Nifty May Open Slightly Higher Following Record High US Closing; But Higher Trajectory Of Domestic Core Inflation May Cap The Gain; All Eyes May Be On The Indian Trade Balance, US Core CPI & Yellen Testimony Later Today

Market Mantra: 14/02/2017 (08:30)

Watch 8855-8745 & 8875-8925 Zone In Nifty Fut (Jan), Which May Open Around 8835 Today

As par early SGX indication, Nifty Fut (Feb) may open around 8835 (+21 points), slightly gap up following another record US Stock Index closing and mixed Asian cues. In the morning, both Chinese CPI & PPI came a bit hotter than expectation at 2.5% & 6.9% for Jan (estimate: 2.4% & 6.3%; prior: 2.1% & 5.5%). The unusual jump in PPI although seems encouraging for the Chinese economy as it may support the perception of widespread economic recovery and manufacturing pricing power, it may be because of seasonal effect also (Lunar new year). In any way, a runaway PPI may also force PBOC for more tightening after its recent injection of huge liquidity in the system (credit fuelled economy) and thus China market is now under some pressure.

Japan is also trading slightly lower as USD is losing some strength ahead of Yellen later in the day; for USDJPY, whatever be the stance of Yellen, it has to sustain over 115.50 zone for further rally towards 119-122 & 126; otherwise it will come down again towards 110-105 area again. Considering Trump’s apathy for lower USD, overall mixed US economic data and uncertainty about “Trumponomics”, Yellen may sound slightly dovish today and March’17 rate hike probability may also be put off the table.

But, renewed optimism about “Trumponomics” and Trump’s tax plan may also keep the reflation trade in momentum and USD/US bond yields falling abruptly from the present level, even if Fed turns dovish now.

Back to home, after yesterday’s higher trajectory of core CPI (5.10%) may be above RBI’s comfort level and being neutral, rate cut cycle may be over for FY-18.

Hints for actionable trading ideas:

Technically, NF has to sustain over 8875 zone for further rally towards 8925*-8995 & 9035-9075 area for the day (under bullish case scenario).

On the other side, sustaining below 8855 area, NF may fall towards 8780-8745/8725* &  8665*-8585 zone for the day (under bear case scenario).

Similarly, BNF (LTP: 20296) has to sustain over 20550 zone for further rally towards 20650*-20800 & 20950*-21350 area for the day (under bullish case scenario).

On the flip side, sustaining below 20500 area, BNF may fall towards 20300-20150* & 20000*-19750 zone for the day (under bear case scenario).

SGX-NF

BNF