Nifty Snapped Recent Rally Amid Negative Global Cues; But Closed The Weak By 0.7% Higher--What's Next ?

Nifty Fut (Sep) today closed around 8903 (-0.89%) after making an opening high of 8962 and session low of 8890; but closed the week almost 60 points higher.

Technically now sustaining below 8890 area, NF may fall towards 8840*-8790-8735 and 8665*-8600-8560 zone in the immediate to short term.

For any strength, NF need to sustain above 8945 area for target of 8975/95-9025-9075* and 9125-9185*-9205/60 in the immediate to short term.

Today's early morning Asian cues was tepid as overnight US market closed lower (-0.25%) on the back of "not so dovish" Draghi/ECB. 

From the overall neutral policy rate & QQE action and tone of the "Super Mario", its more like a hawkish stance as Draghi did not spell out any specific commitment about time extension of the current bond buying programme beyond March'17 as expected by the market; although the door is quite open, if any unforeseen situation demands.

Clearly, ECB may be finding it quite difficult to buy eligible bonds for buying @EUR 80 bln/pm in the present era of NRIP/ZRIP and going forward we may see some tweak in this rule or even an unprecedented direct ETF buying by the ECB (like BOJ ?).

ECB and other central bankers (BOJ/BOE) may be finding it quite difficult to expand the current QQE considering the limitations of NRIP/ZRIP and they are basically pleading for more Govt sponsored fiscal stimulus and structural reform. 

As "firepower" (QQE) of the central banks are at decade high, they want to preserve it for a "rainy day" or so called "dooms day".

Another development is that an influential Fed member will speak on Monday which was unscheduled. Market is apprehending that it may be another hawkish script by Fed as it's trying hard to convince the mkt that a real rate hike is indeed coming by Dec'16. Already Rogerson's rate comment short while ago causing a significant USD strength and Dow plunges as "Fed Fear" in full play.

Today, North Korea was suspected to test a nuclear bomb in the early morning and all these are causing some types of flow to safety of dollar as well.

Despite some hawkish stance by ECB yesterday, USD is rallying as 10YTSY yield jumps above 1.60% and market may soon prepare itself for a probable Dec'16 Fed rate hike.

As par the recent poll, Trump is getting very closer to Clinton and the forthcoming Presidential debate starting from last week of this month (Sep) may guide the market further. 

No doubt, it will be a very close fight this time and any real probability of "Trumpism" may be bad for "risk assets" as well; but in that scenario, Fed will be in hold in Dec'16 also and forever (or at least Dec'17).

Indian market (logistic stocks) today got some support from the progress of GST; yesterday, after mkt hours, GST amendment bill got Presidential approval as expected and now the GST council will be formed to finalize the rate and other formalities, before it will go to the next winter session of Parliament for final approval & shape. These phase will be most vital as par roll out of GST by April'17 is concerned.

But the overall sentiment of the market (specially for the banking stocks) was dampened to some extent today after Yes Bank cancelled/deferred its $1 bln QIP yesterday (after market hours). Whatever may be the actual reason, it may dent the confidence of the overall mkt in the days ahead as talks of some hidden NPA/NPLS are there. Previously, many Indian banks raised capital from the FPIS by telling a lie about its true NPLS/NPAS and over the years, now FPIS are quite cautious too (as par some reports, almost 15-25% of PSB's total loan book may be categorized as NPA/NPL).

Today Nifty got good support from ONGC (GSPC stake buy buzz & rally in crude oil), RIL (some TRAI help in resolving the present telecom war apart from higher crude oil), IT packs (short covering after last few days intense selling).

Nifty was dragged by today Yes Bank (QIP fiasco), Cement & Metal packs, ITC, HDFC and pharma packs.

Pharma stocks yesterday rallied quite significantly as market is assuming that with the forthcoming US Presidential election coming to an end, USFDA issues will be gradually resolved (as it may be a more political problem rather than any structural issues).

Another point is that although oil is rallying on the back of sudden unexpected US inventory draw down yesterday, a closer look reveals that it may be related to huge fall in import and weather (hurricane) related issues. 

Also talks of US SPR (Oil) release and allowing 9/11 lawsuits against Saudi Arabia is putting oil under some selling pressure.

Technically, unless & until Crude is sustained over $48.65-49 zone, it may again come down as there is no visible re-balancing on the ground.

SGX-NIFTY