Market Wrap: 23/12/2016
(17:30)
Technically Nifty Fut (Dec @8000) has
to sustain over 8075-8165 area for further rally towards 8210-8315 zone in next
week for any year end “NAV” rally.
On the other side, sustaining below 7940-7900
zone, NF may further fall towards 7840-7645 area in the weak ahead.
Looking at the chart, 8200 zone may be
now a big technical challenge for the NF and consecutive closing below that, it
may fall towards 7525-7425 area by next few weeks, when volumes (FII) return to
the market.
Similarly, for BNF (LTP: 17918),
consecutive closing below 18000 zone, it may fall towards 17800-17300 by next
few weeks & 16365-15300 area in the next few months and present down trend
may change only consistent closing above 18750-18850 zone.
Nifty
Fut (Dec) today closed around 8000 (+4 points), almost flat after a late day
high of 8037 and an opening session low of 7953; with today’s “positive” flat
close, Nifty snapped the 7 days losing streak and closed the week almost 1.80%
lower amid consistent selling by FII(s) on the back of strong USD, perception
of “Trumponomics”, year end portfolio profit booking and ongoing domestic
headwinds of economic & political disruptions as a direct result of
demonetization and some renewed concerns about FPI taxation issues.
Today
Indian market opened in a negative note following tepid global/Asian cues amid overnight
mixed US economic data. European market also was quiet in a holiday thinned
trade. There was some positive news as DB & Credit Suisse has reached an
agreement with DOJ for a $7.2 bln & $5.28 bln settlement, which may be
nearly half of the original fine imposed on them and is also in line with
market estimates. The deal may be also helpful to settle a major uncertainty;
but another bank (Barclays) was not able to reach a deal and it may now legal
recourse.
The
Italian Bank Monte Paschi has meanwhile “applied” officially for a EUR 5 bln
bail out from the Govt and the Italian Govt may be preparing for a EUR 20 bln
overall bailout packages (indirect nationalization) for its fragile banking
system; although an amount of around EUR 52 bln may be required as par some
estimates.
China
market was also under renewed pressure after recent bond market turmoil, devaluation
of Yuan, capital outflow controls & some other regulatory measures by the
PBOC.
Looking
ahead, weak Yuan coupled with increasing PPI & housing prices may force
PBOC to tighten its monetary policy or at least prevent it for more stimulus.
Chinese authority may also be ready to accept GDP growth below official
projection of 6.5% for the sake of stability in the economy. A weak Yuan and
higher trajectory of real inflation may also increase the cost of Chinese
manufactured products and this inflation may be disseminated all over the
world, which may in turn also force other major central banks to tighten their
policy more rapidly. Thus, a healthy Chinese economy may be most vital for the
global financial market stability.
Apart
from China jitters, EU banking crisis & various geo-political issues and
also uncertainty nature of Trump &
his “twitter tantrum”, conflict of interests of his core team (US political
risk) might be the biggest headwinds in 2017.
Back
to home, a strong USD, strong oil above $60, huge banking NPA, stressed corporate
balance sheets, tepid private investments, high Govt debt/GDP ratio, FPI
taxation issues and demonetization led economical & political disruptions
may also be some of the major headwinds for Indian market in 2017.
Against
these backdrops, there are hopes of some “stimulus” (farm loan waiver &
some transfer of money to zero balance JDY accounts by the Govt from any
windfall/seized/IDS gain after demonetization; rationalization of direct taxes
with simplifications, both personal & corporate) and a “dream budget” to
reduce the demonetization “pain” apart from 0.25-0.50% RBI cut.
Still,
there may be too much headwinds against too few tailwinds for the Indian market
in 2017 and it may be a tough year for passive investors as huge volatility on
both sides of the market will be there. Thus, investors have to act also like a
professional without any underlying emotion for a particular stock and should
know when to sell or book profit.
Today,
domestic market got some boost in the 2nd half after some positive
news about progress of GST was flushed regarding draft laws of CGST/SGST etc.
But, eventually the most vital part of “dual control mechanism” still remains
inconclusive for the lack of political & bureaucratic consensus as both centre
and state levels ST officials are not ready for any loss in their “client base”
(more governance & more corruptions ??).
The
next meeting for resolving this “dual control” issues may be on 4-5th
Jan’17 and it’s almost impossible now to implement GST from April’17 and as par
some reports, Govt may announce a tentative “next date” of July’17 for the same
for the sake of “constitutional compulsion”.
It
remains to be seen, which “compulsion” (economical, political or constitutional)
will get priority next time as everything remains the same, GST should have
been implemented from April’17, if Govt did not surprise the nation on 8th
Nov by announcing sudden demonetization just ahead of winter session of the
Parliament and in the process, further vitiated the overall political & economical
atmosphere.
Almost
all the states are now suffering huge revenue deficit as a direct outcome of
demonetization led economic slowdown and most of them may not be ready for
implementation even by Sep’17. Thus, it’s high time to introspect, if the
Govt/BJP is really ready to implement GST or not as its continue to be a
political game of “ping pong” between Cong & BJP going on almost for the
last decade.
It’s
almost certain that demonetization led economic disruption is transitory by
& large once full remonetization will be done in next few months. As par
some unconfirmed reports, Govt may introduce again a new 1000 note and
demonetize the existing 2000 note shortly; but it may add more chaos at least
for the short time, if the report is true.
But,
there may be long term impact on Indian consumption/demand by at least 30%
because of “war on black/unaccounted money”. Traditionally, India is a mix of
formal & informal economy and even before this “surgical strike” on the “informal
economy”, there was gradual transition from “black” to “white” economy taking
place as a result of various steps taken by the Govt in the last few years.
Precisely, it may be one of the reasons for delayed earning recovery of the
Indian corporates as consumption is being affected to certain level. It may
also be another reason for tepid private investments apart from excessive
regulatory and judicial intervention in some cases (2G/Coal & mining etc).
Thus,
it may take a few years more for visible resumption of private investments
& an overall economic recovery and till that time Govt/Public capex may be
vital. But, for that Govt has to create an atmosphere so that FPI(s) will stay
in India rather than invest in their own country (US/DM); otherwise who will
fund the “Shinning India” story?
SGX-NF(WEEKLY)
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