Daily Morning Newsletter - Oct 16, 2020 - YES SECURITIES
US indices closed in red, off their day's low. With no stimulus deal on the horizon and renewed restrictions in various European cities to limit the spread of infection, kept investors on the edge. Back home, we expect Index to digest it multi month gains and upside appears to be restricted.
The last three trading sessions saw index shielding first line of defence around 11,790 and marking multiple peaks around 12k mark. In yesterday's session, it registered an intra-day high of 12,025 but momentum tapered off sharply, eventually resulting in a drop of 2.4%. Steep decline from 12k erased prior session's gains, momentum on the downside picked up as it sustained below point of polarity zone around 11,800. An appearance of large bearish candle along with negative advance-decline ratio on the index; indicates immediate hurdle near 11,950-12,000 zone. We expect index to digest its multi weeks upmove and it could retrace back to 11,600-11,550 zone. Post Wednesday's up move, BankNifty failed to provide positive follow through. Sharp throwback in today's trade ensures a hurdle near 24k. Immediate floor for BankNifty is placed near 22,500.
- Indian markets crumble in second half as global selloff stroked correction from 12k mark, SGX Nifty indicates positive start for the day.
- India VIX rallied ~10% to move towards 22 mark, while Index options PCR OI slipped sharply towards 1x levels as traders unwinding put positions.
- Options front, weekly expiry accentuated the fall as traders caught on wrong foot unwinding massive put positions and call writing seen across the board.
- FII's index futures positions remained intact with long to short ratio hovering near 1.8x levels no major directional bias seen from index options data.
With US stimulus talks apparently deadlocked, investors have bid up the dollar. Treasury Secretary Mnuchin stated that he and Democratic lawmakers were "far apart" on a package and that a deal would be hard to reach before the election. Meanwhile Pound is pressured by EU/UK Brexit talks that do not seem to be making much progress. Both sides are now bracing for a clean break by year-end.
We are not seeing much in the way of news other than the fact that the coronavirus situation continues to weigh on sentiment in commodity markets. The French announced a state of emergency yesterday and have imposed a curfew on about a third of the country. Britain is expected to impose tougher restrictions on London, while in Germany, Chancellor Merkel announced that restrictions will be tightened as well.
- Saudi Aramco, Adnoc committed to $44 billion west coast refinery project: IOC Chairman. - Adani Green-Total JV takes over Essel's solar assets acquired by Adani earlier. - Natco Pharma eyes launch of 8-10 new drugs in India yearly. - Indian Bank inks MoU with Ministry, SIDBI for street vendors. - Reliance Digital's retail business clocks growth of 30-40% in Aug, Sept. -Reliance's retail arm receives Rs 5,550 crore from KKR for 1.28% stake sale. - Persistent to acquire US-based Capiot Software for $6.34 million.
- Exports up by 6%, imports down by 19.6%. - Revised CPI-IW likely to be released next week. - IMF's debt restructuring programme should help countries: FinMin. - Creative destruction crucial for Indian economy: CEA. - Pradhan Mantri Kaushal Vikas Yojana 3.0 to be launched by November 2020. - Labour codes likely to be made effective from 1 April 2021. - IMF lists policy measures needed to overcome Covid-19 crisis. - India, Arab countries can partner to develop oil, gas reserves: Ministry of External Affairs.