Nifty Closed Just Below 8800 Amid Mild Last Hour Selling After Reaching Fresh 52 Weeks High Ahead Of Indian GDP & US Job Data (ADP/NFP)

Nifty Fut (Sep) today closed around 8839 after reaching a fresh 52 weeks high of 8864 and an opening session low of 8789.

Technically speaking, now NF has to sustain above 8875-8895* zone for further strength towards 8925-8945/75*-9015 and 9075*-9125-9185 zone in the immediate to short term.

On the other side, sustaining below 8850-8815* zone, NF may fall towards 8755*-8690-8655/30 and 8560-8515-8435 area in the immediate to short term.

Overall, for tomorrow, one should watch 8875-8755 area in NF for a definitive movement of overall market in either direction.

Today global cues was tepid as there was broader USD strength on the back of better US economic data (consumer confidence at 11 months high). After recent spate of hawkish Fed statement, currently any good economic data for US may be translated as bad for risk assets (EQ/Gold/COMM) as probability of Fed rate hike will be higher.

Also in Japan, an economic advisor to PM (Abe) even spoke about a new QE idea that BOJ can purchase Foreign currency bond (??) as a strategy to devalue its own currency (Yen). 

As BOJ is increasingly short of eligible Japanese bonds for purchase, its desperate proposal/thinking about purchasing other currency bond may be interpreted as indirect intervention of other foreign currency. As a result, USD is getting more strong against JPY.

Along with the US Job data (ADP/NFP), market will keenly watch culmination of G-20 meet (China) in the weekend as fear of another bout of Yuan devaluation is rumoured by China this time.

Back to home, Indian market was opened today in a positive note after yesterday's Govt plan to release pending bonus for the last two years for the central Govt employees. 

The market got further boost after Govt announced another incremental reform policy for turnkey projects, earmarking release of 75% of Arbitration award to developers. This has caused significant rally in some of the infra & construction scrips (likely beneficiaries are HCC, Gamon, Simplex, NCC) and banks as banks may recover significant amount for its stressed assets accounts under the developers head.

But, its just a draft policy right now and going forward market will keenly watch the actual form and other fine prints, like more clarity on disbursals.

 

Today, Nifty got some support from Ultratech Cem (FII buying permission up to 30%), Kotak Bank (permission to Canadian Pension fund for stake buying between 5-10%), LT (Govt plan to release arbitration money as stated above), ZEEL (above expected amount for sports channel sale to Sony), Tata Motors (plan for domestic operations rejig).

Nifty was primarily dragged today by ONGC, Tata Steel/Hindalco (as steel & iron ore prices fall to 4 weeks low in China), RIL (adverse Shah committee report about Natural Gas dispute with ONGC).

After market hours, India today released its core sector output data (3.2% against 5.2% MOM), Fiscal deficit (almost 73.7% of FY-17) and Q1 GDP figure (7.1% against consensus of 7.6%; prior: 7.9%), which are both seems to be negative for the economy and the market.

 

SGX-NIFTY

Nifty Rallied To Fresh 52 Weeks High After RBI Predicted Brighter Growth Outlook Amid Positive Global Cues Led By Growing Skepticism About Fed's Sep Rate Hike Probability

Nifty Fut (Sep) today soared by almost 155 points (+1.78%) at around 8804 (day high) after making an opening low of 8668.

Now, time & price action suggests that for further strength, NF need to sustain over 8825 zone for target of 8875*-8925-9025 and 9075*-9125-9185/205 in the immediate to short term.

On the other side, sustaining below 8785/55* zone, NF may fall towards 8665*-8615-8560 and 8480*-8315-8250 area in the immediate to short term.

Overall, for further rally, NF need to sustain over 8875 area and below 8755 it will be weak.

Today, Nifty opened in positive note following overnight US market rally (+0.58%) as global market is increasingly skeptical about any real Fed rate hike in Sep'16, although there are increasing "hawkish" jawboning by Fischer. 

