Nifty Fut (Sep): Fed Or No Fed, NF Has To Sustain Above 7900 For 8125-8355, Otherwise Expect Again 7550; Buy On Dips Might Work In Any Fed Induced Meltdown!!

Trading Levels:

SGX NF :7833 (LTP)

NSE NF: 7785 (LTP)

	SL (+/-) 10 POINTS	FROM SLR
	Intraday Swing	Trader
			T1	T2	T3	T4	T5	SLR
Strong >	7900		7955-78	8006-82*	8125-65	8200-16	8242-96	<7880
Weak <	7880		7852-20	7778-55*	7716-690	7665-32	7584-40	>7900
FOR	Conservative	Positional	Trader
			T1	T2	T3	T4	T5	SLR
Strong >	7900		7978	7882*	8165	8296	8355	<7880
Weak <	7880		7820	7755*	7690	7632	7540	>7900

Some Key Takeaways:

We are entering in to one of most vital Fed week and considering various events risks, Fed could be on hold this week. Also Fed Fund Rate is showing little probability ( around 30%) of Sep rate hike and all focus may be shifted to Dec'15 now. Fed commentary may be the most important.

It appears that Fed is not confident enough about US growth potential & stability of global financial market and may take excuses from:

• Probability of another US Govt "Shut Down" by early Oct.
• Uncertainty of Greece election outcome on Sep-20.
• China jitters and Yuan devaluation.
• Delicate socio economic conditions and lack of growth in EU, despite record ECB QE. 
• Lack of visible growth in Japan despite prolonged Abenomics.
• Depressed commodity prices due to tepid global growth outlook.
• Benign inflation trend in US & low wage growth and recent USD strength, (which is also hurting US export and corporate profits). 
• BIS warning about possible cascading effect on global financial system because of Fed hike as the Bank think that the world is not ready yet for Fed rate hike amid cheap money. IMF has also the same view.

Although headline GDP & average employment data in US make the case for rate hike to normal level as par text book, in reality, Fed will take more time to decide and this drama may continue even after Dec'15. For Fed, verbal intervention is now seems to be a perfect tool to control USD strength than any real action. As par rough estimates, 1% currency strength is equivalent to at least 0.25% of rate hike in an economy. As on date dollar index is up by more than 10% from Nov'14 (end of QE3 after year long tapering).

Even if, Fed decides for lift off on Sep-17, market has already discounted at least 0.25% hike and in that case after some initial whipsaw kind of movement (sell off), global market, including India may rally, as a great uncertainty in the form of Fed has been removed (depending upon the Fed statement and its dovish or hawkish stance). A Sep hike of 0.50% may be a negative surprise for the market at this point of time.

A rate hike by FOMC may also indicate that Fed is confident about US growth, being the 1-st largest economy in the world followed by China. The market may also want to see US growth amid so called China slowdown to led the global recovery.

Back home, our market will look to today's evening CPI data after block buster IIP data on Friday and RBI policy meeting on Sep-29. A lower expected CPI (around 3.4%) will make the case for rate cut by RBI as all other conditions are ripe for immediate cut up to 0.50%.

As par reports, GST parliamentary committee will convene its meeting on Sep-15 for a preparation of administrative work for possible nation wide role out by April'16. Govt is also planning to advance the date for winter session of parliament shortly after concluding of Bihar election to pass the GST bill. Political management & back door talks may help.

Overall depressed commodity prices, expected transmission of lower interest rate cycle, better operating leverage & macros and demand revival in our economy may help to upgrade the real earnings of the corporate in the coming days.

Thus India, being a net importer of commodities will continue to be a sweet spot, specially among the EM(s), while some other net exporter EM(s) might suffer to some extent (like Brazil, Russia etc).

Selective buys on dips might work in any Fed or even China induced market melt down until 7500-6900 holds and FY-17 target could be around 9200.

Technical Charts: