Nifty May Open Almost Flat Amid Subdued Global Cues Ahead Of FOMC Minutes, US Data Deluge & Trump’s Meet With China’s XI; Huge Farm Loan Waiver In UP May Be Seen By The Market As “Political Populism”

Market Mantra: 05/04/2017 (08:30)

SGX-NF: 9280 (+6 points)

Key support for NF: 9235-9195

Key resistance for NF: 9310-9350

Key support for BNF: 21450-21350

Key resistance for BNF: 21675-21850

As par early SGX indication, Nifty Fut (Apr) may open around 8280, almost flat following tepid Global/Asian cues ahead of FOMC minutes, ADP Job & ISM Non-Mfg PMI data and much awaited meeting between Trump & Chinese Prez XI. Apart from further indication about Fed rate hike trajectory, market may also keenly watch any hints about Fed’s huge balance sheet shrinking probability (Dec’17) in the FOMC minutes. Although, market may be worried about any direct confrontation (war of words) in US & China summit, considering Trump’s recent rhetoric about trade deficits & currency manipulation, specially from China, the fact is Chinese Yuan has strengthened in the last few months and also yesterday’s US trade deficit numbers was upbeat, such meeting may be a non-event also & may not impact the market significantly in either way.

Japan is trading lower despite upbeat service PMI data today as BOJ purchased less than expected JGB bonds. Also USDJPY is continously hovering around the critical level of 110 and a break of that may also cause significant “risk off” trade.

Back to home, yesterday’s UP cabinet decision to waive off around Rs.36253 cr of farm loans may be seen as a political populism, although it was well known, being an election promise by BJP. But such huge farm loan waiver may also distort overall credit & fiscal discipline for both the borrowers/banks/MFI & also the state Govts as some other states may also peruse such political populism at the cost of exchequer. Farmer’s vote may be necessary for any political party to survive but not at the cost of fiscal discipline. Henceforth, after such multiple farm loan waivers, farmers may also wait for another election for another Govt sponsored loan waiver; rather than such type populism, Govt may focus on the core structural issues behind farmer’s plight all over the nation and bring some reform towards those issues. The instant farm loan waiver may be positive for the PSBS in the short term as they will be reimbursed by the UP Govt shortly, but it may also affect the overall credit discipline of the banking system (negative in long term).

Market may also focus on RBI’s tone tomorrow as there is no probability of a rate cut as of now. Despite, RBI being neutral, some analysts are also expecting rate cuts in Q2FY18 and thus, if tomorrow’s RBI statement and subsequent presser is on the hawkish side, expect some disappointment in the market.

    

Hints for actionable trading idea:

Time & Price action suggests that, Nifty Fut (Apr) has to sustain over 9310 area for further rally towards 9350-9395 & 9425-9465 by today / in the short term (under bullish case scenario).

On the other side, sustaining below 9290 area, NF may fall towards 9235-9195 & 9150-9105 by today / in the short term (under bear case scenario).

Similarly, BNF has to sustain over 21675 area for further rally towards 21750-21850 & 21950-22150 area by today / in the near term (under bullish case scenario).

On the other side, sustaining below 21625-21550 area, BNF may fall towards 21450-21350 & 21100-20900 zone by today / in the near term (under bear case scenario).

SGX-NF