Quite logically, market is assuming that whatever be the incoming US economic data (like NFP etc), Fed will never hike in Sep, just before Nov US Presidential election.

Fed may act in Dec'16 as probability of Trump being next US President is very low now and in that scenario, Fed has to continue its current "Hawkish" script till FFR indicates a 75% probability of Dec rate hike. Fed will never act without telegraphing the market well in advance.

Today Indian market has got further support from yesterday's RBI annual report, which stated that the country's growth potential is brighter supported better monsoon, 7-CPC induced liquidity/consumer demand, but any possibility for further rate cut looks remote due to higher trajectory of headline inflation.

Govt is also releasing previous two years pending bonus for the central employees by next month along with 7-CPC with arrears which may boost up consumer sentiment and spending just before festival season (Indian version of "helicopter money").  

The domestic market got further boost from positive commentary from a slew of investors & influential market participants/people including India's own "Warren Buffet" and according to them, India's market may correct to small extent by anytime, but it may be a more time correction rather then significant price correction.

Its clear that Indian market is refusing to correct at lest modestly, may be because of the "power of liquidity" as of now.

Apart from global events and new RBI Gov's maiden official statement, all eyes will be on the Indian GDP tomorrow and progress of GST.

As par some reports, India's Q1 GDP may come around 7.6% against 7.9% QOQ. The primary reason behind this may be tepid industrial activity and lack of private capex.

Although, Govt capex is encouraging on the back of road & railways infra projects, capacity utilization level is still around 75% and corporate India/MSMES are not investing enough due to tepid demand.

Rural demand is still at nascent stage and there are some recovery in urban demand, but that may be due to high leverage as banks are in massive retail loan push (as demand for business/corporate loan is not good enough due to high NPLS).

Today, Nifty got huge support from banks, autos & IT counters and also from some pharma scrips, but telecom was weak due to ongoing price war and a report of lower growth in consumer data usage.

Overall technically, next two days closing is important as NF has to provide consecutive (3 days) closing above 8675 area for further rally towards 9000-9200; otherwise, expect some correction till 8400-8000 zone in the coming days.

Update:

Today's evening US consumer confidence data came much above consensus at 101.10 (estimate: 97; prior: 96.7), which may be translated into much better NFP on Friday.

As a classic example of "good news for US economy may be bad for risk assets", USD soared (because of increased rate hike probability by Fed) and subsequently OIL/GOLD/EQ slipped.and US10YTSY rallied a bit. Oil is also down for doubt of any "real output freeze probability" by OPEC in Sep'16.

Analytical charts:

 SGX-NIFTY

SGX-NIFTY

Nifty Moved Up In Last Hour Buying After Initial Weakness Amid "Hawkish & Confusing" Fed

Nifty Fut (Sep) today closed around 8659 (+0.39%), just below day high of 8670 after making a session low at 8578 in the opening session.

Technically, now NF has to sustain over 8665-8695* zone for further rally towards 8725-8765/85*-8825 and 8875*-8925-8975 area in the immediate to short term.

On the flip side, sustaining below 8645*-8610 area, NF may again fall towards 8560/40*-8470-8390 and 8310-8250*-8130 zone in the immediate to short term.

Bottom line: NF is consolidating in a narrow triangle range of 8560-8765 and any sustainable break up or break down from this zone may cause around 250 point movement on either side. In the absence of any meaningful triggers (underlying news-flow), market is basically being driven by huge liquidity flow on the back of yield chasing investors amid a world of negative bond yields.

Today early morning Asian session was tepid except some rally (+2%) in Nikkei (Japan) after Kuroda jawboned about more NRIP in Jackson Hole yesterday. This cause a "rally" in USDJPY and subsequently Nikkei jumped on weaker Yen, which is helpful for Japan as an net export country. But later, the rally in USDJPY nosedived after reports that instead of "Helicopter Money", Japan may be considering some structural infra spending like in railways.

