Premarket analysis: 22 July 2020
Risk-on mood in global markets
Better than expected quarterly results so far
Positive news on economic reforms and trade deals
Economic recovery is still far away
Pandemic is not over yet
Global Markets: -Moderate gains
Global markets gained moderately and ended in green. Markets are gaining for about 5 days continuously. Agreement on European union rescue fund was latest positive news that lifted markets yesterday. Additional stimulus and fear index falling has helped emerging market assets gain considerably over the past week. EM equity ETFs and currencies traded in US continued to do well yesterday.
Safe haven US dollar took another leg down and Japanese yen is down as well. Gold however zoomed higher due to US dollar weakness. Industrial metal copper gained. Volatility indices are falling further and approaching pre-COVID levels.
ASIA this morning: - Mixed
Japanese Nikkei and Australian Indices are moderately in red while emerging Asia opened in positive territory. Emerging market currencies are up again this morning. European and US futures are also trading in green this morning. SGX Nifty is trading flat at around 11175.
There are no major economic data release scheduled for today.
Today, Bajaj Auto, Bajaj Holding, L&T and Jindal steel are some of the heavy weights declaring their quarterly results.
India: -Dual between DIIs & FIIs continues
FIIs pumped in more than 2.2K crores in cash market yesterday while DIIs booked profit with moderate selling. Derivative open interest data shows an interesting picture. FIIs and clients are holding long position while DIIs and large proprietary traders are holding short position. DIIs have not exited their short position and still seems to be in the profit booking mood. Therefore, any large amount of selling and buying DIIs and FIIs in the cash market could cause volatile intraday moves in the markets.
How will Nifty perform today?
Nifty continue to have strong positive momentum. It has been closing in green for five consecutive days. Better than expected quarterly results and global risk-on mood are behind this up move. Volatility index are falling globally which means the fear factor is receding in the markets. Hence there are no reasons for the markets to reverse sharply although most of the good news seems to have been already priced in.
NIFTY -Technical Bias: Positive
Nifty price action:
Off late, a day before the weekly expiry have been a decently trending day. But traders need to be watchful as continuing dual between FIIs and DIIs could cause instant spikes and drops. 11200 is the immediate target for Nifty based on Fibonacci replacement. This was almost touched yesterday. Therefore, I expect markets to pause for breath and consolidate within a range of 11250 to 11850 for next few days.
Spreads that will benefit from the above range are appropriate