Trends on SGX Nifty indicate gap-down opening for stock market indices

FPJ Web DeskUpdated: Monday, March 07, 2022, 09:15 AM IST
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Asian shares sank in hectic trading on Monday / Representative image | AFP PHOTO / FRED DUFOUR

Trends on SGX Nifty indicate a gap-down opening for the broader index in India with a loss of 415 points. The Indian markets could open sharply lower in line with largely negative Asian markets today and lower US markets on Friday, said Deepak Jasani, Head-Retail Research, HDFC Securities.

The SGX Nifty well below the psychological 16,000 mark is indicating a gap-down start and most importantly, risk-off mode for Indian stock markets, said Prashanth Tapse, Vice President (Research), Mehta Equities Ltd. Risk aversion will continue to be the preferred theme as investors shall run to safety on backdrop of Russia-Ukraine war. Technically, for the day, bears will be in the drivers seat with aggressive targets at 15,811 mark. The Nifty options data for March series suggests Nifty is likely to be in a trading range of 15,500-17,000 zone.

Benchmark indices may open on a bearish tone today, according to SGX Nifty trends, said Mohit Nigam, Head - PMS, Hem Securities. This week's focus will be on the Russia-Ukraine conflict and its impact on oil prices.

On the home front, investors will be watching the outcome of the state elections in five states on March 10: Uttar Pradesh, Uttarakhand, Goa, Punjab, and Manipur.

Investors all throughout the world are weighing the economic risks of this protracted conflict along with this macroeconomic industrial output data, as well as the direction of foreign fund flows and global commodity price variations, will influence investor mood.

Aside from foreign issues, the domestic market will be watching the Bank of England and the Federal Reserve of the United States for policy announcements. Investors should be cautious in the short-term because the outlook appears to be uncertain, but we have a long-term optimistic outlook on Indian equities and believe that one should invest gradually in every dip, Nigam said.

On the technical front, immediate support and resistance in Nifty 50 are 15,700 and 16,500 respectively. Bank Nifty immediate support and resistance are 33,500 and 35,100 respectively, Nigam added.

Nifty closed lower for the third consecutive day on March 4 as fears over the Russia Ukraine conflict refused to subside. At close, Nifty was down 1.53 percent or 252.7 points at 16,245.3. In the process Nifty was the worst performer in the Asian region.

FPIs in selling spree

Consistent selling by FPIs has resulted in all bounces being sold into. Domestic investors also get impacted in terms of sentiments at intervals with advance decline ratio falling deeply in the negative on March 4. 15,866-15,922 band could provide support to the Nifty in the coming week and a sustainable minor bounce could be seen later as technical indicators are highly oversold.

As per depositories data, they pulled out Rs 14,721 crore from equities, Rs 2,808 crore from debt segment and Rs 9 crore from hybrid instruments between March 2-4. This took the total net outflow to Rs 17,537 crore.

Asian shares sink in early trading

Asian shares sank in hectic trading on Monday as the risk of a US and European ban on Russian product and delays in Iranian talks triggered what was shaping up as a major stagflationary shock for world markets.

Japan's Nikkei sank 1.9 percent, while MSCI's broadest index of Asia-Pacific shares outside Japan lost 0.3 percent. Having climbed 21 percent last week, Brent crude was further energised by the risk of a ban of Russian oil by the United States and Europe.

US stocks end lower

US stocks ended lower Friday, with all three major indexes booking losses for the week, as investors focused on a worsening conflict between Russia and Ukraine that resulted in a fire at a nuclear power plant earlier in the day.

The S&P 500 index fell for the fourth time in five days and commodity prices soared as sanctions on Russia threatened to cause supply disruptions in oil, natural gas, industrial metals and grains. For the week, the Dow and S&P 500 each fell 1.3 percent while the Nasdaq dropped 2.8 percent.

February US nonfarm payrolls climbed 678,000, versus a forecast of 440,000. The unemployment rate dropped to 3.8 percent. from 4 percent.

Oil prices up

Oil prices soared more than 10 percent in hectic trading on Monday as the risk of a US and European ban on Russian product and delays in Iranian talks triggered what was shaping up as a major stagflationary shock for world markets.

Brent was quoted $12.73 higher at $130.84, while US crude rose $9.92 to $125.60. That will act as a tax on consumers and the potential blow to global economic growth saw S&P 500 stock futures drop 1.4 percent, while Nasdaq futures shed 1.9% percent. US 10-year bond yields also dropped to their lowest since early January, Reuters said.

Oil prices remained elevated, with West Texas Intermediate crude for April delivery jumping 7.4 percent on Friday to settle at $115.68 a barrel on the New York Mercantile Exchange. That marks the highest front-month finish since September 2008, according to Dow Jones Market Data.

Brent oil prices soared to a near 14-year high of $140. Oil prices soared to their highest since 2008 due to delays in the potential return of Iranian crude to global markets and as the United States and European allies consider banning imports of Russian oil.

Crude prices posted their highest weekly gains since the middle of 2020. Brent prices gained 21 percent and WTI posted 26 percent gains.

