SGX NF: 7783 (CMP)
NSE NF: 7768
NSE NF: 7768
As par early SGX indication NF may open around 7780-7800 zone after "Fed night".
Technically, NF has to sustain over 7805-7820 area for target of 7865-7915 & 7965-8005 in the short term.
On the downside, inability to sustain over 7805-7820 zone for any reason, NF may fall towards 7740-7725 & 7699-7627-7586-7540 area by the next few days.
As widely expected, Fed yesterday came out of its long "hide & seek" game and hiked FFR by 0.25% with an apparently dovish/soothing communications.The decision seems to have injected some confidence in equity markets, but overall, S&P500 Fut is now trading fractionally higher when NF closed yesterday after some overnight volatility.
The fact that none of the ten FOMC members has dissented in to the yesterday's Fed hike and the 2016 median dot-plots indicating a FFR of around 1.375% by Dec'16, this may be some what more hawkish than the market expected.
The projected 2016 dot-plots indicating that Fed may hike interest @0.25% in almost every quarter (alternate meeting-Apr/June/Oct/Dec'16) to make the 2016 FFR around 1.25-1.50%.
Although the 2017 Fed dot-plots is slightly lowered, the same trend may be continued till 2017 (gradual hike as stressed by Fed).
Going forward, Fed will closely watch inflation & other US economic parameters for appropriate action on its FFR (i.e. data dependent).
For India, successive gradual rate hikes by Fed means that further rate cut ability of RBI may be diminished and we can see maximum one 0.25% cut by H2FY17, depending upon the inflation curve.Focus will be full transmission by banks for the 1.25% rate cuts already done by RBI so far.
Looking ahead, as par analysts, Govt need to fix spiraling food inflation by fixing supply side lacuna to keep the RBI's overall CPI guidance of 4% by 2017-18. As a result of gradual Fed rate hikes, the USD may appreciate significantly and together with US rate differential, USDINR may run towards 71 level, unless RBI intervenes heavily. Also continuous Chinese Yuan depreciation may cause some more pressure on Indian economy in the days ahead. CLSA is projecting a USDINR range of 71-74 in FY:2017-18 !!
A strong USD means more headwinds for some of the heavily indebted Indian corporates in terms of the USD dominated debts, unless properly hedged.
Also, going forward, ECB & BOJ may need less QQE as a result of policy divergence between them & Fed, their respective currencies will stay lower wrt to USD. We may even see some rate hikes from G10 countries in the months ahead (such as UK) to prevent excessive capital outflows because of rate differential with USD.
Back to our home, ongoing GST & political drama is getting serious day-by-day and it may not be possible to pass it in the current Winter session of Parliament which will end on 23-rd Dec.
Though in the last six days, we may see more drama as political mud-slugging is going on heavily with each other, we may see some last minute compromise on GST as "everything is possible in war & politics" (though seems to be a very remote chance at this point of time with Cong leadership is getting ready for "Jail" instead of "Bail" on planned 19-th Dec Court drama and it appeared that BJP is itself now backtracking for quick passage of GST and now talking about next session in March for the same).
Analytical Charts:
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