Market Wrap: 12/01/2017 (20:00)
Looking at
the chart, Nifty Fut (Jan @8422) has to sustain over 8435-8485 area for further
rally towards 8510-8545 & 8585-8635 zone in the short term (under bullish
case scenario).
On the other
side, sustaining below 8405-8360 zone, NF may further fall towards 8300-8225
& 8125-8000 area in the near term (under bear case scenario).
Nifty Fut (Jan) today closed around 8422 (+0.41%)
after a very choppy day of trading, which saw a closing session high of 8424
and an opening session low of 8386.
Domestic market today opened almost flat amid
mixed global cues following lack of any definitive plans about the much touted “Trumponomics”
from Trump’s presser yesterday.
The Q&A session of Trump turned into a virtual “clown
show” with and the main thrust was towards the Russian scandal episode and
hacking allegation with the usual rhetoric about “Obamacare, pharmaceuticals
pricing, trade protection, Mexican wall etc. There were no clues about his plan
for the huge fiscal spending, tax cuts, and deregulation. Thus, politics was at
the forefront rather than economics and “Trump Trade” bumped with fall in
USD/US bond yields, metals (Copper) and stocks. Gold & oil was zoomed following
weakness in USD.
Now, with unpredictable Trump at the top of the
helm, his comments & “Twitter Tantrum” may be now the greatest source of
volatility, far greater than any central banker/Fed and “Trumpism” related
tremendous euphoria just based on his face value (jawboning) may be one of the
headwinds for US as well as global market in 2017 (US political risk) apart
from EU political and banking risk.
Now, depending upon the tomorrow’s US retail sales
data, we may see more long unwinding/shorts for the USD ahead of 20th
Jan, when Trump formally take over.
EM currency as well as India may be one of the beneficiary
of the “Trump Fade Trade” in the coming days (weak USD), even if that may be
short lived and will depend upon the actual plan of action & implementation
of “Trumponomics”.
Today, Pharma was under pressure initially
following Trump’s adverse comments about high pricing of drugs and competitive bidding.
But, later Pharma was recovered to some extent as pricing by various Indian
companies are already under severe competition there in US and as par some
experts, US has no legal authority to force the generic Pharma companies for
such competitive bidding. But, various regulatory action or ghosts of US FDA
may be a consistent overhang for the Indian Pharma sector apart from comments
from Trump.
IT also gave good support to the market today ahead
of TCS & Infy result, for which tepid numbers for Q3 may be already priced
in, considering steep fall in the last few weeks; their guidance & outlook
and strategy under “Trump Threat”, may matter now.
Another reason behind IT rally today may be that
under enhanced H1B visa salary limit of min $100000/pa from the previous
$60000/pa, Indian bigwigs may be already proving min salary more than $100000
to its employees in working in US; it’s a minimum criteria to survive a decent
life in US. Thus it may not be a big issue for them.
Also, under the Trump’s plan of “rebuilding
America again”, there may be renewed IT related boom in US in the coming days.
Thus, despite lack of timely adaption for the latest tech (AI/cloud etc),
Indian IT companies may not be lose so much even from their traditional
business model of servicing/outsource/code writing in the coming days,
specially on the back of BFSI & Oil firms related verticals; i.e. IT will
trade in a range for the time being.
TCS Q3 result flashed just after market hours
today also came good & in line/ slightly above expectation with a decent Q4
guidance. All eyes will be on the Infy numbers & guidance tomorrow.
After upbeat numbers from Indusind Bank & TCS,
market may be already beginning to hike Q3 earnings growth after concerns of
demonetization; but rather than Q3, Q4FY17 and Q1FY18 may matter more for
actual trend as various other high frequency leading data, such as PMI, auto
sales, real estate, stamp duty collections etc are indicating for a significant
slowdown in the Indian economy after Nov-Dec’16.
After market hours today Indian CPI came at 3.41%
for Dec against estimate of 3.57% (prior: 3.63% MOM; 5.61% YOY). Though the headline
number looks good, considering India’s long tradition of high inflation economy,
the sudden fall may be attributable to the lower demand & weak economic
activity as a result of demonetization apart from some seasonal (food inflation)
& base effects. It also indicates tepid consumer sentiment & lower
discretionary spending.
As par some reports, food inflation may surge
after Jan’17 because of lack of harvesting/farming after acute cash crunch in
the rural & semi-urban economy (domestic supply may adversely affected) and
rising oil may be also a concern. There is not so much moderation effect in
core inflation of the economy (core CPI at 4.9%).
IIP for Nov also surprised to the upside and came
at 5.7% against estimate of 1.3% (prior: -1.9% MOM; -3.4% YOY). Experts believe
this as the favourable seasonal & base effect as in Oct end, there were
Diwali holidays last year and various factories were closed. The same may be
also true for the current year (Oct’16).
Also, higher petrol & diesel consumption
because of use of demonetized notes exception may also be one of the reason for
unexpected surge in IIP, apart from surge in capital goods, which grew 15% in
Nov’16 against (-) 26.9% in Oct’16 & (-) 24.4% in Oct’15.
Higher capital goods index in IIP may be an
indication of corresponding capacity addition by the manufactures after record
sales in Diwali season this year (Sep-Oct) to replenish the consumed
inventories. Going forward, this may be tepid considering visible slow down in
the consumer spending after demonetization.
Overall, on cumulative basis IIP growth for Apr-Nov’16
came at 0.4% against 3.8% on YOY basis, even before demonetization in line with
tepid projection of the GDP by CSO few days ago (7.1% from 7.6% till Oct’16).
Technically, NF need to close consecutively over
8485 area for any further rally towards 9000-9555 area in the coming months;
otherwise it may again came down towards 8000-7900 zone.
Tomorrow may be vital after more than 6.5% rally
in Nifty in the last few weeks as EC may announce its decision regarding budget
day in the weekend and in the next week more earnings will come, which may help
to gauze the actual extent of damage done to the economy after demonetization.
SGX-NF
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