Friday's much hyped Yellen's statement was basically "A whole lot of nothing", although Fed basically scripted about a "dovish hike" in Dec'16 with lots of caveats (like incoming NFP numbers, CPI and other US economic data & global headwinds-China/Brexit), a lots will depend upon the actual outcome of the Nov US Presidential election. 

Actually, it appears that rather than "data dependent", Fed is more "S&P-500 dependent".

A Trump presidency (low probability) will prevent Fed of any Dec rate hike as it will cause more market turmoil (Trump win is viewing as negative for risk assets) and vice-versa.

But, more than Yellen, Fed VC Fischer has spoiled the "bull party" on Friday by saying that statement of Yellen is quite consistent with Sep rate hike (??) and by Dec'16, we should have two US rate hikes !!

Among all these Fed confusions (drama/verbal intervention), FFR is indicating now around 40% & 60% rate hike probability in Sep and Dec'16; but unless & until FFR is 75%, Fed will never act without telegraphing the market well in advance.

Thus, by Sep-Dec'16, we may see some extreme volatility in the market because of US factor alone (presidential election outcome & Fed rate hike probability) and it may be a catch-22 situation for Fed as well.

To regain the lost credibility & its own Dec'15 dot-plots, which guided four rate hikes in 2016 (??), Fed may opt for at least one rate hike (0.25%) in 2016, provided Clinton wins the next US election. In this way, Fed may also ensure that its not behind the curve and can also answer the growing criticism from different quarters & this will also help it to show confidence on US & Global economy as well as on its own forecast. 

After all, its very important to show confidence on the underlying strength of an economy, going into election mode.

All eyes will be on the Aug NFP data in US to be released on 2-nd Sep, in order to ascertain the underlying strength of the US economy & probability of Fed rate hike in Sep or Dec'16. A "good" NFP data may be bad for "risk assets" and vice-versa this time; but with the imminent election month, NFP data should not be too "ugly also.

Back to home, Indian market was today somehow supported by the reports that Govt is advancing the forthcoming Winter session of Parliament by two weeks for "smooth" passage of final GST bill and presentation of FY-18 budget.

Although, there are several issues like final GST rate finalization and some other regulatory concerns (like state wise registration or single central registration for all India based companies), market is assuming that GST will be implemented in reality from April'17 with 18% standard rate. Any significant deviation from that or in-ordinate delay in roll out may cause severe volatility in future.

Indian bonds today fall to some extent as a fall out of Fed hike concern. As bond yields are recovering globally after hitting rock bottom/negative, fund flows can return to safety of bonds from equity in a significant way and we may see more volatility in the market.

Today Nifty was supported by ZEEL (talk of its sports channel sale to Sony), Tata Motors (better JLR volume & improved domestic business, despite bad sets of Q1 numbers), RIL (imminent launch of R-JIO), Adani Ports (Australian court relief).

Nifty dragged today to some extent by HCLTECH, Wipro, Infratel, Bharti Airtel (reduction of data charge by up to 80% as competition heats up due to imminent R-JIO launch) & cement packs.

 NIFTY-FUT

TATAMOTORS: 525-535 May Be A Big Hurdle Despite Better JLR/India Volume; Brexit/Cross Currency Headwinds & China Jitters May Drag

Trading idea:Tata Motors

LTP: 515

Sell on rise around 515-525;

TGT: 475-430 (1-3M)

TSL> 530 (INTRA) OR >540 (POSITIONAL)

Note: Consecutive closing (3 days) above 540 zone, TM may further rally up to 575-615 zone in the near to long term (alternative bullish case scenario).

Any one holding long position in the counter or planning to do so, may watch 475 area as nearest positional support for the same.

Q1FY17 EBITDA of TATAMOTORS (TM) fall drastically both on yearly and sequential basis and the overall result is also far below market expectation. Only silverlining is some growth in consolidated top line (revenue) and stand-alone (India) performance, driven by PV & CV segment. Recent launch of Tiago is also helping the domestic business of TM quite well.

