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