Nifty Fut(Apr) Update: Sustaining Below 7540 Zone, Expect 7400-7200 Area In The Near Term

SGX-NF: 7568 (CMP)

NSE-NF: 7583 (LTP)

Consecutive closing below 7540, NF may further fall towards 7400-7305-7200-7145 (5-15 days).

NF will gain some strength only sustaining above 7600-7645-7680 area.

The above updated view on the NF is based upon the trading idea posted on 1-st Apr as:

Either sell below 7780 or on rise around 7825-7875-7890;

TGT: 7720-7680*-7590-7540*-7400-7345-7305-7275 (5-15 days)

TSL>  7915 

( SL +/- 25 points from TSL)

Note: Consecutive closing (3 days) above 7915 for any reason, NF may further rally up to 7980-8015* & 8050-8080 in the short term (alternative bullish case scenario from the current trading level).

As par early morning SGX-NF indication , NSE-NF may open around 7570 after gaining some support from the 7540 zone following better than expected CPI data in China, which came around 2.3% against estimate of  2.5%. Market is expecting that lower inflation data may pave the way for more rate cuts/stimulus by PBOC in the near future, although another 0.25-50% cut may be already discounted. Looking ahead, China's Q1 GDP, trade balance and IIP, retail sales data may dictate the global market as Fed is overly concerned about China and any positive data (better than expected), may influence the Fed's stance (dovish/hawkish) in the near term (June'16 Fed meeting). Also, any positive China data may influence commodity currencies and base metals to a great extent.

There is not so much important US data this week for any change in Fed's dovish stance till its April meeting and the list of Fed speakers (jokers ?) is also not impressive to influence the FX/global market (USD). So, all eyes will be on the China data along with USDJPY, which broke the year long support of 110 last week following Abe's comments that BOJ will not intervene actively in the FX market as par G-20 commitment and Japan being the host country of the forthcoming G-7 meeting. This stance was then corrected by Abe's advisor/spokesperson Suga that G-20 commitment does not mean to overlook "one sided" currency movement. In any way, USDJPY is now eyeing 107-105 level, which is also a strong technical support zone, BOJ may wait for some time in order to complete the capitulation and then intervene physically rather than verbally. So, after G-7 meeting, we may see some real BOJ action, but Fed's dovish stance is causing a concern on JPY and other G-10 currencies and this may be a real catch-22 situation for the major G-10 central bankers going ahead.

Back home, although RBI's 0.25% cut is below expected, but there was some silver lining too in the form of liquidity management of banks and ultimate lowering of cost of funds for proper transmission of rate cuts, which may the most important aspect. So far, banks has transmitted only 0.6-0.7% of the total 1.50%  repo rate cuts by the RBI and there is all round pressure on them to transmit at least the previous full 1.25% cumulative rate cuts in FY-16. But, going by the NPA/provisioning issues, banks may not be in a position to do that in the near term as this will impact its NII/NIM heavily.

Apart from rate transmission issues by banks, all eyes will be on the forthcoming Q4 results and although expectations are very timid, further guidance may dictate the next market movement to a great extent. 

Also prediction and actual happenings of monsoon this year will influence the rural economy and RBI's mind about inflation (specially food) and before Aug, we can't expect any real RBI action to cut rate further. 

Market will also watch any possibility of passage of GST & bankruptcy bills in the forthcoming Parliament session and results of the ongoing state elections. Going by the present political tug of wars between the main parties (BJP/INC), hopes of any consensus on GST passage are looking very thin at this stage. Although, some BJP leaders and our FM is also claiming that after June, Govt may be in a position to pass the GST bill in RS without Cong's support because of better permutations & combinations of RS seats then, but in reality, its going to be a tall order for the Govt.

Cong may change its mind to let the GST pass in the RS because of some thinking that GST may aggravate inflation in our economy by 2019 mainly because of impact of enhanced service tax from the present 15% to 18%. As in 2019, there will be Parliament election, any increased inflationary impact on the Indian economy may help the Cong and put the BJP in the back foot !! 

So, we have to see, if the Govt/BJP is truly serious about GST passage & implementation at this stage and also industry/business community/MSME may not be prepared for GST implementation at this juncture because this will involve substantial system upgradation/modification cost. In the present tepid circumstances of excess capacity and lower demand, corporate India may also prefer to implement it later towards 2019 or after. Thus, we may not see actual implementation of GST before 2019-20.

In the ongoing state elections for the five states, although BJP is expected to loose all, but there is some hope for it in Assam. Any majority or good result in Assam, may not change any equation for it in RS, but it may be a bonus point for the MODINOMICS and flagging popularity of NAMO.

Technically, NF may be now in the corrective A-Wave, after completing the impulsive 5-th Wave by an unusual 261.8% of EW-1 around 7810. The text book target of the present EW-A may be around 7320-7205-6835 depending on the underlying news/events impact and consecutive closing below 7540 will validate this bearish stance more.

Only consecutive closing above 7825-7915 zone may change this scenario and in that case, NF may further rally up to 8015-8055 in the near term under bullish stance.

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