The primary reason behind the poor bottom line may be the forex loss (hedging) between different currencies (GBP/EUR/USD/INR). As a fallout of Brexit, GBP devalued significantly against USD in recent times by more than 12%. As par some analysts/investors, TM need to disclose more about its specific cross currency hedging rate to ascertain the future guidance and cross currency headwinds, where accounting is in GBP, sales in USD and sourcing in EUR (quite confusing & complicated).

Probability of "real Brexit" is getting stronger day by day and as par reports, UK Govt may not need Parliament approval for invoking the Article-50 and by 2019, it may exit from the EU. All eyes will be on a high court case hearing in Oct'16, where a case is pending for this issue of invocation process without Parliament approval.

Thus, all these uncertainty related to Brexit may affect sentiment, trade arrangement for UK and TM may also be adversely affected. In Q1FY17, there was FX impact of Rs.2296 cr and Comm derivatives impact of around Rs.167 cr. But, lower tax cost, JV profit share and insurance claim for Tianjin accident limited the overall impact on PAT this time.

On the other side, depreciated GBP may be also one of the reason for growth in sales volume of JLR (UK) and in China, there was some favourable product mix (JLR).

Although, domestically, TM may benefit from the proposed scrappage policy (old trucks & buses to be scraped first as par reports), actual benefit may be limited as for the last few years, lots of sales has already happened in the replacement market due to various regulatory obligations.

Moreover, domestic operations is a small part of overall TM balance sheet size and what matters most is the JLR performance.

Having said that, TM is certainly a great company for portfolio investment, but going by the recent rally of more than 95% in the last six months, the stock may be running ahead of its fundamentals (intrinsic value).

Going by the current market volatility and time & price action on TM, 525-535 may be a big technical hurdle for the scrip and in that scenario, buy on dips around 430-365 area may not be a bad idea for investment purpose.      

For Tata Motors: Q1FY17 (Consolidated)

EBITDA: Rs.7612.93 cr against YOY:11006.80 & QOQ: 11387.17

PAT: 2260.40 against estimates of 2695 (YOY: 5254.23; QOQ: 5177.06)

Revenue: 67056.10 against estimate of 64755 (YOY: 61510.18; QOQ: 80684.41)

EPS: 6.67 against consensus of around 7.95 (YOY:15.85; QOQ: 15.33)

Actual TTM EPS: 31.14

Projected FWD EPS: 37.75 (FY-17)

Average PE: 12

Present median valuation: 375

Projected fair valuation: 453 (FY-17)

Analytical Charts:

TATA MOTORS

TATAMOTORS

Nifty Starts The New Series In Negative As Banks Under-Performed For RBI's New Corporate Bonds Lending Proposal

Nifty Fut (Sep) today closed around 8630 (-0.17%) after making an opening session high of 8665 and day low of 8596.

Looking ahead, technically sustaining below 8610-8575* area, NF may fall towards 8540-8470*-8370 and 8300-8240*-8125 zone in the immediate to short term.

On the other side, for any strength, NF need to sustain above 8680-8715* area for further rally up to 8765/85*-8825-8875 and 8905-8975-9075* zone in the immediate to short term.

Global markets was continuously trading in a sideways manner today ahead of the much awaited & over hyped (?) Yellen speech today at Jackson Hole symposium.

Although there is much hope that Yellen may be too "hawkish" this time after a series of recent hawkish statements from various Fed members, Yellen may only take the "dovish hike" script and may not guide/talk too much ahead of US election in Nov, thereby causing a "market turmoil" just before the election.

Going by various geo-political factors (like Brexit), China jitters and apparent strength of US economy, Fed may opt for a Dec'16 "Dovish Hike" (one & off), if Clinton is elected as next US President. 

