Positives:

• European and US futures in Asia session are rebounding from yesterday’s panic sell-off

• Asian Market fall this morning is not as sharp as it was in EU/ US markets

Negatives:

• Major sell off in global markets

• Both FII & DII sold in cash yesterday

Global Markets: Sell off

Both US and European markets saw a sharp selloff. What started off as profit booking after Federal Reserve policy decision has snowballed in to panic selling that sent markets sharply lower.

Panic spread to most of the other asset classes as well such as emerging market ETFs traded in US, High yield bonds etc. One exception was emerging market currency index, the fall was not as sharp as it was in other asset classes. Safe haven assets Japanese Yen was sharply up while gold and dollar index reacted less. The US volatility index was up sharply also.

ASIAN Markets this morning: - Negative

Asian markets are trading in negative territory. However, they are down about 1-2% which is much lessor than what developed markets witnessed yesterday. SGX Nifty is trading about 250 points below yesterday’s Nifty close. SGX Nifty is actually recovering from yesterday night lows.

SGX Nifty: A bit of recovery from lows

Calendar events

India’s Trade balance, current account situation and forex reserve position will be released today after market closes.

India: What about Nifty?

The Indian markets have been at the mercy of global mood for while. The panic sell-off will definitely have an impact and markets are likely to open sharply down. It’s easier to know the how markets will open today but what happens after sharp gap down and how to trade in these markets requires skill.

What may happen today after gap down?

Yesterday both FIIs and DIIS sold in cash market. That points to eagerness to book profit by institutional investors. Will they continue selling today? My guess is that DIIs may pass on selling today. FIIs may net sell for few more sessions. Inter market analysis make feel that this global sell off seems to target developed markets mainly. Emerging markets are likely to affected by the bearish sentiment than actual selling. The VIX index that’s holding up so far needs to be watched closely for hints about sustained selling.

Profit booking or panic exit?

Result announcement:

Mahindra & Mahindra, Hindalco, Eicher motors will declare quarterly results today.

NIFTY -Technical Bias:

Price Action & Pattern:

Although the selloff was relatively sharp for Nifty yesterday, the Index is still in the consolidation range. The uptrend will be in trouble only if index breaks below 9500. Till then its more like profit booking and consolidation. I expect markets to gap down and consolidate rather than go down sharply further from open. Nifty may stay above 9600/9550 today. However, if India VIX raises as sharply as US volatility index, it may point to sustained selling and panic.

Nifty: Still in range but bearish

Trade Ideas:

Today’s trading is all about being quick and nimble. Traders need to watch few parameters such as VIX index, advance decline ratio and how price action behaves near intraday swing high/lows. Not entering into any trade in first hour is a good idea.