Pre-market: Nifty50 likely to extend gains on firm global cues

NEW DELHI: The domestic equity indices are likely to continue their positive momentum on Tuesday, tracking firm Asian markets, after the ECB president on Monday hinted at further stimulus for the euro zone.

Brent crude prices climbed to above $33 a barrel in overnight trade amid hopes that the Opec nations could reach a consensus on cutting output to tame the supply glut. The two major triggers may influence investor sentiment on Dalal Street when the market opens for trading on Tuesday.

Technical charts show strong resistance ahead
Experts remained cautious on the market even after Monday’s 2.6 per cent rise in the Nifty50. They believe the 50-pack index needs to breach the 7,250 level on the higher side, before one can assume that a positive setup is in place.

“Further volatility and lower levels will remain open for Nifty50 as long as it trade below 7,250. A similar level for Nifty bank would be at 14,750. Those levels need to be broken for the short-term setup to improve,” said Siddhartha Khemka, Head of Research, Centrum Wealth.

In futures and options, there was significant addition to Put option interest (OI) after a very long time. “The Puts at 7,000 and 7,100 levels have seen addition of fresh OI. There is shedding of OI in Calls. People are rapidly shifting their orientation within the options space. Monday was a fairly decent day, which should spill over to Tuesday. We should probably see continuation of this trend for a day or two,” said CK Narayan, Founder, Chart Advise.

Investors will keep an eye on domestic inflows, which stood strong amid foreign outflows. Provisional data available on BSE showed FIIs pulled Rs 1,312 crore from equities on Monday. DIIs, on the other hand, were net buyers to the tune of Rs 1,987 crore.

At 8 am, Nifty50 futures on the Singapore Stock Exchange were trading 33 points higher at 7,207, indicating a gap-up opening for the domestic market.

Asian markets up on firm European cues
Most Asian markets were trading higher. Japan’s benchmark Nikkei was trading 0.90 per cent higher at 16,166.84

China's CSI300 rose 2.07 per cent to 3,007.68. Other Asian indices, including Hong Kong’s Hang Seng (up 1.44 per cent), South Korea’s Kospi (up 1.24 per cent) and Taiwan’s TWSE (up 1.33 per cent) were also trading higher.

Asian shares rose amid the prevailing optimism over expectation of stimulus from the Bank of Japan after the economy contracted yet again in the December quarter. The assurance by the Chinese central bank governor not to depreciate yuan too helped sentiments.

However, some analysts are taking the Chinese assurance with a pinch of salt.

“The G20 gathers at Shanghai on February 26-27. So you can expect the Chinese to keep talking up the yuan at least till the month end, till the meeting gets over. That was on expected lines, especially after the PBoC governor’s weekend interview where he said he does not see any reason for further decline of the yuan. That gave the market some breather and our market followed suit, but this is still a rally to be sold into,” said market expert Ajay Bagga.

Draghi comment lifts European stocks
The European Central Bank (ECB) President Mario Draghi on Monday said the bank was ready to ease policy further in March, highlighting the risks to its inflation target from low oil prices, slowdown in global growth and volatility in financial markets.

Draghi said the ECB would examine risks emanating from weaker emerging market (EM) growth and look at whether plunging crude prices and market turbulence could derail its efforts to boost inflation. European markets closed 3 per cent higher for the day. The US markets were closed on Monday on account of President’s Day.