Nifty May Open In Positive Tone Amid Upbeat Global Cues After Favourable Election Debate Outcome From France & Renewed Optimism About GST As Cabinet Clears The Same; But Concern Of Stretched Valuation & Farm Loan Waiver/Populist Measures May Also Limit The Gain

Market Mantra: 21/03/2017 (08:30)

SGX-NF: 9180 (+23 points)

Watch 9195-9140 & 9235-9275 Zone In Nifty Fut (March)

As par early SGX indication, Nifty Fut (March) may open slight gap up around 9180 following positive global cues as centrist Prez candidate (Macron) has won the 1^st election debate (TV) defeating the far rightist anti EU candidate Li-Pen in France. As a result, concern of an impending election risk for France (EU) has diminished and precious metals (Gold/Silver) are being sold along with pressure on Copper (metals) & commodity currencies (AUD). 

Also, USD is getting some strength in the morning Asian session as commodity currencies are getting weak despite deluge of Fed speakers overnight, which were so far slightly on the dovish side. As par various Fed speakers, Fed should hike rates by another 2 times at least if inflation and other incoming US economic data supports, so that Fed does not fall behind the inflation curve and can maintain at least neutral US interest rate, equivalent to the core CPI of the US economy. But, markets (USD diehard bulls) are expecting at least 4 hikes in 2017 along with Fed balance sheet squeezing. Also market may be concerned about actual trajectory of “Trumponomics”, which may not be visible in 2017 and all these has kept the USD in a range, because at the end of the day, Fed is the only major central bank in the world now, which is talking and actually implementing multiple rate hikes, whereas all the others are now only showing as neutral stance.

Back to home, although implementation of GST from July’17 is a known factor for the market, considering the time & various regulations factor, corporates & traders community may not be yet ready for its implementation. Under these circumstances, we might hear that Govt will let the country to debate more on the GST and let it be implemented from April’18 or even after 2019, general election, considering that a hurried launch with so many regulations may also cause another disruption for the economy.

Farm loan waiver may be another issue, which if implemented in UP, then other states may also call for such populism at the cost of the exchequer and that will be not good for the PSBS and also for the combined fiscal deficit of the Indian economy; if such election rhetoric is turn reality, then it may be also not good for the market as it may be seen as Govt is taking the path of populism rather than hard core reforms.

Hints for actionable trading idea:

Time & Price action suggests that, Nifty Fut (March) has to sustain over 9235 area for further rally towards 9275-9350 & 9425-9550 for the day/ in the short term (under bullish case scenario).

On the other side, sustaining below 9215-9195 zone, NF may fall towards 9140/9110-9075 & 9035-8995 area for the day/ in the short term (under bear case scenario).

Similarly, BNF has to sustain over 21400 area for further rally towards 21500-21675 & 21855-21950 area for the day/ in the near term (under bullish case scenario).

On the other side, sustaining below 21350 area, BNF may fall towards 21250/21000-20900 & 20800-20600 zone for the day/ in the near term (under bear case scenario).

SGX-NF