Nifty May Open Higher Amid Positive Cues From Wall Street; But Hawkish RBI/MPC Minutes & Geopolitical Concerns May Also Limit The Upside

Market Mantra: 21/04/2017 (08:30)

SGX-NF: 9180 (+17 points)

For the Day:

Key support for NF: 9160-9115/9085

Key resistance for NF: 9200-9255

Key support for BNF: 21450-21250

Key resistance for BNF: 21675-21775

As par early SGX indication, Nifty Fut (Apr) may open around 9180, slightly in green following mixed global cues. Overnight US market rallied by around 0.85% amid better than expected result from American Express and hopes for an imminent tax cut bill by Trump. Although, yesterday’s US economic data was tepid, a comment by US TSY Sec about probability of introduction of the much awaited tax cut bill by Trump has ignited the “risk on” (reflation) trade sentiment there. As par reports, despite failure of health care bill, Trump may go ahead with the tax reform bill and will try to persuade any dissidents for the same by process of due consultations & also some compromises.

But, despite upbeat US market, morning Asian market sentiment was tepid because of a terrorist attack in Paris overnight and risks of French election on Sunday. Although, the market favourite centrist candidate (Macron) is way ahead of the ultra right & anti EU candidate (Li Pen), such terrorist attack may also change that perception/opinion poll in this 1^st round of French election.

Back to home, yesterday’s RBI/MPC minutes may be described as hawkish on inflation and upbeat on growth; thus in such scenario, further rate cut hopes in FY-18 or foreseeable future may be equivalent to almost Nil. RBI may focus more on NPA resolution along with ongoing AQR (reorganization) and previous rate cut transmissions by the banks. As par RBI, there is still room for rate cuts by the banks and also interest rate on small savings instruments need to fall in line with G-SEC 10Y yields. Also, as par RBI, there may not be any concrete new NPA policy immediately and it may take some more time, especially on the NPA hair cut policy, where the regulator may need to consult the Govt & the stakeholders for a more effective & viable mechanism.

After mixed result from IIB & Yes Bank, market may also focus on the report card of HDFC Bank & ACC for further cues of Q4FY17 earnings, which is so far termed as mixed/tepid wrt very high market expectations & subsequent stretched valuations.

Time & Price action suggests that, Nifty Fut (Apr) has to sustain over 9240 area for further rally towards 9275-9310 & 9375-9425 for the day/in the short term (under bullish case scenario).

On the other side, sustaining below 9220-9200 area, NF may fall towards 9160-9115 & 9085/60-9025 area for the day/in the short term (under bear case scenario).

Similarly, BNF has to sustain over 21775 area for further rally towards 21875-21975 & 22050-22150 area in the near term (under bullish case scenario).

On the flip side, sustaining below 21725-675 area, BNF may fall towards 21550-21450 & 21300-21150 area in the near term (under bear case scenario).

 SGX-NF