Trump is now viewing as "severe risk" for global as well as US economy for his anti trade & China rhetoric (pro US stance) and if he is elected (very low probability as of now), then it may force the Fed to be in hold until Dec'17.

Barring any unforeseen situation (like real Brexit, China jitters, slump in Crude oil towards $25, EU/Italian banking NPL crisis etc), Fed may opt for the annual hike of 0.25% (only one hike in a year against Dec'15 dot-plots of four hikes in a year), just to keep the credibility of its own and co-ordinate the FX market (USDJPY-Yen will loose the strength and that will help Japan/BOJ).

As par some reports, BOJ may announce some types of tapering (Yen 10 tln/PM) in the next policy review date (21-st Sep) from its Yen 80 tln/PM bond purchase programme as its increasingly difficult for them to find eligible bonds and will gradually decrease its balance sheet to bring the next round of new QQE (like 50 years perpetual infra funding bond at 50 yrs perpetual). 

In that scenario, USDJPY may fall more and to balance the USD, Fed will have to hike by at least 0.25% in Dec'16 (Possible Co-ordinated action between Fed & BOJ)

Indian market was under pressure today as banks lagged the broader market. As par new corporate bond lending proposal by the RBI, a NBFC can lend from the market against eligible corporate bond from the bond market directly, rather than through a bank (as par present norm). 

Though, the corporate & "masala" bond rejig may be also helpful for bank's liquidity as they can also borrow from the LAF/overnight RBI repo & overseas window against eligible corporate bond in lieu of present norm of only Govt bond, such benefits of more liquidity will be visible only in the mid to long term. As a result, banks were sold, but NBFC(s) gain today.

Today, IT scrips were dragged after Infy concall, in which they had basically given a guidance warning amid weak UK & US markets ( Brexit uncertainty and US election).

Tata Motors was very volatile today and had wild swing after the Q1 result, which is below street estimates, but top line  (sales) growth was encouraging. The co is also in the process of further fund raising and closed today by around 4% up.

Market sentiment was also dragged today, after IMD said that Aug rainfall is around 21% below normal rain fall and overall cumulative figure is 3% below LPA.

Tata steel fall today after reports of UK asset sales at much lower consideration than previous estimates and news of quitting from Chhattisgarh project.

Overall, for the week, Nifty closed lower around 1% as there was no fresh drivers for the market after GST & RBI Gov appointment events in Aug.

Update: 

Yellen's statement at Jackson Hole today is basically a "Whole lot of nothing" and it seems that Fed has no idea about future rate path. This may be also termed as talk of "dovish hike".

But, shortly after Yellen statement ("The rate hike case has strengthened in recent months, but ultimately it depends on various incoming data---") , Fischer commented that Yellen's statements are consistent with possible Sep rate hike or even US could have two rate hikes in 2016 (??) has spooked the brief global market "risk on" rally.

Basically, the present Fed drama (verbal intervention) may be designed to help out the BOJ and most probably Fed will hike by 0.25% in Dec'16 in an effort to just regain its lost credibility, everything being equal, provided Trump will loss the US Presidential election.

But one thing may be sure that by Dec'16, we could see some global market turmoil, because it will be a catch-22 situation. If Trump loose, Fed may hike or if Trump win , Fed may be on hold at lest till 2017. 

In both the above scenario, market (risk assets) will be sold off.

SGX-NIFTY

Nifty Closed The Aug Exp 0.8% Lower As It Failed To Hold On The Opening Gains Ahead Of Yellen Speech Tomorrow---What's Next For Sep ?

Nifty closed today around 8592 (-0.72%) near session low of 8586 after making an opening high of 8685.

Now, looking at the chart, for NF-Sep (CMP: 8639), sustaining below 8610 zone, it may fall towards 8560/40*-8470-8355 and 8295*-8230-8120 area in the immediate to short term.

