Nifty Closed Under Exhaustion Ahead Of Exit Polls Tomorrow As Talks Of A Fractured Verdict In UP Gains Momentum

Market Wrap: 08/03/2017 (19:00)

Time & Price action suggests that, Nifty Fut (March @8954) 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 8945-8900 & 8865-8795 area in the near term (under bear case scenario).

Similarly, BNF (LTP: 20777) 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 & 20490-20250 zone in the near term (under bear case scenario).

Nifty Fut (March) today closed around 8954 (-20 points), in slight negative (-0.22%); but well off the day low of 8908 after making an opening session high of 8980. Indian market today opened almost flat following tepid global cues after disappointing GDP & trade balance data from Japan & China.

Today, China reported its Feb trade balance as:

 

-9.15 bln ($) against estimate of +25.75 bln; prior 51.3 bln.

Exports: (-) 1.3% (estimate +12.3%; prior: +7.9%)

Imports: +38.1% (estimate +20%; prior: 16.7%)

The data shows that after 3 years, China trade balance goes into negative (deficit), although it may be seasonal & base effect of Lunar New Year in Jan-Feb’17; but there was significant increase in imports & stockpiling of coal, iron ore & oil combined with little export. If such trend will persist in the coming months, then it may have significant bearing on Yuan. After China’s trade data, today USDCNY gained momentum. USD was also strong in the afternoon EU session ahead of ADP job data today as Fed hike probability for March is now hovering around 90%.

Overnight US market was under stress after another tweet from Trump calling for competitive prices of Pharma products in US and some Wiki leaks about CIA’s modus-operendi of hacking/surveillance of various electronic devices. Also, Trump administration is under increasing cloud of suspicion about its pre-election involvement with Russian authorities as a report is indicating close door meeting of Trump with the Russian ambassador during election campaigning despite earlier refusal of Trump’s camp. Replacement of Obamacare with another suitable health protection package may be also an overhang for the US market as of now.

After Trump’s congressional speech last week and subsequent rally of US market on the hope of a $1 tln infra spending plan for ten years and “massive” tax cut, market may be now returning to the reality of US politics from the earlier stage of fantasy as Trump has to go through the same political establishment for his vision to “rebuild America again into an wonderland” and there is significant budget constraint too.

Just now, US ADP Job data (Feb) flashed as 298k against estimate of 190k (prior 261k); at a glance the headline ADP is sufficient for a blockbuster NFP to be released on Friday, 10^th March, which may compelled Fed for the expected 0.25% rate hike on 15^th March; going forward, Fed’s guidance/statement will matter (2 or 3 hikes in 2017?).

Back to home, Indian market today again turned cautious ahead of exit polls tomorrow evening and actual result on Saturday, 11^th March. Although, various betting circles across the country unofficially projecting a massive win for BJP in all the states excluding Punjab this time, as par some reports, top brass of BJP may not be so much confident about a majority in UP. This is because, despite NAMO’s best effort and repeated road shows & campaigns, there is no visible wave as in 2014 general election and party strategists are also not so much confident about people’s favourable verdict for the DeMo, specially in the rural zone, which was hit hard mostly and unlike other states, UP has a charismatic political leader in the form of Akhilesh too, who can give good fight to NAMO’s popularity.

Thus, verdict from UP may be fractured, which is also being seen as a mini referendum for NAMO this time after the DeMo. Any unexpected bad result or even a fractured verdict may force NAMO/Govt to be conservative in its reform initiatives in the coming days, keeping in mind the 2019 general election. Although, now most of the main stream political parties are now talking about development & economy, a below expected verdict from UP for BJP may keep the market extreme volatile in the coming days, as political risk for India may also increase, which can also have adverse effect on the final passage of GST in the Parliament & its implementation from Sep-July’17.   

A combination of probable Fed hike in March and a fractured verdict in UP may not be good for the Indian market, at least for the short term; USDINR will zoom and Indian bond yields may also fall with some correction in the Nifty towards 8600-8300 area. On the other side, a combination for NAMO win in UP coupled with a Fed hike on 15^th March may restrict the Nifty between 9125-9195 and a clear NAMO win and no Fed hike in March, may also cause Nifty to rally towards new life time high of around 9275-9550.

SGX-NF

 BNF