Russia exports 4 million to 5 million barrels of oil daily, making it the second-largest crude exporter in the world after Saudi Arabia. Rahul Kalantri, VP Commodities, Mehta Equities Ltd., said, "We expect crude oil prices to remain firm amid geo-political tensions and rising demand. WTI prices could test $140 a barrel and Brent prices could also test $134 a barrel in the upcoming sessions. Crude oil is having support at $118–110.40 and resistance is at $129–140 in todays session. In INR terms, crude oil has support at Rs8,575-8350; while resistance is at Rs 9,000-9120."

Commodity prices strongest start since 11915

Commodity prices are at their strongest start to any year since 1915, says BofA. Among the many movers last week, nickel rose 19 percent, aluminium 15 percent, zinc 12 percent, and copper 8 percent, while wheat futures surged 60 percent and corn 15 percent. That will only add to the global inflationary pulse with US consumer price data this week expected to show annual growth at a stratospheric 7.9 percent, and the core measure at 6.4 percent.

Yield on Treasury notes decline

The yield on the 10-year Treasury note fell 12.1 basis points Friday to 1.722 percent. for a weekly decline of 26.2 basis points. That’s the largest weekly drop since early March 2020 based on levels at 3 pm Eastern Time.

Gold futures rose 1.6 percent on Friday to settle at $1,966.60 an ounce. The precious metal rose 4.2 percent. for the week, notching the largest weekly rise for a most-active contract since July 2020, according to Dow Jones Market Data.

The S&P GSCI a commodity index composed of 24 exchange-traded futures contracts across five physical commodities sectors, is trading around 18 percent. higher for the week during Friday’s session, which would represent the index’s best week based on records dating back to 1970, according to Dow Jones Market Data.

Wheat, oil, gasoline, heating oil, natural gas, palladium, and corn have all seen double-digit percentage gains for the week as Western nations agreed to imposed strict sanctions on Russia for its invasion of Ukraine.

European equities, financial stock funds suffer

European equities as well as financial stocks funds suffered their biggest outflows on record as investors piled into cash in the week to Wednesday as the war in Ukraine roiled global markets, BofA said in its weekly flow note on Friday.

European equity funds haemorrhaged $6.7 billion while financial funds saw outflows of $3.5 billion, said BofA in its report based on EPFR data. Meanwhile cash funds enjoyed the largest inflow in 9 weeks at $46.3 billion and $1.9 billion was funnelled to gold.

Investors rattled by Russia-Ukraine war

US oil in electronic trade was up $10.76, or around 9.3 percent., at $126.34 a barrel Sunday evening. Speaking on CNN’s “State of the Union,” Blinken said the White House is reviewing the prospect of banning Russian oil imports, in coordination with European allies, while attempting to mitigate the impact of any such ban on global supplies, which could drive already-lofty prices further higher.

US stock-index futures fell sharply after trading began late Sunday, as investors remain rattled by the ongoing war in Ukraine. Dow Jones Industrial Average futures slid more than 400 points, while S&P 500 futures and Nasdaq-100 futures each fell nearly 2 percent..

Euro takes a beating, dollar firm

With the outlook for European growth darkening, the single currency took a beating and fell 3 percent last week to its lowest since mid-2020. It was last down 0.6 percent at $1.0864 and in danger of testing its 2020 trough around $1.0635, Reuters said. The euro was also tumbling against the Swiss franc to hit 1.0000 for the first time since early 2015.

The dollar was broadly firmer, supported in part by a strong payrolls report which only reaffirmed market expectations for a Fed hike this month. The dollar index was last at 98.877 having climbed 2.3 percent last week.

Gold, silver prices likely to go up further

Gold and silver showed solid strength last week amid intensifying war between Russia-Ukraine. Major risk aversion due to war supported safe-haven buying of precious metals. Despite strength in the dollar index gold and silver gained last week. Global equity markets also plunged and investors are moving from riskier assets to safe haven assets. Gold prices crossed $1982 per troy ounce amid fresh sanctions on the Russia by western countries. Record global energy prices are also supporting precious metals.

Rahul Kalantri, VP Commodities, Mehta Equities Ltd. said, "We expect gold prices could cross $2000 per troy ounce levels and silver could also test $26.80 per troy ounce levels in the upcoming sessions. Any dip in the prices would be buying opportunity in precious metals. Gold has support at $1970-1948, while resistance at $2000-2022 per troy ounce. Silver has support at $25.55-25.20, while resistance is at $26.30-26.80 per troy ounce.

USD-INR outlook

USDINR futures contract extended its gain and crossed its resistance level of 76.1000 last week. On the weekly technical chart a pair crossed its trend line resistance of 75.0600. MACD is showing positive divergence on the weekly technical chart and RSI is also fetching above 63 levels, said Rahul Kalantri, VP Commodities, Mehta Equities Ltd. "As per the weekly technical chart, we observed that a pair crossed its trend line resistance and showing strength on the weekly technical chart. Looking at the technical set-up, we expect a pair could show further strength in the upcoming sessions. We suggest buying in the pair above 76.3500 with a stop loss below 75.9500 on a closing basis for the targets of 76.5500-76.8000.," Kalantri added.

(With inputs from Reuters)

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