On the other side, for any meaningful strength, NF has to sustain over 8680 area for further rally towards 8725-8765/85*-8825 and 8875*-8925-9075 zone in the immediate to short term.

Today Nifty opened higher despite tepid global cues and overnight US market selling (-0.35%) on the back of slump in oil (US inventory data & lower import by China coupled with some concern about any real output freeze). Later, after EU market opens, IFO business sentiment data drags the global market to some extent.

But, soon after Indian market open, it faced some wave of selling/long unwinding (?) in the last day of Aug exp series and the same was intensified in the last hour of trade.

Incidentally, there was some report from Goldman Sachs, in which they are predicting 7.9% GDP growth for FY-17 on the back of better monsoon this year, incremental FDI inflows, expected increase in consumer demand led by 7-CPC liquidity & key reforms in an incremental manner.

But, as par GS, any rate cut probability is virtually nil till Dec'16 owing to higher trajectory of CPI, which may not come down to the RBI's comfort level of around 5% due to probable wage inflation effect of 7-CPC, recovery in crude prices and narrowing of output gap. 

But, GS also expecting a headline CPI of around 5% by March'17 and RBI may cut by 0.25% in Feb'17 accordingly.

Looking ahead, as 4-th Sep is coming closer (Rexit day), all eyes will be on the next "owlish" (vigilant) RBI Gov (Urjit Patel) for his comments about inflation targeting, banking sector reforms, resolution of India's twin balance sheet pain, overall liquidity management (OMO operations), corporate bond market reform (very few buyers & sellers as of now) and FX rate (USDINR) policy area. 

Going by his known "inflation hawk/warrior" stance, Patel may follow the same RBI policy under Rajan's legacy and overall RBI stance may be "accommodative" as of now. 

But the Indian market was expecting someone more dovish than Patel who can unleash a slew of "Bazookas" to stimulate the overall Indian economy.

Patel may also give stress on the transmission factors for the previous rate cuts under Rajan. So far, only around 50% of the previous RBI repo rate cut of 1.5% has been transmitted by the banks and going by the present trend and various macro economic factors, present small savings rate & bank's statements, one can expect another 0.15-0.25% rate cut transmissions till Dec'16.

But, as par India's commerce minister, MSME are currently undergoing severe stress & they need affordable bank finance and demanded 2% repo rate cut from the present 6.50% and full transmission of previous rate cuts by the banks by FY-17-18 !!

There was also some concern about incremental nature of India's banking NPLS (stressed assets), which jumped to around 11.5% in June'16 from the level of 5.5% in March'15. 

Some section of the market believe that these NPLS are for the reckless lending by the PSBS in 2007-08 & 2012-13 time on the back of some over jealous corporates and should be recognized much before now, rather than hiding it for years under the clamor of various types of CDR. 

Going ahead, we may see more such stressed assets coming in the light, once the present team of CMDS of the public sector banks end their respective terms and there may be around 15% of NPLS in the Indian Banking System to be visible by FY-17.

Also, mere "recognition" of NPLS is not enough for the PSBS; what they need is actual "resolution" or recovery of the huge NPA/NPLS; otherwise, in the absence of well capitalized PSBS, who will fund the "India growth story" ?

Although, Q1FY17 result are good and there are some story of blockbuster earnings growth (YOY), the same came on the back of comparatively lower base and other non-operating factors, such as de-leverage. 

Actually, 2015-16 year may be termed as the "year of de-leverage". While this is a right step for the stressed Indian corporates, most of them having quite stretched balance sheets, core earnings/EPS of the corporate India is now near at historical 20 years low level. 

Analysts are expecting an average 16% EPS growth for FY-17 and in that scenario, FY-17 EPS will be around 425 and FWD PE will be around 20.50 at Nifty level of 8700 against average PE multiple of around 16-18. At 18 FWD PE, fair value of Nifty may be around 7650 (425x18).

