NIFTY AT A VERY CRUCIAL JUNCTURE

NIFTY AT A VERY CRUCIAL JUNCTURE

WORLD MARKETS

After plunging 5%-8% in the opening trade, US indices managed to cut some losses through the volatile session but still ended lower by 3.6%-4% on concerns over global growth and the health of the Chinese economy.

Commodities too participated in the meltdown. Nymex oill fell $2.21 or 5.5% to settle at $38.24 a barrel, the lowest since February 2009. LME Copper fell nearly 4% to $4855 a tonne, marking a six-year low.

The CBOE Volatility Index (VIX), considered the best gauge of fear in the market, traded near 40. Earlier in the session the index leaped above 50 for the first time since February 2009.

Dollar index fell more than 1.5%, with the euro near $1.16 and the yen stronger at 119 yen versus the greenback. Gold fell $6 to $1154 an ounce.

Earlier, Shanghai Composite collapsed 8.5%, its greatest one-day drop since 2007.

European markets nosedived 4.7%-6%

                                                             

AT HOME

It was a bloodbath on Dalal Street as benchmark indices collapsed six percent, registering the largest percentage fall since January 2008 for Nifty and since March 2008 for Sensex. Sensex nosedived 1625 points to settle at 25741 while Nifty ended at 7809, down 491 points.  BSE mid-cap and small-cap indices tumbled 7.7% and 8.8% respectively. All the BSE sectoral indices ended in red with Realty and Oil & Gas indices leading the tally, down 11% and 9.2% respectively.

FIIs net sold stocks worth Rs 5275 cr, marking the highest single day sell figure ever.

Rupee tumbled 81 paise to end at 66.46/$, hitting a fresh 2-year low.

OUTLOOK

Today morning, at the time of writing this report (7.40 am), Shanghai is down nearly 5% but other Asian markets are trading with gains of upto a percent and half and SGX Nifty is suggesting about 150 points higher opening for our market. US stock futures are up about 2%.

In yesterday's report we had mentioned that a breach of 8210, the 61.8% retracement level of the entire 7940-9119 upmove, would open up the possibility of the retest of the 7940 bottom and had advised holding on to trading shorts with the stop loss of 8322.

The benchmark collapsed 491 points to finish at 7809, closing even below the 7940 bottom.

After yesterday's fall, Nity is at a very very crucial juncture. 7800 is where 20-month moving average is placed and our study shows that in even steepest of the correction in the 2003-2008 bull run, the benchmark never closed below 20-month moving average.

This makes 7800 a very crucial support, a monthly close below which would be considered a major trend reversal.  

8060, yesterday's high, would be the immediate hurdle to eye.

After yesterday's heady fall, markets are expected to be very choppy today and one should ideally allow Nifty to settle down before initiating fresh trade.