Nifty Dragged By “Blood Bath” In Pharma And Confusion Over GST Amid Tepid Global Cues And Closed The Week Around 2.4% Lower Marked By US Election Outcome Anxiety; What’s Next ?

Market Wrap: 04/11/2016 (16:30)

Nifty Fut (Nov) today closed around 8458 (-0.70%) after making a session high of 8530 in the opening session and subsequent day low of 8426.

Technically, for next week (07/11/2016), NF has to sustain above 8440-8485* area for any bounce back; otherwise it may fall towards 8405-8360/35*-8260 and 8160-8035*-7975/7925 zone in the immediate to short term.

On the other side, for any meaningful strength, NF needs to close consecutively above 8545-8590* zone for further rally towards 8635-8660-8705* & 8750-8795-8875 area in the immediate to short term.

Overall, consecutive closing below 8545-8485 area, may pave the way for 8000-7925 area in NF and the present down trend may change only consistent closing above 8545-8590 area for any bounce back towards 8800-9000 zone.

Indian market today opened lower (gap down) and there was visible negative sentiment most of the day, especially in the midcaps and Pharma scrips (US DOJ investigation issue for generic drugs pricing marked by US politics).

Indian market also underperformed its global peers for this week marked by US Election uncertainty as gap between Clinton & Trump has narrowed significantly. 

The apparent under performance may be due to the fact that S&P and other rating agencies has refused for any immediate rating upgrade for India citing low per capita income, lack of private investments & sufficient bank recapitalization amid pain of India’s “twin balance sheet”. Also lack of private investments is forcing the Govt for more capex and together with that higher defence expenditure and 7-CPC pay outs are making the fiscal deficit more alarming.

Another factor may be that, who ever wins this time (Clinton or Trump), USD is bound to be strong and Fed also have to hike 1-2 times in 2017 apart from Dec’16. Also, there will be FCNR(B) redemption pressure on INR in the coming days. In that scenario, USDINR may jump towards 70 and a weak rupee may be bad for FPI(s) portfolio and this may be one of the reasons, FII(s) are selling for the last few weeks consistently.

Govt yesterday proposed multiple GST rates along with cess, which may be more confusing and eventually may not contribute to the much expected GDP growth (1.5%) as ultimately consumer spending (consumption) may not increase incrementally, because there will not be any drastic fall in cost of livings and consumer goods.

There was also some report that GST council may not agree for a consensus on another contentious issue of dual control mechanism, which may also hurt the domestic market sentiment.

After market hours today, this concern comes true and the GST council meeting for dual control mechanism remains inconclusive and they will again meet in the last week of Nov. Thus, there may be considerable doubt about passage of final GST bill in the forthcoming winter Parliament session. Subsequently, the roll out plan for April’17 may also look difficult and in that scenario, Govt may “plan” for Oct’17 GST roll out, which may also be negative for the Indian market sentiment.

Also the ongoing tensions in Ind-Pak LOC and "war of words" between Tata & Mistry has affected the overall Indian market sentiment and even at par expected Q2FY17 earnings failed to impressed the overall market sentiment.

Apart from the ongoing US Election drama & today’s NFP data, all eyes may be on the FBI also for any conclusive outcome about Clinton’s e-mail issues. If any “positive clearance” will come from the FBI in the weekend just before US Election day because of immense political pressure, global as well as the Indian market may rebound well.

When there is confusion between fundamentals (underlying news/event) and technicals, one should always follow the technicals, even with a small position as time & price is the ultimate.

As of now, technicals suggest that SPF (LTP: 2082) has to sustain above 2075; otherwise, it may further fall towards 2050-2030-1995 level in the immediate to short term (bear case scenario).

For any strength, SPF need to trade above 2100-2110* area for further bounce back towards 2135-2150-2165 zone in the near term.

 SGX-NF

SPF