Good Morning & Welcome to Tuesday's trading action at Dalal Street, dated 6th August 2019

Bloodbath. Chinese bombshell rocks markets across globe.

The escalation of the U.S.-China trade war puts Dalal Street in a place where it's almost impossible to ascertain the downside risk.

That brings us to our call of the day which suggests that caution should be the buzzword until there are signs of a de-escalation. We suspect it's still a falling knife rather than blood on the street.

Long story short: DO NOT LOOK FOR BARGAIN HUNTING.

7 AM GLOBAL UPDATE:

DOW (-767, 25717)

NASDAQ (-278, 7726)

SGX NIFTY (-85, 10785)

NIKKEI (-502, 20221)

HANG SENG (-679, 25472)

BOVESPA (-2576, 10098)

OIL (-0.14, $54.55)

GOLD (+2, $1478)

USD/INR: 71.04

Institutions:

FII: - 2016.73 Cr

DII: +1871.27 Cr

SUCCESSFUL INVESTING IS ANTICIPATING THE TRENDS OF:

Global: Negative.

FII: Negative.

DII: Positive.

F&O: Negative.

‪Sentiment: Negative.

NIFTY’s CRUCIAL LEVELS:

Nifty’s CURRENT MARKET PRICE: 10,863.

Nifty’s SUPPORT:

Intraday: 10751/10701.

Medium Term: 10001.

Long Term: 9,251.

Nifty’s RESISTANCE:

Intraday: 11071/11139.

Medium Term: 11287/11507.

Long Term: 12,001.

Nifty’s RANGE:

Intraday: 10675-10971.

Medium Term: 10701-11507.

Long Term: 10001-11901.

Nifty’s OUTLOOK:

Intraday: Negative.

Medium Term: Neutral.

Long Term: Neutral.

Our call of the day that sentiments will continued to be weighed by the implications of an escalating trade war with China. Caution should be the buzzword until there are signs of a de-escalation.

Our chart of the day suggests establishing short positions in stocks like BALKRISHNA INDUSTRIES, SUN TV and YES BANK with interweek perspective.

IMPORTANT THEMES FOR THE DAY:

1. Overnight, Wall Street slumps. Blame it to the Chinese yuan which breached the key 7-per-dollar level for the first time in more than a decade. The escalation of the U.S.-China trade war puts Dalal Street in a place where it's almost impossible to ascertain the downside risk.

That brings us to our call of the day which suggests that caution should be the buzzword until there are signs of a de-escalation.

2. The Indian Rupee too dropped the most in six years as Kashmir adds to yuan woes. The Indian Rupee crashed to ₹1.13 to 70.73 versus US dollar.

3. Sentiments were also down after investors expressed disappointment over Federal Reserve Chairman Jerome Powell’s description of the latest rate cut as a “mid-cycle adjustment,”. Well, this indicates that the U.S central bank might not be as aggressive as expected when it comes to future rate cuts.

4. The Centre on Monday scrapped Article 370 of the Constitution that grants special status to Jammu and Kashmir, with an order saying “it shall come into force at once". The abrogation follows the Centre introducing the Jammu and Kashmir Reorganization Bill in Parliament.

5. The government on Monday said it will soon hold discussions with representatives of foreign portfolio investors, amid continuing overseas fund outflow from the markets following the decision to impose surcharge on certain class of such investors. (Well, this is a positive news for our stock markets).

Please note, the street is facing severe negativity and blame the same to FIIs camp who have been in exiting mode in Indian stock markets, selling close to Rs 16,870 crore worth of equities in July alone. That was the largest monthly outflow since October 2018. In the first three trading days of August, FIIs have sold shares worth Rs. 5961.34 cr.

Well, things could improve only if there are bigger rate cuts by RBI. The street expects a 25 basis points rate cut. But we suspect, the trigger on the buy side only if the RBI cuts interest rates by at least 50 bps to boost consumption demand in the decelerating economy.

Low inflation and subdued consumption demand are key positive catalysts in favors of rate cuts. India's inflation has remained below the central bank's medium-term target of 4% for almost a year.

Amidst these catalysts, the Reserve Bank of India (RBI) is expected to cut interest rates for the fourth time in a row at its meeting on 7 August. The RBI did cut policy rates for the 3rd consecutive time in June by a cumulative 75 basis points.

Outlook for Tuesday: Dalal Street likely to be swooned in Tuesday’ trade.

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