But, what ever be the rationality, market actually follow fund flows and its the massive ETF buying by the FPIS, which may be the main reason for the above 25% rally in the last six months as global investors are chasing positive yields in the world of negative bond yields. 

But, global bond yields may also be recovering now after going into negative/life time low territory and in that scenario, fund flow may reverse from EQ to bond again in the coming days.

After India market closed, Govt/RBI has announced a slew of policy measures to boost investor participation in corporate bond markets/"masala bonds" and currency markets, which may be good for the banking sector and overall market sentiment in the medium to long term.

SGX-NIFTY

 

Nifty Closed Flat After A Lackluster Day; But Midcaps Outperformed Amid Calm Global Markets On The Anniversary Of "Black Monday" Led By Chinese Devaluation

Nifty Fut (Aug) closed today around 8654 (+0.15%) after making a session high of 8668 & low of 8617 (opening high of around 8683 may be an act of fat finger).

Looking ahead, sustaining below 8630-8590* area, NF/NS may fall towards 8530-8480*-8440 area immediately.

On the other side, sustaining above 8675-8700* area, NF/NS may target the zone of 8745-8765/85*-8825 immediately.

Positionally, sustaining below 8590-8480 zone NF/NS may target 8340-8270 area and consecutive closing (3 days) above 8715-8765 area, it may rally towards 8950-9015 zone in the short term.

Today there was not much global cues except, some early safe heaven flows after North Korea fired a test missile into Japan air defence zone for the first time and Turkey invaded Syrian border to combat ISIS. All these may be again reminding that geo-political tension is still there in the emerging markets and along with selling in oil (as US inventory is rising again and China cut imports and clamping down on some zombie refineries for tax issues despite talk of OPEC output freeze), global markets was largely range bound.

All eyes are now on the Friday's Yellen comment about strength of US economy & headwinds of global economy and any clarity (?) about Fed rate hike.

Back to the Indian market, although there was some concern about Govt's reported move to amend the Singapore tax treaty, nothing has happened (may be we will see some clarity & action after expiry tomorrow).

Another important development is that IMD revised its 2016 monsoon forecast to normal (100% of LPA) against earlier forecast of excess (106% of LPA) as possibility of La-Lina fades.

But, this revised forecast was already there in the market predicted by Sky Met and market has also discounted a good monsoon this year (food inflation may dip in Aug-Sep and rural economy may revive).

Going ahead, CPI trend in the coming months will dictate any RBI repo rate cut (0.25%) either by Dec'16 (low probability) or by Feb'17 (high probability).

As festival season will start and there will be 7-CPC induced liquidity, market is expecting uptick in consumer spending, specially on the discretionary sides and automobiles.

As par reports, Govt may appoint its three MPC members before Oct-4th RBI policy meet; but before that market will keenly watch Patel commentary about India's inflation trajectory, resolution of pain of twin balance sheets, forthcoming FCNR redemption pressure (around $15 bln) on INR etc.

Incidentally, S&P & also RBI today raised some concern also on incremental nature of India's banking NPLS. Outgoing RBI Gov (Rajan), also expressed some concern about growing tendency of the banks providing personal loans to the retail borrowers to make up for the deficiency in business/corporate loans and another retail loan bubble may be forming in the Indian banking system (although recently SBI chairperson has refuted this apprehension strongly).

After market hours today, NAMO Govt approved huge infra spending in rail ways, road projects and we may see some action in the related stocks tomorrow.

Today, Nifty was supported by Auro Pharma (above estimate Q1 result and positive management commentary despite some apprehension about balance sheet debt level and EIR by US FDA), Maruti (incremental growth in sales in the coming festival season, coupled with expected 7-CPC liquidity and lower exposoure to Yen & better FCF) and Infy (City bank digital project bidding probability).

Nifty was dragged today by Idea (denial of any Vodafone merger talk as reported yesterday), Lupin, Ambuja Cement, Tata Motors & Tata Steel.

