Nifty Momentum "Slowed" After Tepid Infy Result Despite Better Than Expected China Data; But Closed Almost 2.90% Higher In The "BOJ Helicopter Week"

Nifty Fut (July) closed the week at 8557 after opening high of 8605 (also the weekly high) and day low of 8525. 

Looking ahead, technically, NF need to sustain over 8615 for target of 8665-8685*-8735 & 8785-8845-8875 zone in the short term.

On the other side of trade, sustaining below 8505-8480* zone, NF will target 8440-8405*-8360 & 8295-8245-8160 area in the near term.

 

For the week, Nifty closed higher almost 2.90% primarily supported by the positive global cues led by strong speculation of "Helicopter Money" by BOJ/ PM-Abe, after convincing win in the upper house of the Parliament of Japan.

The story of more QQE got further wind, after Bernanke (inventor of the "Helicopter Money") visited Japan/BOJ, supposedly as a "consultant" for Abe to bring out Japan from the decade old spiral of deflation/contraction.

Although, the overall structure of next QQE by Japan is still at "planning stage, the sheer power of Abe jawboning is enough for the market for an massive short squeeze, specially in the USDJPY and the risk assets (for example EQ, Commodity currencies) flared to almost life time high (S&P-500).

As par some experts, this may be a "twisted world" amid record low bond yields and high stock market as investors are buying both bonds and equities for capital appreciation and dividend yield.

The "risk on" rally also got some boost from the block buster NFP job data in the US last Friday, which may be showing that the overall US economy is not so much bad as some other high frequency data are indicating.

The rally also boosted by the fact that FED may never hike again or at most may hike only "once a year" instead of the Dec'15 dot-plots of 3-4 hikes in a year to tame the growing criticism and to show the world that they are quite confident about the underlying strength of US. 

But, at the same time Yellen may even flip-flops to zero, if there is any indication of "dooms day" like scenario (like real Brexit, China jitters etc).

Thus its a pure play of growing jitters around the globe and power of central bank liquidity (QQE), which is helping the overall market to trade in a predefined zone of volatility. In the event of any types of "crisis", central bankers are scrambling fast to open the "tap". 

Today, global market was supported by better than expected China data (GDP/IIP/Retail sales), but, the Indian market was not able to sustain the opening gap up high after Infy announced its Q1FY17 result (below expected and flat in the constant USD currency; also the guidance was weak).

Infy & TCS result was not great in the sequential terms (QOQ) also and guidance was also tepid amid fear of "Real Brexit"/uncertainty, cross currency headwinds and H1B visa issues & incrementally higher staff/salary expenses.

Meanwhile, RIL has announced its Q1 result and it should give some market support on Monday as the result is "above expectation" at a glance. But management commentary about prospects of its core petrochem business and R-JIO will be the most important.

Indian market also got some boost for the good distribution of monsoon (so far 4% above normal), high expectation for monetary easing and Aug rate cut by RBI. 

The market is expecting a market friendly new RBI Gov, who will be  in "good coordination" with the Govt. 

Expectation is quite high for GST passage in the monsoon session of the parliament, but going by the public commentary of both Cong & BJP, this may not be a "done deal" yet. 

Even, BJP, which was earlier so much confident about passage of GST in the RS without Cong's help, now apparently talking about "consensus" for the same.

Market is also expecting excellent Q1FY17 earning numbers, but so far core operating income growth (EBITDA) is decent and not great.

The Indian market also supported by the market talk of imminent announcement of the PSBS recapitalization by the Govt (FY-17 tranche under the old "Indradhanush" plan), but till now it is not announced officially. 

Also, the market is eagerly waiting for the official announcement of the next RBI Gov. So far, four names are doing the round (Arvind Panagariya, Arvind Subramaniyan, Subir Gokran and Rakesh Mohan). Although, name of the Panagariya is speculated to be the most probable RBI Gov, going by the glamour, reputation and media savvy Rajan's stature, Govt may announce the name of Subramaniyan as the next RBI Gov despite some objection by Swamy. 

The week has also some surprise in the form of DY FM's (Jayant Sinha) sudden removal from the finance ministry and appointment of two deputies in the finance ministry in an apparent attempt to clip the wings of the present FM (internal politics/influence of the BJP/RSS). 

The market did not react too much from the "Brexit", "Rexit" or "Jyexit" amid power of liquidity by the central banks, but going forward may show significant volatility after the present dust of QQE settles.

At 8600, TTM PE of Nifty is above 23 and may invite some caution from the large market participants (institutions). So, stock specific approach is more important than overall Nifty or Sensex (market).

Market is not prepared for "Real Brexit" or invocation of the Article-50 in UK, no BOJ "Helicopter Money", FED hike probability (Hawkish FED Comedy) and no GST and may plunge ("risk off mode), if any of this come true.

There is high probability that GST may be victim of the "political game of football" this time too and even if it is passed now, it may not be implemented before 2019 election also.

 

 
Article Courtesy: http://frontiza.com/