Nifty Settled Around Eight Months High At 8288 Amid "Waning Of Brexit & Rexit Blues", Better Domestic Economy Outlook & BOE Stimulus Hopes

Nifty settled the June expiry around 8288 after making a month low of 7927 and high of 8308 and overall closed the June expiry series up by around 2.8%.

Looking ahead, Nifty Spot has to sustain above 8340-8370 zone for an immediate target of 8410-8510 area.

On the other hand, sustain below 8270, NS may fall up to 8205-8175 & 8075-8010 area in the near term.

Market opened today in a strong note amid uncertainty about "Real Brexit" and Soros warning that any "Real Brexit" will be more harmful than 2008 Lehman Crisis. He urged the EU & UK politicians to get their act together and give more importance to solve the refugee & unemployment crisis in EU/UK and also called for some structural reform, rather than too much emphasis on monetary stimulus (QQE). 

But, political uncertainty in UK continue to be dragged on for some months now, at least till Oct'16, which may be a headwind for the "risk assets".

At the EU market open, there was some market report that China is going to devalue its currency (Yuan) to 6.80 level from the present 6.60 area in the near future and that caused some selling initially. However, later China officially denied that news and reiterated its commitments for a stable Yuan basket of currencies. 

Again, no one seems to believe in official China commentaries and probability of more Yuan devaluation may be inevitable in the near future, considering their recent USD outflows and credit bubbles & huge banking NPLS. 

Some of the reasons for the positive sentiment & some rally for the market today may be as:

1. Quarter end flows for re-balancing of portfolios & short covering.

2. Hope of another QE-4 by FED for an excuse of "Real Brexit" and impending US recession.

3. Probability of co-ordinated central bankers stimulus; i.e. more QQE from BOJ/ECB/PBOC & BOE rate cut in the scenario of any "Real Brexit".

4. 7-PC stimulus and Aug rate cut hopes by RBI amid good monsoon.

5. Impending cabinet reshuffle and appointment of new RBI Gov (Subir Gokran or Rakesh Mohan as par latest report).

6. Hope of passage of GST in the forthcoming monsoon session.

But, ultimately time & price is everything in a market and going by the technicals, NS has stiff resistance in the 8340-8370 zone. The above sets of news flow may be already discounted by the market by a large extent, going by the last few days rally after "Brexit" blues on last Friday and unless & until, NS closed consecutively (3 days) above this zone, market may face some selling again.

At 8300 level, TTM PE is around 23 and historically, 23-25 may be a high bubble zone for Nifty also.

Just now, India core sector output published at 2.8% for May against 8.5% (MOM), which may be quite disappointing and disconnect the GDP figure of 7.9% (there are quite anomalies in high frequency other economic indicators wrt with the new series GDP).

Also, the April-May'16 Fiscal Deficit figure may be above street estimates.

Article Courtesy: Frontiza.com