Nifty May Open In Mild Red Ahead Of RBI Following Tepid Global Cues As “Risk On” Trade Got A Jolt After FOMC Minutes Reveals Fed’s Intention About Balance Sheet Reduction & Some Bubbles For “Risk Assets”

Market Mantra: 06/04/2017 (08:30)

SGX-NF: 9240 (-43 points)

Key support for NF: 9215/9195-9140

Key resistance for NF: 9300-9375

Key support for BNF: 21650-21450

Key resistance for BNF: 21775-21875

As par early SGX indication, Nifty Fut (Apr) may open around 9240, gap down by around 0.46% following tepid global cues (risk off trade). Although yesterday’s overall US economic data was mixed, FOMC minutes reveals no specific mention about any Fed rate hike in June or Sep’17; but some members feel that US stock market may be creating an asset bubble and moreover FOMC also discussed a probable reduction in its huge Balance Sheet of $4.5 tln by the end of this year. Though, there was no specific details about tapering of Balance Sheet, Fed may stop reinvesting (backdoor QE) proceeds from its portfolio of TSY & MSB and may gradually taper its huge holdings of QE bonds. Fed also sees no fiscal stimulus package or even an tax reform until 2018 and thus in no urgency for a rapid rate hike. Also, US Congress speaker Ryan hinted yesterday about possible delay in tax reform as there is significant difference of opinions between GOP & Trump over this tax reform.

If Fed indeed go for a Balance Sheet reduction, then it may cause abrupt increase in US bond yields and overall real cost of borrowings may increase significantly and that may be a real QE tapering effect on the economy and thus smart money may be now flowing from “risk assets” (USD/Stocks) to the safety of US bonds & likes of Japanese Yen (safe haven currency).

Back to home, all eyes will be now on the RBI’s statement (hawkish or dovish) & SDF for draining out the excess DeMo bank deposits as there is no probability of a rate cut today.

Hints for actionable trading idea:

Time & Price action suggests that, Nifty Fut (Apr) has to sustain over 9325 area for further rally towards 9375-9425 & 9465-9505 by today / in the short term (under bullish case scenario).

On the other side, sustaining below 9305 area, NF may fall towards 9245-9195 & 9140-9090 area by today / in the short term (under bear case scenario).

Similarly, BNF has to sustain over 21775 area for further rally towards 21875-21950 & 22050-22150 area by today / in the near term (under bullish case scenario).

On the other side, sustaining below 21725 area, BNF may fall towards 21650-21525 & 21425-21300 zone by today / in the near term (under bear case scenario).

 SGX-NF