Berger Paints will be declaring results today.
NIFTY -Technical Bias:
Price Action & Pattern:
Nifty is close to the bull channel top and formed a “doji star” candle yesterday with low volumes. Yesterday’s top 10400 seems to be a place where institutional investors are booking profit. Therefore, I expect markets to stay below the bull channel top i.e. around 10450 while 10K offers a good support on downside. Profit booking is likely to stop Nifty from breaking out of 10500 today.
Those who are holding spreads that benefits from sideways market may continue to hold. However spread traders need to watch out of decisive break above 10500 or below 10K and adjust the legs accordingly.