Market Will Focus Now On Q2FY16 Result, Ongoing Bihar Election & Macros (IIP/WPI/CPI)
BNF: 17608 (LTP)
Trading Levels: Positional
| SL=+/- | 25 POINTS | FROM SLR | ||||||
| T1 | T2 | T3 | T4 | T5 | SLR | |||
| Strong > | 18000 | 18100-150 | 18371-450* | 18550-585 | 18625-850 | 19110-300 | <17950 | |
| Weak < | 17950 | 17823-740 | 17660-585* | 17478-400 | 17351-280 | 17128-027 | >18000 |
Technical Analysis:
As par Monthly EW for BNF, we may be in the B wave and the possible extended target might be around 17950. In that scenario, corrective C wave 1-st target may be around 16880.
Similarly NF has to sustain over 8250 for at least two consecutive days for the target of 8405-8675 in the near term, other wise it may also correct up to 7690.
Some Key Points:
Markets will focus on Infy result along with others biggies this week. Indusind Bank result on last Friday was more or less in line with street estimates. Although analysts are not expecting any miracle in earnings growth for Q2FY16 (average 5% sequential growth YOY), any positive surprise may spark further rally in the market towards 8355-8405 zone in Nifty.
Looking ahead, lower interest rate environment with transmission of at least 100 bps cut in bank base rate (against 125 bps by RBI) within Dec'15 may augur well for our economy.
So far around 70 bps has been transmitted by banks. This along with depressed commodity prices (even with crude around 50-60$) and better operating leverages may start to reflect in corporate earnings by Q3FY16 and we may see actual improved visible sequential growth (expected 15-20% in FY-17).
Although, Bihar election is not a "do or die" situation for BJP & our economy, its certainly a sentiment for our market. As par various reports, the final outcome may be very close and at this moment it appears that BJP/NDA may not be able to garner 2/3-rd majority of its own and opposition combinations (JDU+Cong) might has some edge in formation of Govt in Bihar.
Bad result in Bihar, may also cost some prospect for BJP in coming UP election. But, in another angle, defeat in Bihar may push BJP more boldly in its own economic reform agenda by believing more in it.
For BJP, political compulsion should not hinder its pro-reform policy and it should understand that only by improvement of standard of living for "Aam Admi" (ordinary people), NAMO wave will be there all over India and not by "Beef meat ban" & 'Dadri incident".
BJP does not have a leader like NAMO in each & every state and NAMO wave is very important for them for both Parliament & RS majority by 2019. Bihar or no Bihar, we may see an extreme step like joint session of parliament for passage of GST and some vital amendments in land bill also, if Cong and some others decide to act differently, because after Bihar, BJP has nothing to loose politically in the near future.
Thus appropriate political management and understanding (back door talks) & effective floor coordination is required by the Govt for passage of key reform bills in RS as it lacks majority there, otherwise it has to show boldness for calling joint session of Parliament for passage of it.
Globally, Fed will be in no hurry for lift off till March'16 (as par current set of "dismal" economic data from US and Sep FOMC minutes) and Fed Fund Rate also indicating little probability of any Dec'15 hike. Thus "risk trade" will be "on" with cyclical volatility owing to FOMC drama (cyclical hawkish & dovish comments/verbal intervention to keep USD in control).
On the contrary, we are hearing some possibility of QE4 in US in some different form in the days ahead. (negative interest rate to pop up inflation !!).
ECB & EU are also ready for more QE if such condition arises and PBOC is also trying for some structural reform apart from easy monetary policy and currency devaluation (Chinese style of QE).
In short, there will be no dearth of global liquidity in forcible future and its up to India to attract foreign inflows by pushing its economic pro-reform agenda in right direction along with predictable and consistent tax reform policy.
In the EM market, India is certainly a bright spot being the "fastest growing country surpassed even China". India is a relatively stable (politically) & matured market unlike some of its peers. Thus investors should take the advantage of India's 4-D theme as rightly pointed out by NAMO in his recent US visit.
(4-D=democracy/demography/demand/deregulation).
Thus, looking ahead, with overall expected economic recovery in FY-17 and better corporate earnings from Q3FY16 along with passage of GST/Land bill, Nifty should scale 8700 & 9200 and Bank Nifty 21000-21500 & 22300 by Dec'15-March'16 and "Buy On Major Dips" for quality stocks may not be a bad idea.
Analytical Charts:
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