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Global cues, earnings to set tone

Jan 7 (AZINS) The Indian equity markets opened its very first new year's weekly inning with extreme volatility and ended lower by 1.22% at 10727. This is the eighth alternate weekly gain and loss phenomena in the Nifty with a broader trading range of 10450-10985. The mid and small cap indices also ended lower by 0.88% and 0.28% respectively last week.

Sector-wise, outperformance was seen in the Nifty Bank which ended with a gain of 0.26% backed by gains in the PSU Banks by 1.47% and private banks rising marginally by 0.23%. Rest all the sector indices ended in red lead by Auto (-4.50%), Metals (-3.55%), IT(-1.67%), Media (-1.45%) and FMCG (-1.16%) and Pharma (-0.30%).

Last week, the domestic institutional investors (DII) bought equities worth Rs 513 crore while the foreign institutional investors (FII) sold shares of Rs 2,120 crore.

In the last week highlights, the global markets swung with volatility ahead of concern over an economic slowdown in the US which led to global sell-off. Tech giant, Apple cut earnings forecast for 2019 and on last Friday while China cut bank's reserve ratios by 100 bps to tame slowdown which causes a rally in the Indian market in the closing hour. The US markets also witnessed rebound and rallied in the last session post announcement of 3,12,000 jobs addition and also the Fed chairman Jerome Powell hinted possible pause in rate hikes in 2019.

At home, the government finally proposed merger swap ratio of Dena Bank and Vijaya Bank with Bank of Baroda to become the third largest bank. The government expects to recover Rs 70,000 crore from 12 big companies identified under IBC proceedings by March 31, 2019. This caused a rally in the PSU Banks. Auto companies reported flat to lower than estimated December sales numbers. The major disappointment was from Eicher Motors being a top loser with a 13% decline followed by Mahindra and Mahindra which lost 9.70% on poor tractor sales.

There are no major global events this week. However, India's November month Industrial production data will be released on Friday. Q3'19 corporate earnings season will kick-start in this week in which Tata Elxsi, IndusInd Bank, Tata Consultancy Services (TCS), Infosys, Bandhan Bank will announce their results.

Last week, Nifty traded in the range of 10628-10923 (within the projected range of 10650-10940-11170). The 50-share index failed to breach my first resistance level mentioned last week at 10940 and retraced towards the lower end of my predefined range on last Friday and bounced back smartly from 10628.

Technically on the weekly scale, Nifty made a Bearish candle with Hammer on the daily scale indicates tug of war between Bulls and Bears. For the week, markets will flow global market trend and will take cues from the earnings. Nifty support levels at 10650-10560 while resistance levels at 10940-10980, a decisive move beyond 10980 can fuel rally further towards 11170. The probable trading range for Nifty could be between 10560 and 10940.

TUG-OF-WAR

  • Technically on the weekly scale, Nifty made a Bearish candle with Hammer on the daily scale indicates tug of war between Bulls and Bears 
  • Q3'19 corporate earnings season will kick-start in this week in which Tata Elxsi, IndusInd Bank, Tata Consultancy Services (TCS), Infosys, Bandhan Bank will announce their results

The writer is VP-retail research, Motilal Oswal Financial Services

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