What changed your market while you were sleeping

A record low inflation print at home and Fed Chair Janet Yellen’s dovish comments about US economy and fresh rate hikes leave the domestic equity market in a bullish setup. Nifty50 futures in Singapore are showing strength too.

Let’s check out what all might matter to the Dalal Street on Thursday

Singapore trading sets stage for gap-up opening
At 6.30 am, Nifty50 futures on the Singapore Stock Exchange were trading 46 points higher at 9,882, indicating a gapup opening for the domestic market.

Nifty50 made small Bullish pattern on daily chart
Analysts said the index needs to take out the 9,830-50 range for any consistent rally, while a fall below the 9,770-50 range could trigger selling in the short term.

“The index traded inside the trading range of last session, but nullified the effect of previous day’s Shooting Star candle. It formed a Small Bullish Candle on the daily chart. Now, it has to hold above 9,800 level in order to be able to extend the bounce towards 9,900. On the downside, supports are seen at 9,750 and 9,709 levels,” said Chandan Taparia of Motilal Oswal Securities.

Yellen says economy healthy, but inflation outlook mixed
The US economy is healthy enough for the Fed to raise rates and begin winding down its massive bond portfolio, though low inflation and a low neutral rate may leave the central bank with diminished leeway, Fed Chair Janet Yellen said on Wednesday. In what may be one of her last appearances before the Congress, Yellen depicted an economy that, while growing slowly, continued to add jobs, benefited from steady household consumption and a recent jump in business investment, and was now being supported by stronger economic conditions abroad, Reuters reported.

TCS' Q1 earnings today
TCS, the largest domestic IT firm by sales, is expected to report 2.5 per cent to 3.5 per cent sequential growth in dollar revenue for the June quarter, with up to 200 basis points contraction in margins on Thursday. While it is seasonally weak quarter for the IT industry given the wage revisions that may contribute to 70-120 basis sequential points contraction in margins for TCS, a rise in visa costs (up to 50 bps hit) and appreciating rupee may also dent bottom line. A cross-currency tailwind of 70-80 basis points, because of dollar weakness against major currencies, though is seen to lift numbers a bit. Any traction in the BFSI vertical would be watched keenly, analysts said.

CPI inflation down for 8th month
CPI inflation for June stood at a series low of 1.5 per cent, marking the eight straight month of sub-4% print. "In the ensuing months, we expect CPI to rebound to over 2% amid spike in vegetable prices in July, though we expect core inflation to remain contained. HRA allowance could further add 30-50bps to headline number if implemented from July. Still, current inflation reading would be very comforting to RBI and to that extent likelihood of rate cut in August policy review is quite high," Edelweiss Securities said in a note.

IIP slowed in May
The growth in IIP stood at 1.7 per cent in May, compared with 2.8 per cent in April, official data showed. While weakness in May print may partially be attributed to de-stocking in the run up to GST implementation, what is disappointing is the sizeable downward revisions in the Feb and April prints, Edelweiss Securities said in another note.

Global markets gaining
Most Asian markets gained up to 0.9 per cent in early trade on Thursday as investors judged Federal Reserve Chair Janet Yellen’s comments in her testimony to the Congress as dovish. In overnight trade, the Dow Jones Industrial Average index jumped 123.07 points, or 0.57 per cent, to close at a record high of 21,532.14, The S&P500 index climbed 17.72 points, or 0.73 percent, to settle at 2,443.25. The Nasdaq Composite index gained 67.87 points, or 1.10 per cent, to 6,261.17