Nifty Cools Off From The Eleven Months Top Amid Confusion Of GST & Abenomics (Comics) "Helicopter" Package

Nifty Fut (June) closed today at 8610 after making a intraday low of 8566 and opening session high of around 8667.

Technically, NF/NS now need to sustain above 8565 zone for any strength; otherwise it will fall towards 8515-8475* and 8400-8335* & 8250-8140* area.

On the other side, sustaining above 8615-8645 area, it will immediately target 8665-8685* and 8725*-8785 & 8825-8875* zone in the near term.

Bottom line: 

 

Time & Price on the chart suggests that 8665-8725 zone will be very vital for NF/NS, which will decide the next course of price action in the coming months (either 9000-9200 or 8000-7800).

Yesterday evening, there was reports that GST council & Govt has broadly agreed to some of the issues of the states and will table the bill for debate & passage in RS in the 1-st Week of Aug instead of this week. 

But some sections of the market are also apprehending that Cong may not support the bill in the RS due to some political issues & ongoing ED probe against one of its senior leader (Ex. CM of Haryana).

Formally, Cong & some other states/political parties will raise the GST rate (revenue neutral/18% or 25-27%) and Dual control issues.

Yesterday, a senior TMC leader also termed this ongoing GST jitters a game of "ping pong" between Cong & BJP, which is going on for nearly a decade. As par TMC, they and the other regional parties has done their job and its now up to BJP & Cong to pass the GST in the RS now. 

From the overall tone of the TMC, it seems that they & some other regional parties (Non Cong/Non BJP) are trying their best to place an third alternative in the 2019 election.

A third front led by TMC & other regional parties will bring more instability in the Indian politics & economy, although its now in very early stage.

There are also some thinking in the political circle that a "No GST" is better that a "flawed GST" at this point of time, if it does not serve any purpose to lower the present exorbitant indirect tax rate of around 30% on "common people" (general voters).

A Nomura report in the last hour of trade helped to regain some Nifty loss as it predicted 60% probability of GST passage on 12-th Aug.

But the present RS math will make it difficult for the BJP to pass it in the absence of direct/indirect Cong support.

On the earnings front, we have seen some block buster earnings, far above the street estimates, but despite that scrips were not able to hold their opening gap up high today (like Ambuja, ZEEL etc). Next few day's price action will tell us if the market has already discounted those "excellent" earnings or not, going by the recent steep rally.

Globally, from yesterday there was all sorts of rumours and counter denial regarding various BOJ stimulus packages ranging from $95 monthly "Helicopter Money" to the lower income people in Japan to YEN 6 TLN - 27 TLN package & 50 years perpetual bond.

From various reports, it seemed that Japan PM Abe will officially announce some fiscal & monetary packages of YEN 27 TLN on 2-nd Aug. Market is also expecting some "bazooka" from the BOJ (Kuroda) on 29-th June.

Basically, it appears that BOJ is waiting for the Fed tone today to decide its actual package and testing the likely market reaction by selectively leaking all types of stimulus package and its turning out to be a real "comics" by Abe & Co/BOJ.

If Yellen scripted some hawkish tone and make alive the Sep/Dec rate hike probability, then BOJ will opt for smaller QQE this time as USD will fly against JPY. 

After today's meet, next important focus will be Yellen's speech in Jackson Hole on 26-th Aug, where she should clearly telegraph the Fed's thinking about any rate hike in 2016.

Ultimately, BOJ will be forced to expand its balance sheet and monetize the debt. Another factor is that, in the world of negative yields bonds, BOJ may have some scarcity to buy eligible bonds and in that scenario, may also opt for direct ETF buying to boost up the stock market. The idea may be that, an inflated stock market will give confidence & good feeling to the consumers, who in turn spend enough to boost up the economy.

There was also some steep selling in the Chinese EQ market after reports of regulatory curbs on some wealth management products there.

Equity market may now fighting an intense war between the power of liquidity by the central banks and valuations.