Nifty chart staring at 22500?
Nifty opens door for 22,500 on closing below 23,070 swing low, 22,900-22,800 levels in sight.
As of 08:59 IST, 25 Sept
Pre-open indicates a flat opening near 23,035, but with crude above $105, US yields at multi-decade highs and FIIs in selling mode, Yen, Crude and US bond yields remain the three macro variables to watch.
Nifty falls -384 points on Thursday to close at 23,063, breaking below the June 11 swing low of 23,070 with an intraday low of 23,045.
As flagged in our yesterday's update, the breach of the 23,150-23,120 support dragged the market towards 23,000. The selloff was broad - 48 of the 50 Nifty stocks ended in the red, banks and NBFCs led the fall - as US 10-year Treasury yields climbed above 5.20%, the 30-year above 5.48%, and FIIs sold heavily (Rs 5,027 crore).
The close below the swing low nullifies any near-term recovery set-up and opens the door for further downside towards 22,500, in line with our larger-picture view. Immediately, we may see 22,900-22,800 levels. On the upside, Nifty now needs to reclaim 23,150-23,300 for any relief; till then, every pullback rally is likely to be sold into.
Crude remains the biggest headwind. Brent has surged above $105 with Iran holding firm on the Strait of Hormuz, keeping India's import bill and inflation concerns alive. The cooling we saw early in the week has fully reversed.
The Yen has firmed after the BoJ rate hike - USD/JPY has slipped to around 156 from above 158, and the risk of intervention keeps the carry trade nervous.
The Larger Picture
The market resumed down trend to 23000-22500 level after Nifty completed 61.8% retracement of the entire fall at 24752 during consolidation, and has now made low 23118 against our 1st target of 23000.
The market has already absorbed the immediate Fed and BoJ rate decisions.
The more important variables from here are Yen, crude oil and global liquidity.
The Yen remaining weak is currently helping delay a larger carry-trade unwind. A sharp Yen appreciation, particularly towards the intervention zone, could change this equation quickly.
At the same time, falling crude would remove one of the biggest sources of inflationary pressure currently affecting emerging markets.
For India, this creates a two-sided setup:
01 Weak Yen + cooling Oil = supportive for equities
02 Strong Yen + elevated Oil = risk of renewed selling
Key Macro Risks Ahead
Tips disappears, Tradzo stands with you.
- 1.Probability of US sanction based Tariffs on India upto 500%.
- 2.Crude & Refining capacity around the world translating inflation in downstream crude products, Urea shortage leading food security concerns
- 3.Escalation of US-Iran war to entire West Asia
- 4.US Debt & housing collapse due to unwinding of Yen carry trade.
- 5.AI Bubble burst - AI maybe becoming popular and very successful tools in the right hands but for majority its just new dopamine, with sky high valuations and no signs of profits.
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Tradzo Research
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