8540 CONTINUES TO BE CRUCIAL SUPPORT; 8740 IMMEDIATE HURDLE

8540 CONTINUES TO BE CRUCIAL SUPPORT; 8740 IMMEDIATE HURDLE

WORLD MARKETS                             

Dow climbed 0.9% while S & P 500 and Nasdaq gained 0.8% each on Friday as Deutsche Bank shares rebounded amid a report that the German banking giant was near a settlement with the Justice Department.

U.S.-listed shares of Deutsche bank surged 14%, recovering all of their losses from Thursday and registering its best single day gain since 2009, on news its settlement of a mortgage-backed securities mis-selling case could be reduced from $14 billion to $5.4 billion.

Comments from the Fed Chair Yellen that U.S. central bank might be able to help the U.S. economy in a future downturn if it could buy stocks and corporate bonds also boosted the sentiment.

In economic news, personal spending remained flat in August, while income rose 0.2%. The core PCE, the Federal Reserve's preferred inflation measure, rose 0.2%. Also released were the final read on September consumer sentiment and the September Chicago PMI, both of which beat expectations.

U.S. crude futures settled up 41 cents to $49.06 a barrel on Friday, while Brent futures settled down 0.4 percent at $48.24.

In Europe FTSE and Spain fell 0.3% and 0.2% respectively while DAX, CAC and Italy gained 1%, 0.1% and 0.4% respectively. A flash estimate of euro zone inflation in August came in at 0.4% year-on-year, in line with consensus. Unemployment in the euro zone held steady at 10.1% in August, the same as in July. In the U.K., second-quarter gross domestic product (GDP) figures were revised up to 0.7% from 0.6%.

For the week, US indices managed to eke out gains of 0.1%-0.3%. European market ended with cuts of 0.2% to 1.1%. Asia was the worst performer, falling 1% to 2.8%.

AT HOME

After trading along the zero-line for better part of the day, benchmark indices spiked up in the late noon trade to end with modest gains on Friday. Sensex added 38 points to settle at 27866 while Nifty finished at 8611, up 20 points. BSE mid-cap and small-cap indices soared 2% and 2.1% respectively. Except a 0.1% cut in FMCG index, all the BSE sectoral indices ended in green with Realty index leading the tally, up 3.2%, followed by 1.6% rise in Basic Material index.

FIIs net sold stocks and index futures worth Rs 1028 cr and 1380 cr respectively but net bought stock futures worth Rs 489 cr. DIIs were net buyers to the tune of Rs 1560 cr.

Rupee appreciated 24 paise to end at 66.61/$.

For the week, Sensex and Nifty lost 2.8% and 2.5% respectively, registering the largest weekly fall in nearly nine months.

Shares of Cipla tumbled after the company said US Food and Drug Administration recently concluded audit of its 3 manufacturing facilities at Goa and had issued 4 observations across these 3 facilities.

Maruti reported highest monthly sales of 1.49 lac units in September, a growth of 31% y-o-y.  Eicher sold 30% more Royal Enfields at 57842 units. M & M reported 8% growth at 46130 units. Ashok Leyland however posted 18% dip at 12057 units.

Government cut natural gas price to $2.50 from $3.06 earlier.

Growth in the eight core sectors of the economy during August came in at 3.2%, remaining unchanged at July's level. Fiscal deficit for April to August period for current financial year stood at 4.08 lac cr., which is 76.5% of the full year target.

OUTLOOK

China, Malaysia and South Korea markets are shut today for public holidays. Other Asian markets are up between 0.4% to 1.5% with Hang Seng on the top. SGX Nifty is suggesting about 30 points higher start for our market.

Nifty on Friday touched a low of 8555 before recovering to close at 8611, holding on to the crucial 8540 for the second consecutive day.

8540, as we have been mentioning, is the bottom of the long consolidation phase of August and also coincides with a trendline adjoining major bottoms on the daily chart. If 8540 is taken out, next meaningful support will come only around 8300, which was the top made in June.

On the way up, 8740 is the immediate hurdle on the hourly chart, at least a crossover of which is required for further gains.