Nifty Closed Almost Flat; But Well Of The Day High & Finished The Week 0.7% Lower Amid Concern Of US Political Drama Over Obamacare/Trumpcare & Stretched Valuation Despite Brightening Prospect Of An Early NPA Resolution Mechanism & Implementation Of GST

Market Wrap: 24/03/2017 (19:00)

NSE-NF: 9111 (+3 points; +0.04%)

NSE-BNF: 21145 (+192 points; +0.92%)

For 27/03/2017/Next Week

Key support for NF: 9100-9060 & 8995-8950

Key resistance for NF: 9150-9195 & 9235-9275

Key support for BNF: 21100-20950 & 20800-20700

Vital resistance for BNF: 21250-21350 & 21500-21675

Time & Price action suggests that, Nifty Fut (March) has to sustain over 9175 area for further rally towards 9195/9215-9235 & 9275-9350 by next week/ in the short term (under bullish case scenario).

On the other side, sustaining below 9150 area, NF may fall towards 9100-9060 & 9040-8995/50 & 8865/8830 area by next week/ in the short term (under bear case scenario).

Similarly, BNF has to sustain over 21350 area for further rally towards 21500-21675 & 21800-21950 area by next week/ in the near term (under bullish case scenario).

On the other side, sustaining below 21300-21250 area, BNF may fall towards 21100-20950 & 20800-20600 zone by next week/ in the near term (under bear case scenario).

Nifty Fut (March) today closed around 9111, almost flat after making a session high of 9147 and day low of 9099. Domestic market today opened in a positive note following FM’s comments about an early & effective resolution of the NPA mess with the Indian banking system, especially for the top most 40-50 large stressed accounts in power & infra sectors (too big to fall). As a result, most of the PSBS (SBI/BOB) and also some of the private lenders (ICICI) rallied quite smartly. But global concern on US political squabbling over fate of the affordable health care bill has dampened the sentiment towards the closing session of the market and it closed almost flat, well off the day high. Also, stretched valuation concern may be another head wind for the Indian market as of now.

Today RIL, ITC, Kotak & Yes Bank also provided some support to the market; but IT stocks were under pressure following reports of H1B visa bill movement by the US congress, despite earlier rhetoric by the Indian Govt that it’s not a new & big issue

Although the market is keeping great hope on Govt’s stance of an immediate resolution of the NPA mess in the line of a super bad bank (ARC) in PPP mode, as par latest report, Govt may be not in favour of an idea of such bad bank basically funded by precious tax payer’s money. Instead, Govt may be planning some new framework to address the NPA mess including some modifications in the DRT/SARFASI Act. So this is nothing new and considering the magnitude of the problem, mere transfer of stressed assets from the balance sheet of the banks to some other places (bad bank/ARC) may not solve the actual problem of the NPA crisis.

In most of the cases, change of the management may not also work as there is basic structural problem of the project/business viability on the back of extreme greed by some of the corporates & commodity super cycle (2003-08) burst off, legacy issues of comparatively high bank lending rate & some policy paralysis in India. Unless these basic structural issues are addressed by the Govt in a proper manner (appropriate reforms), no management, however efficient it be, can’t solve these problems. Govt may also find it very difficult for buyers of such stressed projects, even at throw away prices (deep haircuts), not only for the issue of project viability, but also for various legal issues involved with it. There may be much more supply of the stressed assets than actual demand in India now.

Apart from the issue of NPA, domestic market may also keenly watch actual progress of GST on the ground and its scheduled implementation from July’17. As par latest trends, Govt may be able to finalize the whole GST laws, rate structures etc only by May’17 and in that scenario, a hurried launch of the same by July’17 may be another nightmare or disruption for the Indian economy, at least for the short term as industry/business community and also the administration may find it quite difficult to cope with it, considering the time constraint and lack of preparedness. Thus Govt may not be fully confident about its roll out from July’17 and eventually it may be delayed more towards April’18 paving the way for more debate about the GST structures & various real issues with the stakeholders.

Govt may also take some major steps in its ongoing “war on the black money” after 31^st March or after the budget session, depending upon the actual response of the last IDS under DeMo.

Globally, all the eyes will be now on Trump’s ability to manage some of his own RNC members for his health care act plan, which is being seen as a litmus test for his rhetoric of Trumponomics. Although, considering the recent history of US politics, eventually it may be passed by Trump in the last minutes, even after an intense drama (negotiations & compromise); but the real concern may be the allegation of Russian contacts with Trump during his election days. We may see some serious headwinds out of this Russian connection issues for Trump in the coming days after this issue of Obamacare/Trumpcare, and in that scenario a full blown US political risk might pose a major threat for the global market despite perception of a Trumpflation (reflation) trade.

SGX-NF

BNF