Nifty Ends In Red Amid Tepid Global Cues & No Fresh Domestic Triggers Ahead Of US NFP---What's Next?

Nifty Fut (Oct) today closed around 8720 (-0.13%) after a range bound trading most of the days (Opening session high 8748 and day low 8691). 

With today's closing Nifty closed the "Post-Surgical Strike" week higher by almost 0.90%.

Technically, for Monday (10/10/2016), sustaining below 8715-05* zone NF may fall towards 8665/45*-8585/40-8515/8475 area in the immediate to short term.

On the other side, for any strength, NF need to sustain above 8765-95* area for any meaningful rally towards 8835/75*-8905/36-8995/9030 zone in the immediate to short term.

Indian market today opened almost flat following subdued global cues. Yesterday, US market got some boost as an ECB official categorically denied any early bond buying tapering as speculated for the last few days. 

Also, there was report that DB is going for some asset monetization plan and some of the top German corporates are planning required amount of capital injection, in case of any "emergency" (back door German bailout plan??). All these has improved some "risk on" sentiment despite concerns of Dec Fed hike.

But, "risk on" sentiment was battered in the early Asian session today, when Pound (GBPUSD) suddenly plunged more than 6% within few minutes before recovered again. 

Although, the main reason may be fat fingered flash crash/stop loss trade in a huge option barrier (thin liquidity) induced by some hard Brexit talks by the French Prez yesterday and similar hard stance by the UK PM (now talking more like communists!!), it reminds that the global financial market may not be prepared fully yet for a "Real Brexit". 

Some sections of the market participants may still believe that eventually UK will not exit EU/EZ. In any way, even after London opens, GBPUSD again turned lower and trading below the psychological 1.25 level and eventually may be heading for parity in the months ahead simply because of an environment of uncertainty in UK and stronger USD (policy divergence between Fed & BOE).

UK/BOE may have done a good job by devaluing its currency (GBP) simply on the fear of Brexit without too much stimulus, which is helping the mfg/export sector of UK by a great extent. But, the real concern may come in the months ahead, because UK can't be allowed to enjoy the advantage of both sides (weak currency/GBP & benefit of EZ trade advantage).

Globally, all eyes will be on the US NFP job data today for an assessment of the underlying strength of the US economy and probability of Fed's rate hike in Dec'16. Although NFP estimate today 175k, unemployment rate 4.9% and hourly wage growth at 0.2% (mom), some analysts are also looking for 190k/4.8%/0.3% respectively. 

In any way, any good NFP data above 200k today may make the USD much stronger and we may see some serious "risk off" trade in the days ahead. Any NFP data below 150k, may keep Fed in the sideline further and in that scenario, "risk on" trade should flare up, at least for the short term.

From various indications, it seems that if there is no unexpected geo-political shock this time, Fed will not only hike in Dec'16, but may also give a clear guidance about path of future hikes (probably 1/2 hike in a year). 

Thus, rather than one symbolic hike, Fed's dot-plots may matter more as market is seriously taking Fed's hawkish comments now-a-days.

IMF also warned yesterday about disorderly global financial market, especially in the Asian EM in the case of  Dec hike by Fed and it seems that they are less confident about the underlying strength of the global economy.

Overall, it seems that G7 central bankers have now little room for more QQE and their credibility is at stake. 

After decade long QQE and record public/private debt creation, Central bankers are now looking to the Govt for some fiscal as well as structural measures to stimulate the economy. But, the market is now too much addicted for QQE and any slight hints of roll back is causing massive "risk aversion".

Back to home, India yesterday concludes Telecom Spectrum auction for an amount which is far less than the budget estimate and it may prompt the Govt for more disinvestment & SUUTI sales to make up for the budgeted expenditure, which may be negative for the market sentiment in the days ahead.

The Q4FY17 result reason kicked off today with result of South Bank. Although PAT surged, may be because of low base effect, there was no let up in stressed assets and it actually increased. Thus, NPA/NPL cycle may not be over yet, though it may be near bottom as par some analysts.

Indian market sentiment was also adversely affected this week due to repeated incidents of cease fire violations in the border (Pak) and increasing attacks to various Army/BSF camps.

As Pak officially dined any incident of "Surgical Strike" by the Indian Army last week, there may not be any immediate retaliation by Pak Army, but incidents of cross border firings & terrorism may increase multi fold, which may keep our market on an edge.

Though, in the face of global isolation, Pak may officially take position to inactive/destroy the "bad elements" (terror hubs) in POK, in reality, Pak Army may not be in true control of the Pak Govt and in that scenario, we may see more geo-political tensions in the months ahead. 

On the other side, it’s not possible to destroy all the terror hubs in POK by one & off "Surgical Strike" and in that scenario we may see many more such "surgical operations"  by India, but "deep surgery" without "required anesthesia" may often be bad for both the "surgeon" (India) and the patient" (Pak).

Today, Nifty was supported by Tata Steel (better Sep production figure, fund rising), Tata Motors (SA contract for its Bolt model & Weak GBP), Bajaj Auto, Adani Ports, while it was dragged by Cipla, Infy, HDFC & Bharti (telecom capex). IT packs were weak today, may be because of fear of Brexit & UK election risk.

Overall, technically, a weekly closing below 8740 in NF may be not an good indication for the market.

 SGX-NF