Nifty Fut (July) closed today
at almost day high of around 8590 after an opening low of
8542.50.
Time & price action
suggests that NF has to sustain over 8615-8665* zone for an
immediate target of 8685-8725* and 8785-8870* & 8950-9015
area in the near term.
On the other side,
sustaining below 8585-8550 area, NF may again fall towards 8500-8475*
& 8405-8380 and 8340-8300 zone in the next few trading
sessions.
Ahead of ECB tomorrow, there were little global
cues today.
Basically, on the prospect/hopes for more central
banks stimulus and increasing geo-political risks (Brexit/Turkey
etc), both equities, bonds, gold are rallying (capital appreciation, dividend yield and flight to safety) breaking from their
respective traditional inverse relationship mode.
Apart from FED & BOC, most of the other major
G-10 central banks including BOJ/ECB/BOE/PBOC/SNB/RBA/RNNZ are in
the easing mode and ready to launch fresh QQE/rate cuts/liquidity
injection, if economic condition deteriorates. As a result, USD is
getting strong and "risk rally" (EQ) is also "on".
FED may again return to some of their "hawkish"
comedy in the days ahead (as there is no immediate risk of "Real
Brexit").
FFR is also indicating greater "rate hike"
probability in Sep16, just ahead of US presidential election. But, in reality, FED will not hike just months before US election and may prefer to wait till Dec'16 for a 0.25% hike with lots of caveats/conditions (like Brexit/China jitters etc).
Apart from Brexit, China jitters, oil, banking
crisis in Italy, surging bond yield risk for the DB & "Hawkish
FED", the global market may face another headwinds/risks for the
prospect of Trump being President of the US, despite ever
easing/supportive Central Banks.
Today Nifty got good support from pharma sectors
amid news of approval of a generic version of an anti-cholesterol
drug in US by a Court there.
For the Indian market, the overall mood may be cautious today amid strong
"political battle" going on in the LS/RS and prospect of GST passage. As
par some BJP leader comments, we can expect passage of the GST in
the month of Aug, instead of July (as previously expected).
All eyes will be on the ongoing Q1FY17 results
also and it seemed that mere "above/inline estimates" results are
not sufficient for renewed buying as most of the good results may
have been already discounted going by the recent rally of over 25%
in the last five months.
On the other hand, below expected result
with weak guidance resulting in some deep correction of the scrips
(Infy, Wipro, TCS, RIL etc).
Similarly, Bank Nifty may also face some selling pressure as
all the "good news" (like rate cuts, good monsoon, RBI OMO,
NPL resolution, PSBS merger & recapitalization etc) may have
been already discounted to a great extent, going by nearly 44%
rally in the last five months.
Similarly, passage of GST may have been already
discounted by the market to a large extent. So, even if it will
pass this time, apart form some whipsaw movement of around 100-200
points (48 hrs) in Nifty, market will back to the reality and concentrate
on the fine print & implementation of the same.
At 8600 Nifty, TTM PE is above 23 and valuation
may be quite expensive. So, stock specific approach is necessary
with a note of caution.
Technically, Nifty will rally further
towards 9000-9200, only if it is able to close consecutively (at
least 3 days) above 8685-8725 zone. For this, apart from the
passage of GST, we need real earnings upgrade, so that FWD PE will
come to a more reasonable level of 20-18.
In that scenario, we need Nifty EPS of at least
450-500 in FY:17-18 from the current level of around 365 (i.e.
around 25-40% growth in EPS by FY:17-18).
Considering the present trend of actual earnings,
guidance & overall global gloomy situation, 25-40% earnings upgrade may be quite
tough despite prospect of good monsoon, more rate cuts, 7PC
induced consumption, better macros, public investments in infra
and some other green shoots. Going forward, we need to increase private
investments and better capacity utilization and for
that India's problem/legacy issues of "Twin Balance Sheets" may be
the biggest headwinds at this moment.
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