ALL EYES ON BOJ, FED; 8690-8860 CONTINUES TO BE RANGE AT HOME

ALL EYES ON BOJ, FED; 8690-8860 CONTINUES TO BE RANGE AT HOME

WORLD MARKETS                             

US indices, after gaining about half a percent in the initial trade, gave away most of the gains through the session to end just marginally higher, awaiting the latest monetary policy decisions from the Federal Reserve and the Bank of Japan.

U.S. housing starts came in at an annualized rate of 1.14 million in August, well below the expected 1.19 million. Construction permits fell 0.4% to a 1.14 million-unit rate last month.

US oil ended 0.32% higher at $43.44 per barrel.

Dollar index rose to 96 from 95.84. U.S. Treasuries traded mixed, with the two-year note yield traded at 0.77% and the benchmark 10-year note yield around 1.69%.

AT HOME

Benchmark indices ended lower four tenth of a percent yesterday, breaking the four-day winning streak. Sensex lost 111 points to settle at 28523 while Nifty finished at 8776, down 32 points. BSE mid-cap and small-cap indices fell 0.1% and 0.3% respectively. Except a 0.3% and 0.2% rise in Metal and Oil & Gas indices respectively, all the BSE sectoral indices ended in red with Realty and Power indices leading the tally, down 1.9% and 0.8% respectively.

FIIs net sold stocks, index futures and stock futures worth Rs 1147 cr, 89 cr and 896 cr respectively. DIIs were net buyers to the tune of Rs 778 cr.

Rupee depreciated 5 paise to end at 67.01/$.

OUTLOOK

All eyes today would be on the Bank of Japan and US Federal Reserve, which are scheduled to issue policy statements today, at the end of their two-day policy review meetings.

There is some talk the Japanese central bank could cut rates further into negative territory, but it could also cut back on purchases of long-dated bonds while continuing to buy short-dated securities in  a bid to steepen the yield curve to mitigate the costs of negative rates. Market would also be interested in the outcome of an internal staff review of Japan's growth and inflation under the bank's quantitative and qualitative easing (QQE) and negative interest rate policies (NIRP).

Fed on the other hand is widely expected not to not to raise interest rate until December owing to global economic weakness, inconsistent U.S. data, upcoming US Presidential election and the failure of the market to price in a hike. Markets however would watch out for the tone of the policy statement and inflation forecast to guage the dovishness/hawkishness of the Fed and its assessment of the US economy.

Today morning, Asian markets are trading mixed with modest changes and SGX Nifty is suggesting about 10 points lower start for our market.

At the risk of repeating, 8690, the bottom made last week, which coincided with 34-DMA, continues to be important immediate support to eye, a breach of which will also confirm a lower-top lower-bottom formation on the daily chart. 8540, the bottom made towards the end of August, would be the next support in that case. On the way up, 8860, the upper level of the gap created by the big gap-down opening last Monday, continues to be the immediate hurdle, a crossover of which is required for the fresh upmove.