protrader1969
Long

NIFTY for 26th August

NSE:NIFTY   Nifty 50 Index
Two important events happened, after our markets closed in last 24 hours. One, Finance minister announced a slew of measures which will give some badly needed relief to Indian businesses and economy in general. Two, Dow Jones Industrial Average (DJIA ) fell by 623 points, which is 2.37%, due to Trump's series of tweets, after China announced that it planned to impose tariffs on $75 billion worth of US goods aggravating the trade war between US and China. From FII's standpoint both are important. But first about FM's booster dose.
Important announcements for us traders, which will make immediate impact are:
1) Removal of tax surcharge of FPIs- The reason due to which majority believed FPIs were selling incessantly since budget, is done away with. So at least from that perspective FPIs & FIIs will not sell. Now if they sell, it will be because of slowdown or slump in demand or some other factor.
2) Surcharge on LTCG and STCG was completely done away with- This will surely stop the flight of capital from equity markets and HNIs will once again look for opportunities in stock markets.
3) Govt . to infuse 70,000Cr into PSU banks - This will improve liquidity among PSU banks and credit uptake may increase. However, it is difficult to guage the actual benefit derived immediately, market sentiment will improve and good PSU bank stocks will definitely rally.
4) Sops for Auto sector-
(a) Most important announcement was" BS-IV vehicles purchased till March 2020 will remain operational till their registration is valid'. This means that all the inventory which auto sector was bothered about is most likely to be absorbed and further, without any additional investment they can manufacture more if they can sell that till March 2020.
(b) No increase in vehicle registration charges till 2020- This will provide limited relief because nobody was deferring a car purchase of around 7 lakhs since additional cost of 5000 in being levied. But it is a step in right direction.
(c) Auto loans getting cheaper- With reduced interest rates in vehicle loans, dealers may be able to swing some fence sitters with some discount from their or manufacturer's side. So this also will contribute to some extent in sales increase.
Now Maruti , Bajaj Auto , Heromotocorp, etc. have already shown run up in anticipation of these measures so trade on these stocks with caution.
Apart from these, there were other important announcements like reduction in housing loan interest, housing finance companies to receive 20,000 Cr for increasing credit, pending GST refunds to be settled within next 30 days and so on which will improve liquidity situation and sentiment in general. Impact of DJIA going down by 2.37% will be minimal, at least for tomorrow.
My normal analysis of FII& DII data, option chain analysis and technicals on chart will be of no use for 26th August since these fundamentals will override over all those. A technical trader should understand this- Fundamentals and news can change the structure of chart anytime. But just for study sake I have posted Nifty weekly chart. If you notice last time 100 WEMA curve was breached on week ending 22nd October 2018 and next week onward we staged rally. This week's candle breached 100 WEMA though, but didn't close below it. Also 10813 is 61.8% on Fibonacci retracement . So all indicators point towards a reversal. How far that reversal will go remains to be seen since slowdown in all sectors is real and not all the pain can be eased by these measures since we basically are fighting demand slowdown. But for Monday expect atleast 150 point gap-up in Nifty and it may further go up too.
All the best . Happy trading.
Good work and analysis once again Sir. As a personal rule I stay out of trades during such times and allow the market to show it's direction and trend. Often newbies get their fingers burnt and lose all their capital just trying to anticipate the markets move. And voila ! The market usually moves in exactly the direction opposite to their position..... All the best for tomorrow.
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protrader1969 ShanTrader
@ShanTrader, Very true. Thanks for the kind words. All the best to you too.
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ShanTrader protrader1969
@protrader1969, Thanks bro, so now you can see how a retailer would have got butchered, as stop losses may have been hit both for longs and shorts today.
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