We may see some action after expiry tomorrow (65% rollover as of yesterday) & Friday's Yellen speech. Hopefully, Nifty will see some action from next week onwards after the narrow range consolidation (small triangle beak out or break down) for the last few days.

 

Nifty Closed Almost Flat After A Smart Intra Recovery Aided By Railways Clarification About Freight Hikes/Rationalization

Nifty Fut (Aug) closed around 8655 (+0.25%), which is also the day high after making a smart intraday rally from around 8591 (session low). 

Looking at the chart, now sustaining below 8625 zone NF may fall towards 8590/8570*-8530 & 8480*-8445-8305 area in the immediate to short term.

For any further strength, NF need to sustain above 8675 area for further rally up to 8705-8765/8785*-8825 & 8875-8925-9075 in the immediate t short term.

Thus, basically one need to watch 8675 area in Nifty for further trading direction.

 

The sudden intraday selling from around 8640 level today was caused primarily by the report that Railways has increased freight rates by up to 19% across the board. The news came as a bit of shock because of probable negative effect on steel/cement/power (core sectors of the economy) and the subsequent inflationary effect on the overall economy. 

But, shortly thereafter, Railways authority clarified that the it was not a case of freight increase across the commodities, but just a freight rationalization for Coal by changing the distance slabs. 

Its not clear about the probable effect of this Coal freight rationalization on the core sector of the economy, but market may be over reacted without seeing the fine print on the back of 7.74% fall in freight revenue for the Railways in July (YOY).

As Nifty is technically overbought and there was virtually no meaningful correction since March'16, any kind of negative news/rumour may be causing over reaction on the sell side/long profit booking.

Today market was mainly dragged by Bhel (NTPC order issue), BPCL (talk of 5% excise duty imposition on petrol & diesel), HPCL (Q1 GRM drop), Tata Power (below estimate Q1 result for FX loss & Ind-AS issue), Tata Steel & also JSW Steel (railway freight issue for Coal).

Nifty was supported primarily by Idea (talk of merger with Vodafone), BOB (ahead of PSBS meeting with the FM), INFY/TCS/Wipro (short covering in IT packs after last few days selling and clarification by INFY about the lay off news).

There were also some news that Govt may postpone any immediate SUTTI sale (positive for Axis Bank, ITC).

As par some analysts, of late, US market is consolidating in an extremely narrow range and this may be an indication of "silence" before a "storm" as bond yields are recovering from their life time lows and liquidity may revert to bonds again from equity.

Globally, there was not so much cues today as BOJ chief did not talk about market/FX in his scheduled speech. EU market also trading in a sideways manner after EZ PMI index came at 7 months high, which is although encouraging, the underlying data may also suggesting that, overall sluggishness in fresh manufacturing order books and a dip in service sector may led to tepid hiring activities in the coming months amid muted inflationary environment.

Oil is also under some selling pressure after export data of China and US oil rigs number. Also, Saudi comment that they are pumping at life time high level before any production cut/freeze on Sep and "Niger Delta" ceasefire offer (in Nigeria oil fields) dampened the bullish sentiment of the oil.

Despite recent hawkish stance of various Fed members about rate hikes in Dec'16, no one seems believing in Fed and there is visible USD selling across the board and that may be one of the reason for recent divergence in USDJPY & 10Y TSY apart from light trading volume amid summer doldrums in US/EU.

All eyes will be on Friday's Yellen speech at Jackson Hole Annual Symposium for a hint about probable Fed rate movement in 2016. But for any real Fed rate hike expectation in the market, FFR need to be in the +70% range, while its is just around 50% as of now (for the Dec'16 rate hike probability). 

As market is too complacent about Fed rate hike and not ready for any Fed rate hike in 2016, any hints of even "dovish hike" in Dec'16 by Yellen may cause significant turmoil in the global as well as Indian market.

Yellen may deliver a more hawkish script than the market expected this time just for the sake of regaining Fed's lost credibility.

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