Nifty Snaps 3-Day Losing Streak & Closed Around 0.59% Higher Led By Short Covering Ahead Of US Political Drama On Obamacare/Trumpcare & Speech Of Yellen And Brightening Prospect Of GST Roll Out By July’17

Market Wrap: 23/03/2017 (19:00)

NSE-NF: 9104 (+54 points; +0.59%)

NSE-BNF: 20941 (+92 points; +0.44%)

For 24/03/2017:

Vital support for NF: 9060-9015/8980

Vital resistance for NF: 9135-9165/9195

Vital support for BNF: 20800-20650

Vital resistance for BNF: 21100-21250

Time & Price action suggests that, Nifty Fut (March) has to sustain over 9135 area for further rally towards 9165-9195 & 9235-9275 by tomorrow/ in the short term (under bullish case scenario).

On the other side, sustaining below 9115 area, NF may fall towards 9060-901 & 8980-8950 area by 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 by tomorrow/ in the near term (under bullish case scenario).

On the other side, sustaining below 21050 area, BNF may fall towards 20950-20800 & 20650-20475 zone by tomorrow/ in the near term (under bear case scenario).

Nifty Fut (March) today closed around 9104, up by 0.59% after making a late session high of 9121 and day low of 9061. The market covered some shorts around the day low, which is also a positional support zone after yesterday’s fall as there was no fresh triggers ahead of today’s crucial US senate voting on Obamacare/Trumpcare and Yellen’s speech.

There were also some reports that Indian Govt may allow banks to drain the excess DeMo liquidity using standing deposit facility without any SLR requirement (?) and that may be positive for the banks & Indian GSEC bond yields as banks don’t have to buy bonds for incremental requirement of SLR. Indian 10YGSEC bond yields today rose by 0.19%.

Also, at the fag end of the market, Govt (FM) announced that “GST council decides tentatively for roll out of the GST from 1^st July and final product & service wise rate structure may be announced by May end”; although the statement may be itself not 100% sure of a GST roll out from July’17, market sentiment may have boosted suddenly and NF broke the barrier of 9105 briefly and closed around that.

Meanwhile, today’s speech by Yellen is just intended for some community development programme and she has not commented anything about US monetary policy; but there are some other FOMC members later today and market may also keenly watch them as in the recent weeks, Fed was very successful in restoring its lost credibility by hiking in March as par its hawkish scripts going on from Feb’17. Market will now take Fed more seriously than before in its communications.

But the real headwind may come from US politics tonight, where Trump is trying his best to repel the Obamacare act. As par latest reports, Trump is facing significant oppositions from not only his political opponents (DNC), but also from his own party (RNC); a significant number of RNC members are now reportedly against abolition of Obamacare before confirmation of any suitable replacement (Trumpcare) and the voting may not happen today under such circumstances.

A failure of Trump to repel Obamacare may also be seen as his lack of political control over the US senate/congress and even on some of his own party members, which in turn may also affect his ability for passage of his plans for tax cut and fiscal/infra spending. In that scenario, reflation (risk on) trade may take further jolt. But if Trump is successful for his move on the health care bill, USD may see some rally and along with that, global market should also participate.

Indian market was helped today by Yes Bank (QIP plan), Tata Motors (access to Volkwagen’s modular platform for product development), RIL (buzz of new data tariff), Infy, LT, HDFC & Lupin (US FDA approval for new generic & recent spate of various launches).

As 2019 general election is two years away, Govt may not try for any major big bang reform such as 100% FDI in multi brand retail, Land & Labour bill, Judicial reform, Bad Bank for parking & actual resolution of stressed assets etc as being expected by the market. Instead, the Govt may continue its present policy of small incremental reforms with an eye on welfare capitalism such as initiatives for job creation, improvement of SMES & agricultural income, ease of doing business in the ground level etc.

Govt may tilt more towards pro-poor (populism) policies in the coming days eyeing for 2019 election rather than its previous plank as pro-industry or pro-corporate. Although, market is expecting an animal spirit by the Govt/BJP for some big bang reforms powered by undisputed political advantage, Govt may not show such hurry and instead may focus on longer term structural reform, whose effect may also not be visible in the near term earnings of the corporate.

SGX-NF

 BNF