Premarket analysis: 27 July 2020
Asian equity indices are positive
Emerging market currencies are gaining
FIIs continuously buying
Spike in virus infections
US China tensions
Non-Stop DIIs profit booking.
Global Markets: -Profit booking
European and US markets ended in red on Friday. US China tension seems to be taking a toll on developed markets. However, futures are trading in green this morning in Asian session. European session this afternoon will offer hints if the profit booking continues in the developed market indices.
Risk assets: High yield bonds and most of the emerging market currencies had performed better on Friday. The local government bonds of emerging Asia continued to fall. Copper and Industrial metals were flat.
Safe heaven assets: US China tensions is crashing Dollar index and that is causing funds to flee dollar in favor of both other safe haven assets such as Gold and Japanese yen and some emerging market currencies/ assets that offer higher yields. Volatility index is steady.
ASIA this morning: - Positive opening for the week
Most of the Asian equity indices are trading in green except for Japanese Nikkei. Asian currencies and European, US stock futures are also trading in green in the Asian session. SGX Nifty is trading flat.
There are no important economic data scheduled for release today.
Several companies are declaring quarterly results today. Some of the heavy weights are Kotak Bank, Tech Mahindra, Escorts, Havel, Infratel and India cements.
India: -Will DIIs moderate profit booking?
Falling US dollar is giving FIIs a good reason to buy emerging market assets such as India which is largely immune to US-China trade tensions. DIIs are taking advantage of the inflow and booking profits. How far DIIs can go on profit booking is the open question. Because mutual funds have continuously received inflow of funds till June ’20 that needs to be deployed in the market. DIIs have only net bought to the tune of Rs.5.5K crore year to date. The have actually net sold about Rs.7.5Kcrore for month to date in July'20
FIIs and DIIs continue to have opposing position in derivative segment. DIIs continue to hold short position in stock and index derivatives segment. On the other hand, FIIs continue to hold long position in index derivatives market. Large proprietary traders are holding short position as well in derivatives market.
How will Nifty perform today?
FIIs may not turn net sellers anytime soon. They are likely to continue to be net buyers at least till dollar continues to fall. As far as DIIs are concerned, their hand may be forced by the excess cash in their books and may have to stop profit booking sometime. This will cause a spike in markets. Traders need to watch out for this possibility. Therefore, I expect markets to trade with positive bias and attempt another break out.
NIFTY -Technical Bias: Positive
Nifty price action:
Fibonacci level 11230/250 is offering some resistance on upside. The resistance is mainly on account of DIIs booking profit around that level. Therefore, if this level is broken by EOD, further upside towards 12K is possible.
The support and resistance levels remain same.
Support: 10850. Strong support at 10750
Bullish spreads are appropriate