Market
Wrap: 16/02/2017 (19:00)
Looking at the chart, Nifty Fut (Feb @8786)
has to sustain over 8800 area for further rally towards 8855/8875-8925 & 8995-9075
zone in the short term (under bullish case scenario).
On the other side, sustaining below 8775
zone, NF may fall towards 8715-8675 & 8605-8505 area in the near term
(under bear case scenario).
Similarly, BNF (LTP: 20302) has to
sustain over 20400 area for further rally towards 20550-20650 & 20750-20950
area in the near term (under bullish case scenario).
On the other side, sustaining below
20350 zone, BNF may fall towards 20200-20100 & 19950-19850 area in the near
term (under bear case scenario).
Nifty
Fut (Feb) today closed around 8786 (+0.49%) after making a session low of 8734
and late day high of 8796.15. Domestic market today opened almost flat
following mixed global cues supported by another record high of US market amid
upbeat economic data, corporate earnings and Trump’s pledge of tax cuts by a “huge”
proportion.
But,
USD/US bond yields were tepid as Yellen sounded quite defensive yesterday in
her 2nd day of testimony and US IIP & wage hikes flashed below
estimates; although other data (core CPI & retail sales) came good.
Overall, FFR expectation of a probable March Fed rate hike is now around 45%,
up from 15% few weeks ago and that for June’17 is now around 75%. Thus, irrespective
of any Fed narratives, there is virtually no probability of a March hike this
time, with barely 30 days in hand.
Fed
will never hike US rate abruptly without telegraphing the market well in advance
and for that FFR needs to go above 75% minimum. Thus, by some hawkish script,
Fed may be trying to convince the market about real possibility of a June’17
rate hike (0.25%) as by that time, Fed will have more incoming US economic data
to gauze the underlying strength of US economy to withstand possible two rate
hikes this year (0.50% by CY-2017).
Apart
from US economic data, by March-Apr’17, Fed may have more clear idea about
actual trajectory of “Trumponomics” and depending upon the fiscal/infra
spending size, tax cut, fiscal deficit proposals and its passage &
implementation, Fed may go for a June hike; otherwise it will eventually act
only once by hiking 0.25% in Dec’17. Also, growing US political risks may be
another hurdle for Fed to act in the near future.
For
EM & Indian market, this uncertainty about “Trumponomics” & US
political risks may be a blessing in disguise as despite repeated Fed
jawboning, Fed may be in the sideline in the near term (at least June & Dec’17).
In the changed world after “Trumpism” and US trade protection, border tax and “America
First” rhetoric, China & also Russia may take leading roles in the
globalization; domestic consumption of China is increasing rapidly contrary to
earlier perception.
Usually,
a strong USD may not be good also for US economy & corporate profits and
abrupt Fed rate hikes may also push US into another recession. But, this time
US EQ market is resilient because of upbeat corporate earnings, economic data
and hopes of “Trumponomics” despite a hawkish Fed as market is assuming that
successive Fed rate hikes may be well absorbed by the US economy.
Back
to home, apart from yesterday’s defensive Yellen stance (Comment: “overall US
economic performance has been quite disappointing”), Indian market sentiment
today also supported by IT, Pharma & Autos. IT counters were under demand
because of buy back buzz from several pivotals including TCS & INFY. It
seems that IT companies has huge cash in their balance sheets and as such have
no plan for any big organic or inorganic expansion, thus decided to pay back
the shareholders by buying back. Although, being EPS positive, it helps the
scrip in the short term, in the long term, it may be negative as it also indicates
that the company may have no plan for further growth.
Pharma
scrips were strong today, after US FDA gave no objection to Cadila in its
recent audit and thus market may be assuming that previous hard stance of compliance
by the UD FDA is changing gradually after it has a new head. But, Trump may be
still a considerable risk for Indian Pharma companies amid his rhetoric of “Made
In USA” and exorbitant drug prices in America. Also, scrapping of “Obamacare”
may be another risk for Pharma, unless it is being substituted by another
suitable alternative health insurance policy/act.
Positive
Indian trade data (YOY) flashed yesterday after market hours may have also
helped the domestic market sentiment today. Both export & import showed
some growth of 4.32% & 10.7% on YOY basis; but on MOM basis, exports slowed
from $23.51 bln to 22.12 bln (-5.9%) and imports fall from $33.67 to 31.96 bln
(-5.35%). Net trade balance for Jan’17 was (-) $9.84 bln (22.12-31.96) against estimate
of (-) 7.64 (prior:-10.37). Oil & gold may be one of the primary reasons
for such volatility.
Technically, NF may be now in the
corrective 4th wave in the daily EW cycle and the measured target of
the same may be from 8670-8300 zone unless & until it closed consecutively
above 8875 area in the coming days.
SGX-NF
BNF
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