NIFTY ACHIEVES 8555 TARGET; 8700 IS THE IMMEDIATE HURDLE

NIFTY ACHIEVES 8555 TARGET; 8700 IS THE IMMEDIATE HURDLE

WORLD MARKETS                             

After opening sharply lower, US indices recovered more than half a percent from the session lows to end with cuts of 0.25%-0.5%, digesting weak data out of China and rising oil prices while assessing the possibility of a Federal Reserve rate hike.

US oill rose 0.5% to $50.44 and Brent added 0.4% to $52.03 a barrel. The U.S. Energy Information Administration data showed crude stocks increased 4.9 million barrels in the week ended on October 7, well above forecast of a 700,000-barrel rise. However distillates, which include diesel and heating oil, fell 3.7 million barrels and gasoline declined 1.9 million barrels.

Earlier, data showed China exports tumbled 10% last month in dollar terms, while imports fell 1.9%.

In U.S. economic news, weekly jobless claims held at a 43-year low, while import prices rose less than expected in September.

Dollar index fell 0.4% to 97.55.

European markets lost 0.7%-1.2% with mining stocks leading the losses following weak china trade data.

AT HOME

After a negative start, benchmark indices kept on moving lower through the session and ended with deep cuts of 1.6% with Sensex and Nifty closing at the lowest level since 11th July and 4th August respectively. Sensex plunged 439 points to settle at 27643 while Nifty finished at 8573, down 135 points. BSE mid-cap and small-cap indices lost 1.5% AND 1.4% respectively. Except a 0.2% higher IT index, all the sectoral indices ended in red with Finance index and Bankex leading the losses, down 2.2% each.

FIIs net sold stocks, index futures and stock futures worth Rs 912 cr, 2330 cr and 52 cr respectively. DIIs were net buyers to the tune of Rs 679 cr.

Rupee depreciated 40 paise to end at 66.93/$.

India’s retail inflation stood at 4.31% in September, its slowest pace in 13 months.

TCS disappointed significantly on revenue front but surprised positively on margins and bottomline. Dollar revenue rose just 0.3% q-o-q to USD 4374 mn and constant currency revenue growth stood at 1%. In rupee terms, revenue slipped 0.1% to Rs 29284 cr and net profit rose 4.3% to Rs 6317 cr. EBIT grew 3.7% to Rs 7617 cr and margins stood at 26%, up 90 bps.

N Chandrasekaran, company CEO and MD said that it has been an ‘unusual Q2’ for TCS as growing uncertainties in the environment is creating caution among customers and resulted in holdbacks in discretionary spending this quarter. "In additional, volatility in markets like India and Latin America also muted revenue growth.

OUTLOOK

Today morning, except a modestly lower Shanghai, other Asian markets are trading with modest gains and SGX Nifty is suggesting about 15 points higher start for our market.

In yesterday's report we had mentioned that 8690-8650 is the immediate support area for Nifty and a breach of 8650 would open up the possibility of the retest of the 8555 bottom made on 30th September.

The benchmark broke 8650 support in the initial trade itself and plunged all the way to 8541 before closing at 8573, achieving the target mentioned above and vindicating our view.

Now readers would recall that 8540 is the bottom of the long consolidation phase witnessed earlier in August and also coincides with the 20-week moving average and hence is an important support to eye. A decisive breach of 8540 would open up the space for a larger correction and nearest support to eye in that case would be around 8300, the top made in June this year.

On the way up 8700 is the immediate hurdle on teh hourly chart.

Traders should wait for the breach of 8540 for taking a fresh negative view.

Infosys will report its quarterly earnings today and is expected to show a dollar revenue growth of 2.3% at USD 2559 mn. In rupee terms revenue may increase 2.2% to Rs 17150 cr and profit is likely to rise 1.8% to Rs 3500 cr. EBIT margin is seen at 24.4% vs 24.1%. The company is expected to lower its constant currency growth guidance to 8.5%-10% from 10.5%-12%. Also will be watched commentary on BFSI growth, attrition and deal win momentum.