Market Wrap: 22/03/2017
(19:00)
NSE-NF: 9047 (-96
points; -1.05%)
NSE-BNF: 20847 (-244
points; -1.16%)
Vital support for NF:
9025/8995-8950
Vital resistance for
NF: 9125-9165/9195
Vital support for BNF:
20700/20650-20450
Vital resistance for BNF:
21100-21250/21350
Time & Price action suggests that,
Nifty Fut (March) has to sustain over 9125 area for further rally towards
9165-9195 & 9235-9275 for tomorrow/ in the short term (under bullish case
scenario).
On the other side, sustaining below 9105
area, NF may fall towards 9060-9025/8995 & 8950-8865 area for tomorrow/ in
the short term (under bear case scenario).
Similarly, BNF has to sustain over
21100 area for further rally towards 21250-21350 & 21500-21650 area for
tomorrow/ in the near term (under bullish case scenario).
On the other side, sustaining below
21050 area, BNF may fall towards 20950-20650 & 20450-20325/195 zone for
tomorrow/ in the near term (under bear case scenario).
Nifty
Fut (March) today closed around 9047 after making an opening minutes high of
9130 (actually 9098 as par tick chart) and session low of 9045 and closed
almost 1% down amid tepid global cues and domestic worries of stretched
valuations and lingering concerns about some of the banking shares for
depressed credit growth & farm loan waiver rhetoric in UP/other states.
Indian
market today opened gap down around 9081 (-74 points) following overnight slump
in US market (-1.15%) after many weeks. Although US market rallied quite
relentlessly after Trumpism without any major correction just on the hopes of Trumponomics,
market was also extremely overbought and thus a time & price correction was
long overdue; valuations are also stretched. A dovish hike by Fed and
subsequent fall in USD/US bond yields and other aspects of Trumpomania may have
acted as just a trigger.
One
of the major trigger may be ongoing US political risks, in which FBI director’s
statement about Trump’s alleged Russian connection, helping him to win the US
election may be a major headwind for the market. If Trump is eventually accused
as a “Russian Spy” directly or indirectly by FBI or his political opponents
(RNC), he may be impeached by the US congress/senate and that may be turned as
quite serious for the “risk trade”.
Another
point is that, due to ongoing political squabbling in US & Trump administration
regarding various issues like Obamacare etc, market is apprehending that Trump
may not be able to focus on his core theme of Trumponomics (huge fiscal/infra
spending & tax cuts) in the near term at least till 2017. As of now, Trump’s
focus is on the defence & border wall (Mexico) spending by cutting “unproductive”
spending elsewhere in the US budget. But to be very frankly, for the huge
Mexican border wall, Trump may not be able to garner the political &
funding support from US congress/senate and above all, he may not find enough
workers in US to build such border wall in the first place!!
Analysts
are worried that, if the slump in US equity market is continuing, it may have a
spillover effect on the US consumer sentiment & spending, which is already
tepid despite recent spate of upbeat US economic data; wage inflation may be no
where as par Fed’s own assumption. This may in turn also affect adversely Fed’s
normalization path in 2017 and thus USD is getting further jolt; risk trade is
off and smart money may be flowing from the riskier EQ assets to the safety of
the US bonds, which in turn causing bond yields down and financials/banking
shares are also being affected due to concern of NIM (lower bond yield = lower
NIM).
Also,
Trump has to pass the usual budget spending plan from US senate by
tomorrow/this week; otherwise US may be stand stilled, at least theoretically;
although practically, we may see last minute passage of the same after intense
political drama as happened few years back.
Apart
from various Trump Tantrums, oil & commodities (metals) are also in bad
shape due to increasing concern of supply glut and tightening China money
market. China today injected huge liquidity to stem the alarming situation in
the interbank money market, where some small lenders have reportedly defaulted.
PBOC also tightened the home loan market (real estate) in a bid to control the
bubbles. But the problem in China may be getting serious as its overnight
lending rate in the repo market is now around 3.28%, which is higher than its
5YCNY bond yields.
Among
all these global jitters, today NK also tried for some missile tests again,
which was reportedly failed; but caused enough tension in the Japanese market.
Japan was already down due to strength in Yen as USDJPY was in free fall mode, which
further exaggerated after BOJ official’s upbeat assessment about Japanese
economy/inflation.
After
all, whatever be the narratives, as Fed is thinking and actually implementing
multiple rate hikes to stay ahead of the inflation curve, other major central
banks (BOJ/ECB/PBOC/BOE) may be also on the neutral/slightly hawkish (owlish)
mode from their earlier dovish stance in order to keep parity with the Fed’s
hawkish outlook and interest & bond yield differential at present ideal level.
Thus, the era of easy money may be over and Fed may be also thinking to squeeze
its huge balance sheet of $4.5 tln in the months ahead.
Technically, SPX-500 (LTP: 2340) has to
sustain over 2330 zone; otherwise expect more correction towards 2290-2260 area
in the days ahead.
Similarly, watch 111 for USDJPY (LTP: 111.15);
sustaining below 111, it may further fall towards 108.50-107 zone, triggering
more “risk off” trade.
Also, US 10YTSY bonds is in upbeat mode
(LTP: 124.45) and sustaining above 124.65-124.85 area, it may further rally
towards 125.65-126.50 & 127.35 causing more fall of the bond yields &
EQ market.
Among
all these global headwinds, Indian market may have also its own concern of a
stretched valuation after recent non-stop rally of almost 17% from Dec’16 low.
Market is basically discounting future recovery in earnings and hopes of an
incremental or some big bang reforms by the Govt armed by an undisputable
political support.
But,
despite such political advantage, it seems that Govt may be itself not so much
confident about likely roll out of the GST from July’17 as FM today commented
that “we are trying our best for a July roll out of the GST”. As time and
administrative & business preparedness may be quite challenging, Govt may
ultimately allow more time to the Nation for further debate on GST and might
implement it with the present or some modified form from April’18 (beginning of
a new FY, if not after 2019 general election).
In
its present form with so many slabs of taxes (5 including a zero rate),
regulations & complexities, the GST may be far cry from the earlier theme
of “one tax one nation” and may not be much different from the present system
of VAT. Thus, a hurried implementation of the same by July’17 for the “constitutional
obligation” narrative may do more disruption to the economy rather than any
meaningful contribution towards GDP & earnings of the business.
Today,
Indian market sentiment was also down after reports of Govt intention to sell
its SUUTI stake (LT/AXIS/ITC); although the Govt has denied it after the market
hours.
Also,
Govt’s stance for further “war on black money” such as fixation of cash
transaction to Rs.2 lakhs instead of Rs.3 lakhs earlier and mandatory of “Aadhaar”
(UID) card in income tax return & PAN card application may have depressed
the local market sentiment; Govt may be quite right morally & ethically in
its continuing war against black money; but it may not be good for “risk trade”
in the coming days.
SGX-NF
BNF
SPX-500
USDJPY
US10YTSY BOND
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