Pre market analysis: 25 June 2020
FIIs bot heavily yesterday in cash market
Hopes of global economic rebound is still alive
Global markets especially developed markets fell sharply yesterday
Worries about second wave of virus
Global Markets: -Sharply down
Both European and US markets ended sharply lower yesterday. They were down about 3%. Second wave of virus worry is growing. IMF warned that global recession could be deeper than expected and said global economy is likely shrink by around 5% as against its earlier prediction of around 3% contraction. Safe haven asset US Dollar, JPY did not react much and were on sideways coil. Gold held on to its gain on account of US Dollar’s recent down move. Emerging market equity ETFs that are traded in US fell sharply as well. However, one exception is the emerging market currencies. They did not fall much and mostly held onto their recent gains. Volatility index rose as equity markets fell sharply.
ASIAN Markets this morning: - Down as well
Most of the Asian markets are trading deeply in red. They are down by more than 1.50%. SGX Nifty is more than 100 points below Nifty’s yesterday’ close.
There are no major regular economic data to be released today
India: Global mood spoiled the rally
FIIs bot heavily in the cash market yesterday even though the European markets were falling. DIIs booked profit to the tune of Rs.1525 Cr. Advance decline ratio was negative with 459 stocks advancing against 947 declining. The trading volumes for both Nifty 50 and Nifty 500 were higher as markets fell yesterday. Recently, the volumes are higher on down days than on up days. This is a sign of market top.
How will Nifty perform today?
Nifty having fallen sharply yesterday and global mood being negative this morning, it is obvious that Nifty will gap down today. The problem for traders is that in these kinds of markets most of the moves are over in the first 15-30 minutes of trading and for the rest of the day, markets could be on a slow sideways move.
This sell off like last one that started on 09 June, seems to be targeted at higher valuation developed markets, while news flow and investor mood affects the emerging markets rather than actual selling. DIIs may book profit for a day or two more. FIIs behavior is key. Markets could fall sharply If they stop buying or worst if they start selling. This seems to be not the case at the moment. However, this time markets are reversing from a key technical level.
Apollo hospital, Ashok Leyland will be declaring results today.
NIFTY -Technical Bias:
Price Action & Pattern:
Nifty sharply reversed from bull channel boundary line with a bearish dark cloud cover candle. Bank Nifty break out failed and yesterday’s long red candle without wick points to further downside. Markets could be preparing to go back to the channel bottom. I expect markets to trade between 10300 to 10K. Most of the move could be over in first 15-30 minutes. Markets may see volatility on account of weekly expiry today.
Bearish spreads are appropriate today. However, entry is key. Entering a bearish spread after markets have fallen is not advisable. There is always a chance of sideways move or pull back after a sharp fall