Nifty Closed Subdued After An Extremely Range Bound Day As Caution Prevails Ahead Of State Election Results & US NFP Job Data In The Weekend

Market Wrap: 07/03/2017 (19:00)

Time & Price action suggests that, Nifty Fut (March @8973) has to sustain over 9020-9035 area for further rally towards 9075-9125 & 9195-9275 in the short term (under bullish case scenario).

On the other side, sustaining below 8995 zone, NF may fall towards 8945-8905 & 8865-8795 area in the near term (under bear case scenario).

Similarly, BNF (LTP: 20720) has to sustain over 20950 area for further rally towards 21050-21150 & 21350-21500 area in the near term (under bullish case scenario).

On the other side, sustaining below 20900 area, BNF may fall towards 20750-20600 & 20500-20250 zone in the near term (under bear case scenario).

Nifty Fut (March) today closed around 8973 (-6 points) after gyrating the whole day in an extremely narrow range of less than 30 points with session low of 8960 & high of 8989. Indian market today opened in a flat note following tepid global cues and did not move much as there was no fresh trigger for the domestic market as a whole, except some stock specific news & moves. As market is already trading around life time high and Nifty is also facing considerable resistance around 9000 level, it need some fresh triggers to move ahead on either directions; weekend poll result and US NFP data may be such events in the coming days.

Technically, whatever be the narratives, NF need to close/sustain consistently above 9035-9075 area for target of 9195-9260 & 9425-9550 in the coming days; otherwise it will fall towards 8725-8435 area in the days ahead.

Apart from state election results, especially for the prestigious UP assembly & actual progress of GST, Indian market may also focus on US NFP job data on the weekend as Fed is poised to raise rate by another 0.25% on 15^th March, provided the NFP data is not terrible. Also tomorrow’s US ADP Job data, China trade balance and Draghi/ECB on Thursday may be important for the global as well as Indian market sentiment.

Indian market may not be discounted yet for a March rate hike by Fed as the domestic market is being driven by better than expected Q3FY17 GDP & earnings, hopes of GST from July-Se’17 and a high probable big win for BJP/NAMO in the ongoing state elections, including UP (except Punjab).

Domestic market sentiment was turned slight tepid today after reports that Govt may take some harder rules for FY-18 PSBS recapitalization programme linked on actual performance & resolution of NPA; some PSBS was turned lower. Market sentiment was also turned sluggish after OECD warned about tepid global growth amid increasing geo-political risks, trade protection rhetoric by Trump/US and probability of successive rate hikes by Fed in 2017-18. All these can lead to stagflation like scenario in US and other parts of the global economy, which is now evident with UK, which is dueling with higher inflation and lower growth at present, thanks to concerns of Brexit and a significant devalued currency (GBP).

As par Fitch, by 2017-18, Fed may hike by 7-8 times (??) and if that is the case, there may be immense pressure on EM currencies & also on INR and it may be also an end to easy money policy by ECB/BOJ/PBOC as they can’t afford to be much divergent with Fed’s monetary policy. For the time being, global market is discounting 2 rate hikes by Fed in 2017 and depending upon the actual rate action on 15^th March and Fed’s language/guidance (hawkish or dovish), market will decide next course of action.

Rating agency Fitch today also expressed some doubt about CSO’s (Govt) figure of 7% GDP growth in Q3FY17 citing improper/no capture of the informal economy; although it has predicted FY-17 GDP at 7.1% and 7.7% for FY:18-19. In any way, there may be some favourable base effects for the better than expected Q3 GDP figure and after proper capturing of informal data (?), it may be also revised downwards in its final calculation (Jan’18). In the meanwhile, market may focus on some other high frequency macro data & forthcoming Q4FY17 earnings to have some fair & reasonable assessment of the true state of Indian economy, especially after DeMo.

Metal stocks were down today as “Dr. Copper” & other commodities/metals were under pressure after forecast of tepid global & China growth. Also, despite all the rhetoric, Trump has not divulged any specific plan for his $100-130 bln infra spending plan in US for next ten years (total 1$ infra spending talks by Trump, which is also well known by the market).

ITC recovered today from the low of the day after reports of price hike in some of their cigarette brands. Power Stocks were in the limelight today after reports approval by the Govt for their coal linkage auction.  

 SGX-NF

 BNF