Nifty "tanked" by more than 1% after analyst's poll forecast July CPI at 5.90% and effect of solid US NFP data waned off

Nifty Fut (Aug) closed around 8595, just shy off the day low (8590) after making an opening high of around 8724.

Technically, despite last two day's close above 8665 zone, today it failed to sustain that level and thus it may be an early indication of "change in trend" as distribution may be happening now after the recent blockbuster rally of around 28% from the Feb'16 low.

Looking ahead, sustaining below 8560-8540* zone, NF may target 8480*-8390-8270 and 8205*-8105-8000 area in the immediate to short term.

On the other side, for any strength, NF need to trade above 8640-8675* zone for the target of 8700-8785*-8825 and 8875*-8950-9075* in the immediate to short term.

Today's morning Asian session was lacklustre and USDJPY fall towards 101 as there was some report that BOJ may alter bond purchase programme in a range of 70-90 bln Yen against the present 80 bln Yen/month. It appears that there is a growing scarcity of eligible bonds for purchase (QE) by the global central bankers and BOJ is not an exception also.

USD was also weak across the board as yesterday's Non-Firm productivity index came worse than expected and market is getting the sense that despite recent surge in job data (NFP), inflation is not boosting up and this divergence along with the forthcoming US election may be perfect excuses for the Fed to be in hold at least till Dec'16. 

Also growing divergent monetary policy accommodation stances between Fed and other G-10 central bankers will force the Fed to be in sideline even after Dec'16. Thus, JPY getting stronger and risk trade is "off" for the time being.

Back to our market, after yesterday's red flag about inflation trajectory by the RBI, there was some reports of economist's poll for July CPI and the median projection came around 5.90% against 5.77% of June'16 and that spooked the market to a great extent today.

As par present RBI policy, RBI will take a call regarding Oct'16 rate cut depending upon the CPI trajectory in July & Aug and if CPI will indeed be in the upper trajectory above 5.50%; i.e. in the range of 5.90%-5.75%, there may be little elbow room for any rate cut, even by 0.25%.

Incrementally higher foods/vegetables/sugars and some commodity prices may be some of the prime reasons for possible higher inflation in the July-Aug period, despite better monsoon. Also there may be some adverse effect of 7-CPC induced wage inflation in the economy in the months ahead.

Also, the famous bear king (Marc Faber) today predicted 50% correction in S&P-500 to almost 1100 level (??) without any specific reason and that may also act as some sentiment dampener today. 

As par Faber & Greenspan, all central bankers, specially G-4 may have reached an inflection point and we may see a "dooms day" scenario in the months ahead. 

As there is no fresh driver today, market choose to book some profits (long unwinding/fresh shorting) and correct modestly.

Technically, till 8480 is convincingly broken in NF, there will be some hopes for the bulls and the same is true for bears till they are able to protect 8785 zone.