Market Wrap: 15/11/2016
(16:30)
Nifty
Fut (Nov) today plummeted by around 2.40% to close around 8126 after making an
opening session high of 8288 and late day low of 8124. NF also closed below key
technical level of 8195-8135 zone and consecutive closing below this zone may
also open the flood gates for 7900-7200 area in the coming days/months.
Indian
market today opened lower by around 56 points after extended weekend on the
back of continued pressure on EM currencies as a result of “Trumponomics” &
strong DXY (dollar index) coupled with rising yield and domestic headwinds of
demonetization (war on black money) and its effect on economic activity &
overall H2FY17 corporate earnings. Analysts are now expecting an overall Nifty
EPS growth of around 10% in FY-17 against earlier estimate of 15%.
Although,
after EU session kicked off, the “Trumpflation” trade has begun to fade by some
extent and Copper & Bond Yield fall slightly from the recent record high,
Indian market did not react positively as domestic concern continues and USDINR
surged towards 68 levels.
Globally, in the current bond market routs, around $9 tln bonds are in severe risk as a result of Trump's rhetoric about more fiscal stimulus package to "rebuild" America and coupled with that the tax cut plans may increase US fiscal deficit & inflation in the coming quarters, which may also prompt Fed for a rapid rate hike (at least 2-3 hikes in 2017 against earlier expectation of 1 hike).
In that scenario, USDINR may also surge towards 71 level, which may prompt for more FII selling in the Indian market and this out-flow concern may have also dampened the Indian market mood.
The
Indian market sentiment also affected by the continuing “Board Room Battle”
between Tata & Mistry and weak earnings by some of the key Nifty
constituent like Tata Motors.
Also,
there were visible selling pressure on the NBFC spaces and some private banks having
greater retail liabilities. As a result of Govt’s war on black/unaccounted
money and subsequent chaos & cash-flow issues, NPL/NPA may increase
multifold, especially from the rural regions and CV finance portfolio may also
be affected apart from the “jolt” in India’s consumption story, which may be
dependent “too much” on the parallel economy of the country for decades (like
real estates, autos & expensive 2W, cement, consumer durables etc).
In
short, confidence of Indian public on its high denomination currency may also
be rattled and popularity of NAMO may be also in question after this
demonetization crisis and resultant hardships of common people.
As
a result, various political parties including BJP are indulging in serious
political battles and “war of words” as par their convenience. Eventually, this
may have a serious effect on the passage of final GST bill in the forthcoming
Winter Parliament session and its implementation from April’17 may looks
difficult at this point as Govt is pre-occupied with this demonetization chaos
and will also be busy for the budget presentation on Feb-1 (2017).
Lack of
political consensus because of this so called “war on black money” and series
of forthcoming state elections may also slow the overall economic reforms from
the NAMO Govt and it may be also difficult to roll out GST even by Sep’2017.
Apart
from the domestic headwinds and high probable Fed rate hike in Dec’16, there
are various geo-political events and EU political risks as a result of
increasing “Anti-Establishment” notions fuelled by “Brexit” & “Trumpism”,
concern of further Chinese Yuan devaluation, fund outflow & debt. Also
Russia may be hardening its stance on Syria issues taking advantage of some
probable “power vacuum” as a result of “weak” Trump & his election rhetoric
about providing “Nato protection” to its EU allies for an “appropriate fees”.
Thus
between Dec’16 to March’17, there will be various geo-political and economic
events which may add significant volatility for the global financial as well as
the Indian market.
Technically, consecutive
closing below 8485 may invite for 7975-7925 area for NF in the short term and
7200-6800 zone in the mid-term (by March’17).
SGX-NF
No comments:
Post a Comment