Premarket analysis: 10 August 2020
Global equity markets continue to go up
Foreign funds flow in to emerging market stocks
No economic recovery in India
DIIs continue to sell
Global Markets: -Positive
US and European markets closed in green on Friday. As major fund houses predicted, the rotation from bonds to equity in the global markets are pushing up the equity markets. S&P500 has broken out of range and is trending while Dow Jones and major European indices are bear the swing high.
Risk assets: High yield bonds coiled sideways after sharp raise for few weeks. The Emerging market equity ETFs traded in US, however was down sharply on Friday. Local government bonds of emerging Asia were flat. Copper was sharply down and industrial metal index was flat.
Safe heaven assets: Dollar index is consolidating after few weeks of fall. Japanese yen is raising while gold after relentless raise, has paused in the up move. It is consolidating. Volatility indices were down.
ASIA this morning: - Green
Asian indices started the week in green except for Japanese Nikkei which is trading slightly in red. European and US futures are flat in the Asian session. SGX Nifty is trading about 25 points above Fridays’ futures close.
RBI did not cut rates as widely expected. Import, Export and trade balance data will be released today.
Bank of Baroda, Equitas and Ujjivan are some of the well-known companies that will declare results today. Business standard reports that “exuberance of early bird results has given way to a sense of worry as more companies have declared their results for the April-June quarter (Q1FY21). The combined profit before tax (PBT) of 748 companies, which have declared their results for Q1FY21, is down 46 per cent year-on-year (YoY)"
India: - Global sentiment is helping.
The economic scene in India is comparatively worse than rest of the world. Other major economies are recovering quickly from COVID imposed lockdowns with help of stimulus and easing of lockdowns quickly while India is lagging behind in both stimulus and quick re-opening of stalled economy.
However, the global liquidity is helping fund flow into emerging market equities which is largely helping Indian markets so far. All time high valuation and continuing economic recession seems to be not in the focus of markets right now.
FIIs are still holding long position in index derivatives while DIIs and large proprietary traders are holding short position. FIIs continue to buy in cash while DIIs seems to be looking for every opportunity to book profits without dragging down the Nifty too far.
How will Nifty perform today?
Asian markets and SGX Nifty indicate that Nifty is likely to have a positive opening for the week. The markets may trend up slowly with the help of FIIs and retail buying. DIIs have been selling for quite sometime now. If they continue to sell this week, that could result in intraday whipsaws as usual.
NIFTY -Technical Bias: Still Positive
Nifty price action:
Nifty weekly candle positive. Hence Nifty is likely to stay bullish today. It is likely to take another aim at 11300. If that level is broken without much effort, Nifty may continue to move towards 12k. However, DIIs profit booking at around 11300 is to be watched for whipsaw.
Support: Immediate support exists at 11050 and then at 10880
Bank Nifty on weekly time frame has formed a bullish candle. It could be headed for 22650 again. A strong support exists at 21K.
Markets are likely to move up with some whipsaw. Hence mildly bullish spreads such as covered call is appropriate.