Pre-market: Nifty likely to open negative on IIP numbers, Fed

NEW DELHI: The domestic equity market is likely see a weak start on Friday following dismal factory output numbers at home and amid fears of a possible liftoff by the US Federal Reserve in its December policy meet.

At 07:45 am, Nifty50 futures on the Singapore Stock Exchange were trading 37 points lower at ,7774.50, indicating a negative opening for the domestic market.
Government data released on Thursday showed annual industrial output grew at a slower-than-expected pace of 3.6 per cent in September, dampened mainly by a slower of in the mining sector. IIP for August was revised to 6.3 per cent.

Meanwhile, consumer price index (CPI) based inflation, the primary gauge of Reserve Bank of India, rose to 5 per cent in October versus 4.41 per cent in the previous month, but it was still within RBI’s comfort zone of 6 per cent by January 2016.

On Thursday, European Central Bank (ECB) President Mario Draghi repeated his recent pledge to expand the quantitative easing programme, if needed, to spur growth of the trading bloc. He said the inflation dynamics had somewhat weakened and that a “sustained normalisation” of inflation could take longer to achieve than thought.

ECB’s dovish comments were in line with its recent commentary, but what hurt the most were comments by a US policymaker. While Fed Chair Janet Yellen did not comment on the timing of a rate hike at an overnight event, Reuters quoted New York Fed President William Dudley as saying, “It is quite possible that the conditions the committee has established to begin to normalise monetary policy could soon be satisfied.”

Earlier in the day, an International Monetary Fund paper urged the Fed to wait to see firm signs of rising inflation as well as a stronger labour market before hiking benchmark interest rates.

Asian markets traded with a negative bias on Friday morning. China's Shanghai Composite was down 0.11 per cent at 3,629.09. Nikkei fell 0.83 per cent to 19,533.16. Other Asian indices, including Hong Kong’s Hang Seng (down 1.93 per cent), South Korea's Kospi (down 0.80 per cent) and Taiwan's TWSE (0.25 per cent) were all trading lower.

Investors are likely to keenly await US data on imports and exports, foreign reserves and PPI numbers, scheduled later for the day. Globally, investors would eye Japanese industrial production numbers for September and euro zone’s GDP data for the September quarter. At home, the last leg of quarterly earnings will trigger stock-specific actions.

Technical charts hint at a negative trend for the market in the short term. “The range for Nifty50 has very clearly shifted from 7,800-8,000 to 7,650-7,850. A bounceback of 50-70 points is very much possible and that should be sold into. One has to wait and watch where the bottom is,” said Sandeep Wagle, Founder & CEO, Power My Wealth.

Mitesh Thacker, technical analyst at miteshthacker.com, said, “Broadly, if you were to talk about till calendar year-end, we are in for retesting the earlier lows of 7,550 and thereabouts. Nifty50 may even break below the level. So, I would be slightly on the negative side, at least with a one-and-a-half-two month kind of perspective.”

This month has seen foreign investors pulling out Rs 1,792 crore from domestic equities and Rs 2,455 crore from the debt market. While a part of it can be attributed to the looming Fed liftoff, concerns over likely outflows from the emerging markets space too played spoilsport.