Weekly Markets Round Up

Finally the much talked about FED hike has come. As no surprises, FED rate has been raised and it was as per expectations. But has the after effects of the same sunk in? Index goes up 300 points then down 300 points? Volatility will rule in the days going forward, keep an eye on VIX. Sentiment seems a bit uncertain on the street and plus the December anomaly should be at the back of our minds. (it is a consensus event wherein FIIs sell out and take money home for reporting stronger sheets as US year ending is 31/12/2015).

Technically speaking 25000 SENSEX held up firmly and is a reasonable support as far as charts are concerned. This coincides with 7500-7600 range for NIFTY. Traders looking for opening shorts must see the risk-reward ration which is skewed against them. Does that mean it is time to go long? Well technically no, however adventurous longs can be opened as risk-reward is in longs favour. But be prepared to be chopped as we affirm volatility will rule going ahead.

Fundamentally speaking markets are priced at 20x trailing earnings with a dividend yield of 1.4x. This picture is of a reasonably priced markets. It is neither cheap nor expensive. One can do bottom up fishing looking for reasonably cheap stocks however within the index there are counters available at a good entry point given the current bull run we are having. Troubled counters like DRL have ben languishing at 52-W lows and provide a good entry point for very patient and long term investors.

Currency is interestingly poised for the coming week as there are multiple holidays. Technically oversold for the very near term and fundamentally still adjusting to the FED hike, currency has been all over the place with INR getting stronger session on session. Traders are advised to trade longs and shorts with extreme caution and having said that a decent option strategy such as call and put spreads should give comfort as expiry is round the corner.



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Currency Insight

EUR/USD retreats to 1.1250 on PMIs

After hitting fresh multi-week tops in the boundaries of 1.1300 the figure overnight, the pair has surrendered part of those gains and has returned to the 1.1250/45 area in response to the mixed preliminary PMIs from France and Germany.

Spot continues to derive support from diminishing market expectations of a Fed’s lift-off in September – now with December as the most likely candidate – following the dovish tone from the FOMC minutes on Wednesday.
On the Greek front, market participants perceive Tsipras stepping down as EUR-supportive as well, as that could facilitate the negotiations with the international creditors. .

German flash manufacturing PMI in August prints at 16-month high

The preliminary German manufacturing PMI in August rose to a 16-month high of 53.2 from July’s 51.8.

The services PMI dropped to a three-month low of 53.6, restricting the composite index to a 4-month high of 54.00. The Markit report shows, “New orders placed with German private sector companies also rose at a faster pace in August. Goods-producers reported the sharpest rise in new export orders in one-and-a half years. The rate of job creation accelerated to a 44-month high.”

On the price front, companies reported a sixth successive monthly rise in input costs in August. Output prices also rose further during August, with the rate of inflation the highest in three months.

Pound falls to 2-week lows vs. stronger dollar

The pound fell to two-week lows against the U.S. dollar on Tuesday, as expectations for a U.S. rate hike in the coming months continued to lend broad support to the greenback.

GBP/USD hit 1.5385 during European morning trade, the pair’s lowest since May 8; the pair subsequently consolidated at 1.5415, sliding 0.36%. Cable was likely to find support at 1.5241, the low of May 8 and resistance at 1.5591, the high of May 20. The dollar was boosted after Federal Reserve Chair Janet Yellen reiterated Friday that the bank still expects to start raising interest rates later in the year if the economy continues to improve as expected.

Important events and their explanation:


Time ( IST) Currency Economic Data Actual Expectation Previous
CNY Caixin Flash Manufacturing PMI 48.1 47.8
12:30pm EUR French Flash Manufacturing PMI 48.6 49.8 49.6
EUR French Flash Services PMI 51.8 52.1 52
1:00pm EUR German Flash Manufacturing PMI 53.2 51.7 51.8
EUR German Flash Services PMI 53.6 53.7 53.8
 1:30pm EUR Flash Manufacturing PMI 52.3 52.4
EUR Flash Services PMI 54.1 54
2:00pm GBP Public Sector Net Borrowing -2.3B 8.6B
7:15pm USD Flash Manufacturing PMI 53.9 53.8

Explanation:- Above China’s data might further dampen the Importer’s move. China might further devalue there currency in the coming days and that would be bad for the INR.

Quick Glance :
Instrument Price %Chg Volume OI
USD/INR 65.80 0.17 788526 960103
EUR/INR 74.16 -0.82 37048 48836
GBP/INR 103.54 0.07 21059 41217
JPY/INR 53.64 -0.64 7908 15311
Technical touch :



As seen pair has pierced its prolonged Ascending triangle and trading above crucial 64.50 levels.

After a surprise move by the Chinese banks rupee depreciated and touched 64.80 levels.  We assume rupee might take some breath near 65.81 levels and appreciate till 65.30 levels. But we expect 66.30 is not far enough too.


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