Nifty Fut (Sep) today closed
almost flat around 8782 (+0.16%) after a late day recovery (high
of 8784) and session low of 8728.
Looking at the chart, for
tomorrow (16/09/2016), Nifty Fut has to sustain over 8800-8825*
area for further rally up to 8875*-8925-8975/9025 zone.
On the flip side,
sustaining below 8785-8745* area, it may again fall towards
8705-8665*-8615/8545 zone.
Today global market was
tepid after overnight weak closing of US market amid
selling in oil and various BOJ speculation/leaks.
Yesterday, oil was a big headwind of the mkt. Although, DOE inventory report was supportive, crushing data was above expectation and this may be an indication that more & more supply is coming to the mkt as oil is stabilized in the 40-50$ range.
With Fed is in the black out period, all
attention was with the BOJ and their various selective leaks about
the probable stance in the next week. Market will be happy if
there will be some modification of the current QQE program without
any condition; any talk of tapering to steepen the Japanese bond yield
curve may be negative for the market.
Basically, global market is
dancing for the last few days in the tune of various BOJ
speculation as its now almost certain that Fed will not act in Sep,
just before US election (Nov), whatever may be the incoming
economic data in US.
As expected, both SNB & BOE came pat today
with no policy change and maintain accommodative stance (as
expected). But the overall tone of the BOE is not so much dovish
as market was expecting.
As a result of Brexit, GBP is already
depreciated significantly (by around 12%) from Pre-Brexit level
and together with Post-Brexit QQE by BOE, UK economy has performed
quite well, specially in the export front despite some headwinds
in the housing market (price falls significantly). Devalued currency (GBP) has helped the UK economy by a great extent contrary to the notion of immediate uncertainty/stability as a result of Brexit referendum.
Going ahead, invocation of Article-50 will be
most vital as Germany & other EU officials may not tolerate for long
UK's present stance to be officially in the EU taking all the
trade advantage and at the same time enjoying the benefit of a
weaker currency (GBP).
Germany may be the biggest looser of Brexit
as of now as their export has plummeted significantly due to
weaker GBP/export competitiveness of UK. Thus, UK will have to
take a definitive decision sooner than later to either stay in EU
or exit by 2017-19 and if real Brexit happens, then it will be a
acid test for EU concept as more country will try to take the
similar path and uncertainty will grip the global financial
market.
Today Indian market opened little gap down, but
soon after opening there was some market news that Govt/Commerce
Ministry are actively pitching for rupee devaluation by policy
changes (??) and planned a meeting with the Finance ministry on
20-th Sep for this issue. Soon after that, USDINR jumped and there
was some broad based selling in the market.
Though, later this rupee devaluation plan was
denied by both the Commerce & Finance ministry, some damage
was already done (as there is no smoke without fire). Without
tacit approval by the PMO, its not possible for the Commerce
Ministry to even divulge a rupee devaluation plan intentionally or
otherwise, even for the benefit of the slagging export sector.
Actually, it seems that Commerce Ministry is
pitching for an overall export oriented package to the PMO
comprising of INR devaluation (to compete with other countries in
this era of currency war), rationalization of railway freights
structure (abolition of cross subsidy concept in Indian Railways),
withdrawal of MIP on the steel sector to help the domestic
engineering export industry, easy visa regime with reasonable cost etc.
As India is an import oriented country, abrupt
devaluation of INR may be bad for overall economy except some
selected sectors (export oriented: IT, Pharma etc).
A weak INR may
also cause significant headwinds for the Indian Bond market and
confidence of the FPIS in the stability of the Indian Rupee may
tarnish.
Also, corporate India are now in a "masala bond" spree,
where the currency risk is borne with the bond holders (FPIS/FIIS)
and thus any deliberate INR devaluation plan by policy changes
(backdoor QE by India ??) may be quite risky as far FPIS are
concerned.
Another point is that a devalued Rupee may aid further uptrend in the inflation and thus it may be quite difficult for the RBI for any future rate cut.
Thus India may be facing a double whammy of tepid trend of export and risk of downside of the overall domestic economy if Rupee is devalued significantly. India is basically a service based economy and to transform it to manufacturing based economy like China, it has to export significant manufactured goods beside service (IT). India's share in global trade is now just around 2% and the aim is to increase it to around 3.5% by 2020. Without export competitiveness, India's dream of achieving $10 tln GDP from the present level of $2 tln may be very tough as domestic consumption is not sufficient to fulfill this dream and "Make In India" initiative by the Govt may be in jeopardy also.
Indian market was also supported today by the
report that PMO is actively monitoring the progress of GST for a
nationwide roll out scheduled for April'17.
Incidentally, Infy CEO
today made a presentation of the GST IT network software to the FM
and as par him, its quite challenging to launch a complex
GST IT software within such a short period ("GST roll out is a hell of challenge").
Market sentiment was slightly dragged today after
reports of deficient rain (4% below LPA as of now against earlier
6% above LPA and normal/at par LPA) this year.
As par some reports, India may report
Q1F17 current A/C surplus after a long period of nine years; while
this looks good for our macro, it may also indicate tepid
investment and weak export activities. Although Govt capex in
infra is encouraging, the much awaited private investments are not
happening as expected for various macro economic reasons.
The sharp contrast between the CPI
& the WPI is also worrisome and may deter any immediate hope
for Oct rate cut.
Today, Nifty was significantly
supported by media stocks (buzz of Reliance buying Sun TV with
open offer @600/share ??), Bhel, RIL (telecom interconnections by
the other operators and INR devaluation Buzz may help its oil
export), ITC (positive management commentary), HDFC (above
expected advance tax figure).
Nifty was dragged today most by Banks
(Oct rate cut hope is diminishing), metals (Chinese holidays &
lower demand). Yes bank also fall today again after reports of
SEBI investigation about the recent QIP fiasco and stock price
volatility. There was also some report about the bank's core
operating profit strategy, which is mainly fee based rather than
thrust on net interest income and hidden stressed assets.
SGX-NIFTY
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