Nifty May Open & Stay Lower Amid Tepid Global Cues And Report Of Mixed Auto Sales Data & Demonetization Led Bank Deposits Almost Near 80% With A Month In Hand

Market Mantra: 02/12/2016 (08:30)

Is Demonetization A Total Failure, Where More Than Official Circulation Of Old Currency Can Enter The System?

Watch 8195-8275 & 8130-8040 Zone In Nifty Fut (Dec), Which May Open Around 8155'

As par early SGX indication, Nifty Fut (Dec) may open around 8155 (-55 points) following tepid global cues in the Asian session. Overnight, US market was mixed with selling in techs (Nasdaq) and some visible stress in the “Trump Rally” with mixed economic data yesterday, where except, ISM Mfg PMI, all the other economic data came slightly lower than market estimate (auto sales, construction spending, initial jobless claims).

Despite surging US bond yields, USD dropped yesterday may be because of mixed economic data and some market talk that going forward, ECB may indicate some bond buying tapering after extension of the current LTRO programme up to March’17 (EUR 500 bln). Also, current French president may not be a potential candidate for the next election may be influencing the EUR as he was very dovish along with impending Italy referendum on Sunday and other imminent EU political risks on the negative side.

Globally, all eyes will be on the US NFP job data today in order to assess the core strength of US economy to withstand Dec’16 and further rate hikes in 2017. NFP estimate is around 175-180k; 4.9% unemployment rate; 0.2% hourly wage hike (MOM); but we may not be surprised, if NFP will come around 200k + as now there is no risk of market capitulation because of Dec’16 Fed rate hike (already discounted) and to “make up” the past few months of tepid job data; yesterday’s ADP blockbuster job data may help.

Back to home, Indian market may be continuing under pressure for the Demonetization fiasco and economic disruptions. Market will keenly watch auto sales & other high frequency data to gauze the extent of real impact after Demonetization led business disruptions, which may continue for a least 3-6 months. Yesterday’s auto sales data was mixed as surge in PV & 4-W may come in on the back of “trashed black money on old currency” and 7-CPC induced liquidity.

Also, as par reports almost 11.5 lakh cr of bank deposits has been made in old currency notes out of total official circulation of around Rs.14.5 lakh cr; i.e. almost 80% and already made the Govt target. But, from the ongoing trend, the gross deposits may exceed even the official circulation of Rs.14.5 lakh cr, especially after the announcement of VDS Amnesty scheme, which means that fake/counterfeit currency may be entering the system for making it “white” undermining the Govt effort of “war against black money”.

Technically, NF has to sustain above 8195-8225* area for further rebound towards 8275*-8295 & 8335*-8375 zone for the day (under bullish case scenario).

On the other side, sustaining below 8130-8100* zone, NF may further fall towards 8060-8040* & 8000*-7950 and 7900-7880 area for the day (under bear case scenario).

Similarly, BNF (LTP: 18478) has to sustain above 18300* area; otherwise it may further fall towards 18200*-18100 & 17950-17750* zone for the day (under bear case scenario).

For any strength, BNF needs to trade above 18500* area for further rebound towards 18650-18800* & 18900-19050* zone for the day (under bear case scenario).

 SGX-NF

 BNF