Nifty May Continue To Be Under Pressure Amid Rising US Bond Yields And Fear Of GDP Impact As Indian Govt Declares “War” On “Black Money”; Watch 8195-8135 & 8290-8385 In NF Today

Market Mantra: 15/11/2016 (08:15)

As Par early SGX indication, Nifty Fut (Nov) may open around 8240 (-96 points) amid continuing carnage in EM currencies as a result of strong USD & rising bond yields for expectation of more fiscal stimulus/infra spending in PPP mode, tax cuts and boost in inflation. FFR is now indicating around 92% of rate hike probability in Dec’16, which is also making USD/DXY stronger.

Although US market is hovering around life time high and EU market is also not faring bad despite significant political risk, there is visible pressure on EM for the last few days, except Japan, which is quite stable for weak Yen and better than expected economic data (yesterday, GDP came much above consensus at 2.2% YOY & 0.5% MOM).

As a result of Brexit & Trumpism, nationalistic or anti-establishment politics is on the rise across EU. Italy is going for a constitutional referendum in early Dec’16 and “NO” vote is again on the rise, threatening the political stability (??) there and it may be also viewed as an “Italyexit” like Brexit. Thus, across the EU, there may be some types of rising political risk, where Germany, France, Italy, Netherlands and some other countries are going for election in the coming months (2017-18).

Back to home, Indian market may be under immense pressure as a result of sudden “Surgical Strike” on “Black/Unaccounted Money” & demonetization by NAMO. While there is no doubt about the good intention of the Govt to eradicate the menace of “black money”, its may be a reality that India’s consumption story may be severely affected at least in the short to mid-term and we may also have significant effect on the overall GDP too.

Although, banking stocks were in the limelight after demonetization drive, the resulting chaos and effect on cash flow & “lack” of unaccounted money may also drive the NPL higher in the coming months, despite “surge” in CASA (bank deposits). Also, in the days ahead, we may see more bank withdrawals than deposits as Indian households may prefer to keep some savings in the new currency notes at home (“hidden savings by Indian house wives”).

Technically, NF has to sustain over 8290-8310* area for rebound towards 8365/8385*-8425 & 8475/8495*-8550 zone for the day (bullish case scenario after gap down opening).

On the other side, sustaining below 8215-8195* area, NF may further fall towards 8135/8115*-8065/8045 & 8000/7975-7925/7900* zone for the day (worst bear case scenario after gap down opening).

Similarly, BNF (19866) may open gap down around 19665 zone and it has to sustain above 19600-19530 area; otherwise, it may further fall towards 19430-19350* & 19150-19000*/18850 area for the day (bear case scenario after gap down opening).

For any meaningful strength, BNF need to sustain above 19800-19900 zone for further rally towards 20050-20350* & 20450-20650* area for the day (alternative bullish case scenario).

 SGX-NF

BNF