Premarket analysis: 28 July 2020
Risk-on mood in global market is alive
Emerging market assets are gaining
Vaccine likely to a reality soon.
Virus infections are spreading faster
Bad loan situation in Banking sector is gaining attention
Non-Stop DIIs profit booking.
Global Markets: -Green again
Both US and European markets had retraced some of the up move by the end of last week. However, they reversed and ended in green yesterday, which likely indicates that the profit booking is short lived. Indices are likely to go up again to attempt a break out. US China tension is still alive but excess liquidity pumped by the developed market central banks are flooding in to all asset classes.
Risk assets: Almost all risk asset classes rallied apart from local government bonds of emerging Asia. Copper and Industrial metals were up again.
Safe heaven assets: Dollar index continued its downhill journey. Japanese Yen and Gold against dollar were shooting up. Dollar was also down against emerging market currencies Volatility index was steady.
ASIA this morning: - Green
Almost all of the Asian equity indices are trading in green. Asian currencies and European, US stock futures are also trading in green in the Asian session. SGX Nifty is trading about 60 points above yesterday’s Nifty futures’ close.
There are no significant economic data scheduled for release today.
Kotak Bank that declared results was not up to the mark. Other results were largely as per expectations. Several other companies are declaring quarterly results today. Some of them are Indusind Bank, UltraTech Cement, Yes Bank, IDBI, RBL Bank and Muthuoot finance.
India: Attention on bad loan situation in banking sector
Banking stocks were impacted by the comments from RBI and below par results from Kotak Bank. This caused Bank Nifty's sharp fall yesterday while Nifty's fall was not that sharp. The global sentiment and Asian markets opening in green should help Indian markets to open in green today. The incoming results from heavy weights will likely continue to cause volatility intraday.
FIIs net sold about Rs. 457 Cr yesterday while DIIs continued to book profit to the tune of 1K Crore everyday for some time now. There is no change in the open interest where FIIs continue to hold net long position while DIIs and large proprietary traders are holding net short position.
How will Nifty perform today?
Although FIIs net sold small amount yesterday, they are unlikely to sell in large quantity considering their positioning in derivative markets and global liquidity. I expected DIIs to stop booking profit this week. However, they are continuing to book profit. Therefore, intraday price action needs to be studied about the possible moderation or increase in selling by DIIs that will set the stage for breakout of Nifty in either direction. Incoming results, if better than expected, could help markets break out above the range.
NIFTY -Technical Bias: Still Positive
Nifty price action:
11250 is still attracts profit booking and hence it needs to be broken decisively for further up move. Nifty has been in sideways for almost 5 days now. Therefore a move on either direction outside the range is likely today or tomorrow.
The support and resistance levels remain same.
Support: Immediate support exists at 11030 and then 10850 is a good support
Bullish spreads are appropriate