Nifty Closed The Oct Exp At 8615 After After A Volatile Day Marked By Tata-Mistry Duets---What's In Store For Nov?

Market Wrap: 27/10/2016 (17:00)

Nifty Fut (Oct) today closed around 8615, almost flat after a wild day of swing and made a session low of 8547 and late day high of 8624. 

For the Oct Exp, Nifty also finished almost flat after making "Surgical Strike" induced low of around 8505 and later marked by "Cyexit".

Technically, NF-NOV (LTP: 8655) has to close above 8700 zone for at least three consecutive days for target of 9000-9200 in Nov-Dec in extreme bull case scenario.

On the other side, consecutive closing below 8480 zone for at least three days, NF may fall towards 8000-7925 area by Nov-Dec in the worst bear case scenario.

For tomorrow (28/10/2016), NF has to sustain over 8680-8720* area for further rally towards 8760/8790*-8815/8850 zone in the immediate to short term.

On the flip side, sustaining below 8660-8620* area, NF may further fall towards 8600/8540*-8500/8480-8450/8425 zone in the immediate to short term.

Overnight US market recovered from negative to close flat on the back of robust earnings of Boeing and rally in Oil amid surprise inventory draw down by a Govt report, contrary to earlier Pvt Report. But, eventually, Crude was not able to sustain above $50, because of skepticism about OPEC's plan of production cut or even freeze.

Indian market today opened lower (gap down) following tepid global cues and most of the days traded in deep negative amid "Cyexit" jitters, which have not only affected some of the Tata Group shares significantly, but also affected the sentiment of the overall market. 

Also, largely "in line with estimates" earnings, but tepid guidance may have failed to convince the market and along with that, the continuing uptrend of the NPA woes of the banking sector may have also made the market jittery to some extent.

Market sentiment was improved today in the last hour, after Govt announced its plan to sale its stake for 17 PSUS (although there is no definitive time line). If sold successfully, then it may help the Govt to reduce the burgeoning fiscal deficit because of high infra capex & defence expenditure and 7-CPC/OROP pay outs. Govt today announced another "Diwali Gift" to the central Govt employees in the form of 2% DA.

Also, Tata Sons response to the "Letter Bomb" by Mistry helped to calm the nerves of the market/Tata shares by some extent. Although, the verbal duel will go on for some days, it has already dented shareholder's worth by a huge amount and already damaged the reputation of brand "TATA" for various reasons.

Now, regulators (SEBI), stock exchanges (NSE/BSE), various rating agencies and also banks are getting concerned and seeking clarifications regarding alleged write down probability of $18 bln in various group cos, corporate governance, cash flow issues etc. SBI may also review its total exposure of more than Rs.70000 cr with the Tata groups shortly.

From the overall flow of events, it seems that no big name (like Indra Nooyi), outside Tata family may be willing to act as a "Lame Duck" TATA SONS chairman, and in that scenario, Noel Tata may be an ideal candidate (being half brother of R.Tata, he may be an “Yes man”). But, Noel Tata has also married the sister of Mistry and it may be very doubtful also for him to be the next Chairman of TATA SONS.

Thus, in this board room war & family saga, R. Tata may continue for another 1-2 years as interim Chairman till they found any "suitable" big name, who can act as a "Lame Duck" Chairman and also be a global ambassador of brand/image “TATA”. 

Eventually, moral & confidence of key people in the group may deteriorate and investors may lose faith in the Tata groups as public spat between Tata & Mistry gets uglier day by day.

The main concern for the market may be the continuation of the present strategy of deleveraging employed primarily by Mistry, irrespective of “passion & emotion” attached with a non-viable business for Tata ("Hotspots" like Tata Steel UK/Corus, Tata Motors PV/Nano, Tata Power/Mundra, Indian Hotels, Airline ventures/Air Asia & Vistara).

Overall, sentiment of the global market was subdued in the early Asian session today after some verbal jawboning by BOJ-Kuroda, which made the Yen stronger.

But, later in the EU session, better than expected UK GDP data helped the "risk on" sentiment and Indian market also rebound from the days low.

Although, UK's GDP data may be revised later, but it also showed a "resilient" economy supported by dual benefit of a weaker currency and EZ/EU trade access. It does not capture the likely fall out of a "Real Brexit", be it "soft" or "hard" and did not alter the high probability of invocation of Article-50 in the coming months (March'17 or by Dec'17) and uncertainty with it.

Moreover, the better than expected UK GDP data came on today largely on the back of service sector & consumer spending and going forward, because of rising inflation (weak currency) & weak earnings growth may reduce the consumer's spending power and subsequent growth of the economy.

Thus, US election risk (Trump is now getting closer to Clinton as par latest poll), Fed hike (Dec'16) and subsequent dot-plots (1-2 hike in 2017), Real Brexit, China Yuan devaluation & credit concerns, EU/Italian banking crisis may be some of the global head winds, which may affect the market in Nov-Dec, despite India being a "sweet spot" in the global economy.

Domestically, all eyes will be on the Q2FY17 earnings, current spate of Tata saga, progress of GST & budget and ongoing geo-political tensions with Pakistan which is taking the shape of a virtual "Mini War" amid daily incidence of cease fire violations.

Overall, Nifty can break the present trading range amid various geo-political events & domestic cues and can move significantly in either way (500 points) by Nov-Dec'16.

SGX-NF