Market Wrap: 10/01/2017 (17:30)
Looking at
the chart, Nifty Fut (Jan @8297) has to sustain over 8350-8375 area for further
rally towards 8425-8485 & 8545-8585 zone in the short term (under bullish
case scenario).
On the other
side, sustaining below 8275-8235 zone, NF may further fall towards 8155-8040
& 8000-7940 area in the near term (under bear case scenario).
Nifty Fut (Jan) today closed around 8297 (+0.57%)
after making an opening session low of 8260 and late day high of 8299 amid
mixed global cues supported by some fall in USD & Oil and upbeat Q3FY17
numbers from Indusind Bank.
Domestic market today opened in flat note
following mixed global/Asian cues. Overnight US market fall to some extent after
some drops in USD/US bond yields and concerns of renewed supply glut in oil
from higher production out puts from Iraq & Iran and US SRDR release &
additions of more oil rigs/productions.
Although, there are some reports of a first “official”
presser by Trump tomorrow, it may not be an occasion to divulge any concrete
plan of “Trumponomics” as he is yet to take charge of the White House. All eyes
may be on some scheduled speech by Yellen and some economists closer to Trump
(potential Fed chair after Yellen in 2018) to gauze their thinking about path
of US economy and rate hike trajectory. As there are no fresh triggers after
the upbeat NFP last week for the USD, some long unwinding/fresh shorts may be
happening at the higher levels.
USD is
being driven by US bond yields and looking at the 10Y TSY notes, which is
trading around 125, USD/US bond yields may fall more, if the 10YTSY rallied
& sustained over 126 area in the days ahead.
Today’s upbeat China PPI (Dec) data, which came at
5.5% against estimate of 4.5% (prior: 3.3%), although may not help Chinese
economy much and in fact may force PBOC for more tightening, it’s good for the
global economy (DM), which is thriving for “inflation”.
For the last few years due to production glut, “cheap”
Chinese goods may be spreading some kind of “deflation” across the globe; but
now with some deleveraging in its manufacturing hubs (curtailment of excess
capacity) and more devaluation of CNY (costly raw materials import), China’s
factory prices (PPI) has increased and that’s a great news for the “inflation
savvy” DM. If such incremental PPI sustained, it may be seen as an important
source of inflationary impulse apart from oil for the developed economy in the
coming days.
Indian market sentiment may be boosted today after
various “upbeat comments” in the ongoing “Vibrant Gujrat Global Summit”, which
may see record commitments of investments/FDI in the state. In the recent
years, Indian FDI is surpassing flow from the highly volatile FPI(s), which is
giving some good support for the INR stability, even in times of crisis.
Although, recent auto & real estate sales data
is indicating tepid consumer sentiment after Nov demonetization and the trend
may continue in the coming months (Q4FY17), slightly better than expected Q3
numbers from Indusind Bank may also helped the overall market sentiment that
Q3FY17 earnings may not be so bad as feared by the street.
Tomorrow, all eyes may be on the EC’s stance after
Govt officially replied to the opposition demand of rescheduling the budget
presentation day, just ahead of the crucial state elections.
Looking ahead, apart from the outcome of the state
elections & budget presentation, all eyes may be on the CPI & IIP data
and earnings from Infy/TCS later this week.
The political outcome from the series of five
state elections, especially from UP may be seen as “mini referendum” for “NAMO”
for the 2019 general election. Any adverse outcome may also heighten the
political risk and uncertainty apart from the ongoing demonetization issues.
As almost 97% of the demonetized notes has their
way in the banks, market may be “relieved” that all is “not lost” in the “surgical
strike against black/unaccounted money” and at least 25-50% of the “destroyed
wealth” may be eventually came back in the system even after paying the
required taxes & lock in period, which may again support the Indian
consumption story.
But, as par various reports, at least Rs.3-7 lakhs
(25-50%) of demonetized bank deposits may be out of undeclared income (black
money). As Govt is repeatedly stressing that all “black money” can’t be “white”
overnight by merely depositing it in the bank accounts and required taxes have
to be paid on it (amnesty scheme).
In its fight against black money, all may now
depend upon the pace of remonetization and Govt/IT steps on such “black” demonetized
bank deposits, which are not “anonymous” now. A regular IT demand and its
implementation may take decades to be settled, considering various legal
hurdles & lack of IT manpower/infra and in that scenario, Govt may impose
certain kind of BTT, even for digital transactions above certain limits in the
forthcoming budget or even take the help of “Benami Act” for such illegal
demonetized bank deposits.
In both the above scenarios, vicious cycle of the
Indian consumption story may take at least five years to revive again and in
the mean time one can expect at least 30% fall in demand on an average, even
after the remonetization as redistribution or rebuilding of “lost wealth” &
revival of lost “consumer sentiment” may take considerable time.
SGX-NF
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