Nifty Bounced Back By 51 Points Supported By Positive Global Cues On Hopes Of An Impending Tax Reform By Trump After Disappointment Of The Healthcare Bill And An Effective Resolution Mechanism Of Indian Banking NPA

Market Wrap: 28/03/2017 (19:00)

NSE-NF: 9119 (+51 points; +0.56%)

NSE-BNF: 21244 (+142 points; +0.67%)

For 29/03/2017:

Key support for NF: 9075-9030

Key resistance for NF: 9150-9195

Key support for BNF: 21250-21100

Vital resistance for BNF: 21350-21500

Time & Price action suggests that, Nifty Fut (March) has to sustain over 9150 area for further rally towards 9195-9235 & 9275-9350 for tomorrow/ in the short term (under bullish case scenario).

On the other side, sustaining below 9130 area, NF may fall towards 9075-9030 & 8980-8870 area by for tomorrow/ in the short term (under bear case scenario).

Similarly, BNF has to sustain over 21350 area for further rally towards 21500-21675 & 21850-21950 area by tomorrow/ in the near term (under bullish case scenario).

On the other side, sustaining below 21300-21250 area, BNF may fall towards 21100-21000 & 20900-20700 zone by tomorrow/ in the near term (under bear case scenario).

Nifty Fut (March) today closed around 9119, bounced by 0.56% and recouped almost yesterday’s fall. NF made a session high of 9124 and low of 9085 after opening in positive bias today following mixed global cues. 

Overnight US market also recouped almost all the early losses after weekend disappointment over passage repel & replace of Obamacare/Trumpcare primarily on the back of short covering. There was also some optimism that after defeat of the health care bill (Ryan version), Trump may made a deal with his DNC oppositions about some modifications in the same and eventually will be able to pass it. Also, the US tax reform, being a complete different issue, Trump is expected to garner the supports of his own RNC dissidents and may also pass it in the days ahead.

But, it seems that market is too much optimistic about Trump and instead of focusing on the tax reform bill, he is busy with repelling some of the other bills (climate change) of his predecessor (Obama) and that may also disappoint the investors again.

Technically, whatever be the story, SPX-500 (LTP: 2335) has to sustain over 2355 area for any further rally towards 2370-2400 & 2415-2440 zone; otherwise it may fall towards 2325 and sustaining below that 2310-2295 & 2255-2225 area may be the downside target in the short to medium term.

Apart from US political risks, global market may also focus on UK’s invocation of Articlle-50 tomorrow for the start of official Brexit process. Although, the event is almost discounted by the market, it may be very interesting to watch EU’s official response. As par some reports, EU officials are scrambling for some suitable response and it may be a “hard Brexit” for UK instead of a “soft Brexit” as assumed earlier. 

Market may not be prepared for such hard Brexit for UK and we may see some knee jerk reaction. It may be June’17 or even later (after election in Germany), when EU will actually start the negotiation process and there is also some talk of a pre-payment of a huge amount of EZ access/Brexit fee by UK and the ultimate divorce will take place only after two years (March’2019), but the impending uncertainty over the whole process & negotiations may not be good for the UK economy and also for the “risk trade”.

Today, China market was in pressure after recent spate of interbank money market tightening by PBOC, which may be slowly changing its easy money policy towards a more deleveraging Chinese economy.

Back to home, Indian market today was supported by banks on the hopes of an early & effective NPA resolution mechanism and some M&A buzz following Kotak Bank promoter’s apparent show of “animal spirit” for an inorganic expansion. Axis Bank may be an ideal target for Kotak Bank management as Govt is also very keen to sell its SUUTI stake and may also keen for a change of management in Axis following various recent DeMo related controversies and lack of control over its stressed assets. Also, by acquiring Axis, Kotak Bank promoter may be able to lower its stake in the company as par RBI compliance/directive.

As par indications from the Indian policymakers, there may not be a big-bang announcement of a bad bank or a super ARC immediately, but it may be an ongoing incremental NPA resolution process, like changing in some of the existing loan restructuring (CDR) policies, which may pave the way for less NPA provision for the banks to improve their balance sheet and capability of fund raising. Govt may also announce some policy for the hair cut mechanism for an early resolution of a NPA/NPL, so that bankers could be able to take a business decision without fearing for any actions from law enforcing agencies in future.

 NF

SPX-500