Market
Wrap: 05/11/2016 (17:00)
Nifty
Fut (Nov) today closed around 8508 (+0.60% & +51 points) after making a
session high of 8560 and opening session low of 8503.
Technically, for
tomorrow (08/11/2016), NF has to sustain over 8480 zone; otherwise it may fall
towards 8440-8405*-8360 & 8335*-8270-8160 area in the immediate to short
term.
On the other side, for
any meaningful strength and overall trend reversal, NF has to sustain
consistently over 8545 area for further rally towards 8575/8595*-8655-8705
& 8750*-8800-8875 zone in the immediate to short term.
Despite
opening gap up following positive global cues after FBI cleared Clinton for her
e-mail saga in the weekend, just before election day tomorrow, NF failed to
sustain over the crucial technical level of 8545 and closed the day well of the
high, making a “Doji” (indecisive candle) on the technical chart.
This
may be because, despite FBI clearance, US Election outcome uncertainty may not
be over yet, as Clinton is now enjoying only 3% lead in the opinion poll over
Trump. FBI announced its investigation only last week and its “super efficient”
officers has scanned nearly 6500 e-mails in the last 5-7 days for giving clean
chit to Clinton may have raised some serious "questions of trust" on the whole
process and significant voters may be still undecided as the damage has been
already done to the Clinton camp.
There was also some story of Clinton acknowledged
ISIS related funding from Saudi Arabia, when she was the US secretary of state.
All these may have been playing in the minds of the voters of “Real Street” and
eventually, it may be a close finish between Clinton & Trump or Democrats
& Republicans this time.
Ultimately,
Clinton may win (as also being reflected by various polls), because at the end
of the day, voters may decide for a “stability” as Clinton is being viewed as a
candidate for “status co”, whereas Trump is being portrayed as a symbol for “Change”.
Friday’s
US NFP was basically a non-event except some momentary whipsaws and did not
affect materially any probability of Dec rate hike by Fed. Although, the
headline NFP (161k) was less than market estimate (175k), the revisions of the
previous months along with drop in unemployment rate (4.9%) and spike in
average hourly earnings (0.4% MOM against estimate of 0.3%) has reinforced the
notion that except for any nasty surprise (like “Trumpism”), Fed is well poised
for the Dec’16 rate hike and subsequent guidance of 1-2 rate hikes in 2017 as
overall US economic data may be well above Fed’s own projection.
But,
the market will dance to the tune of US election in the near term as economics
and monetary policy has taken the back seat ahead of the ongoing US election
drama.
As
par various reports, there may be three scenarios of US Election outcome this
time, which may be an exceptional geo-political nature, considering that one of
the potential candidate (Trump) is an “unknown” political leader with no record
of any previous political skills or policies :
1. Trump becomes next US Prez and Clinton
accepts defeat: Expect an immediate “dooms day like scenario” for the global
risk assets and SPF & Nifty may correct by 10% in the near term.
2. Clinton becomes the first female Prez
of US; Trump accepts defeat: Expect an immediate rally to the tune of 5% in SPF
& Nifty; but may again move lower as Clinton, though viewed as a candidate for
“stability & continuity”, she has many problems of her own too. Fed has to
hike in Dec’16 as they may have no other caveats by then and geo-political
clash with Russia may also escalate because of Syria issues (Clinton being
viewed as also a “war mongering” US Prez) and some concern with China may again pop up.
3. Clinton/Trump becomes Prez by narrow
margin (lack of absolute majority in both houses of US congress) with losers
refuse to accept defeat: This may be the most likely one post US election saga.
In this scenario of divided government, where White House & Senate may be controlled by the Democrats (Clinton) and the House may be the republicans (Trump), the ongoing uncertainty may prevail and that may also be
extremely negative for the market as it does not like “uncertainty”. Risk assets
may also be doomed including USD, EQ, Bonds and precious metals (Gold/Silver)
may be surged.
Thus,
after US election result, global market including India may rally around 5% for
few days in the best case scenario of a clear Clinton win and may fall again.
On the other side both Trump win or a narrow result may cause significant
turmoil for the global “risk on” sentiment and we may have 10-5% correction in
the short term.
Another
point may be that, irrespective of Clinton or Trump, USD may be stronger and in
that scenario, “hunt for EM yields” may decrease and Indian market may also
correct for FII(s) outflows.
Today,
after opening in a strong note, global as well as Indian market did not see any
significant “value buying”, may be because of UK’s intention to draft a separate
law for an early “Brexit”.
Also,
another report that Chinese FX reserve has declined unexpectedly may have also
dampened the “risk on” sentiment as this may an indication of Chinese outflow
and may also force PBOC for more Yuan devaluation. A Trump win may also devalue
“Yuan” just like Mexican “Peso” and other export oriented EM currency because
of trade barriers. Indian Rupee may also be affected because Trump is against
Indian software service & Pharma exports in US. Even, Clinton win may also prompt for some trade protectionism because of US political & structural reform reality.
Domestically,
there were also no fresh drivers of the market, but UBI’s result may also
highlight that NPA woes for Indian banks may not be over yet, which also
dampened the overall market sentiment along with multiplicity of various
GST rates and dual control confusion.
Also Indian political roadmap is now extremely hot as crucial UP & Punjab
election is coming and there is no let up in LOC tensions with Pak.
In
the absence of any domestic triggers, all attention is now on the US Election
drama and its final outcome by this week.
SGX-NF
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