Nifty Closed The Weak Almost Flat For Lack Of Any Meaningful Trigger And Slowing Down Of FII Flows Amid Concern Of Inflation---What's Next ?

Nifty Fut (Aug) today closed almost flat around 8680 after a lot of struggle visibly in the mid-cap & IT space and also closed the week basically at the same level. But, there were lots of actions in specific mid/large cap stocks outside Nifty and this trend is continuing for the last few months.

Looking ahead, technically NF may correct to some extent and for that, it has to sustain below 8675 zone for target of 8625-8570*-8530 and 8480*-8430-8270 area in the immediate to short term.

For retaining any further strength, NF has to stay over 8725 for a target of 8765/8785*-8825-8875* and 8925-8985-9075* in the immediate to short term.

As par daily EW cycle, NF may be in the corrective A wave and the initial target of the same may be around 8270, provided it will not close above 8765 area for consecutive 3 days.

Today there was lackluster global cues in the morning Asian session; but after EU market opens, there was some broad based selling primarily triggered by Crude Oil after last few days blasting move. 

Technically, Crude (CMP:$48.50) has to sustain above $50-53 zone for any further big rally towards $60-65 & 75; otherwise it will come down again towards $45-40 zone again. 

Jawboning about supply cut by OPEC and increasing demand from US, China & India may be supporting Crude Oil to some extent, actual re-balancing in supply/demand dynamics may be still far away. Crude is now directly co-related to risk trade, while USDJPY may be the opposite (inversely co-related).

Indian market was struggling today a little bit as there was some report that fiscal math of the Govt may come into pressure as a direct fall out of immediate payment (Aug salary) for the 7-CPC along with arrears and OROP (for around Rs.34000 cr). 

Although, previously Govt was banking on the telecom spectrum auction and PSBS share buy back proceeds, there may be some delay & shortfall in actual receipt for these and thus Govt may go slow on fiscal spending (capex) in the 2-nd half of this fiscal.

There was also some report that industry lobby want at least six months time frame for implementation of GST after expected Dec'16 passage of the bill (full with final rate) . This means that the GST roll out may happen in Oct'17 in lieu of earlier expectation of April'17.

The week was stared with bad news in the inflation front with the CPI at 6.07% and virtually, there will be almost no probability of any rat cut by RBI in Oct'16; subsequently there was some broad based selling in the rate sensitive & bank scrips on the 1-st trading day of this week.

But later in the week, SBI result came above market expectation, specially on the NPL front and that had changed the bearish sentiment for the banking stocks to some extent.

Also yesterday's SEBI proposal about corporate bond rejig helped the banking stocks significantly. 

As par reports, SEBI is going to rejig the much awaited Corporate Bond market in India and once approved, Banks can lend from the overnight RBI repo window against approved corporate bonds with some limits/restrictions. Previously, Banks can only borrow against Govt bonds. This step may also be helpful for a vibrant corporate debt market, which is still at nascent stage in India and many corporates may access fund from this route rather than depending only on Bank finances.

As a direct fall out of NPA mess, Banks are now increasingly reluctant to give corporates any fresh loans (except top graded corporates). New generation private banks, such as Indusind, Yes & Kotak banks may be the major beneficiary for this Corporate bond market rejig proposal as a significant portion of their fund requirement come from the overnight RBI repo/MSF window (wholesale funding).

 

Bank stocks also got some boost as the Govt may announce name of the new RBI Gov by this week itself (hopes of market friendly dovish RBI Gov). But till now, there is little suspense about it although there is only around two weeks left for "Rexit".

Overall, for the next week, all eyes will be on the BOJ, Yellen at the annual Jackson Hall symposium for some cues about Fed thinking and on the Indian Govt announcement of the new RBI Gov's name.

 

As par some reports, UK may invoke Aticle-50 by April'17 to begin the official negotiations with EU and will be ready for "divorce" by 2019. A large section of the market participants still believe that UK will not exit EU by any cost and market is not basically prepared for real exit and combination for "Brexit & Rexit" (real) may be fatal despite "power of liquidity" by the central banks

 

 

SGX-NF-EW

 SGX-NF