Technical & Macro Analysis Of Indian & Global Market----: Nifty Rallied By Another 71 Points To Close At Record High Amid Upbeat Global Cues & Mixed Q4 Report Cards (So Far) And Optimism About PSBS (Earnings Recovery, Consolidation & NPA Resolution Policy)

Market Wrap: 25/04/2017 (19:00)

NSE-NF (April): 9295 (+71 points; +0.77%)

NSE-BNF (April): 22002 (+172 points; +0.79%)

For 26/04/2017:

Key support for NF: 9275-9235

Key resistance for NF: 9310-9385

Key support for BNF: 21975-21825

Key resistance for BNF: 22050-22150

Time & Price action suggests that, Nifty Fut (Apr) has to sustain over 9340 area for further rally towards 9385-9435 & 9505-9550 in the short term (under bullish case scenario).

On flip side, sustaining below 9320-9275 area, NF may fall towards 9235-9180 & 9115-9080/8995 area in the short term (under bear case scenario).

Similarly, BNF has to sustain over 22150 area for further rally towards 22305-22400 & 22500-22650/22800 area in the near term (under bullish case scenario).

On the flip side, sustaining below 22100-22050 area, BNF may fall towards 21975-21825 & 21650-21350 area in the near term (under bear case scenario).

Nifty Fut (April) today closed around 9295, rallied by 0.77% after making an opening session low of 9244 and day high of 9298. Indian market today opened in green following positive global cues amid 2^nd day of “French Relief Rally”, renewed optimism about Trump’s tax cut plan & upbeat earnings from some US corporates (almost 77% Q1 EPS are above estimates with an average 10% growth, highest in recent years).

Although, overall US economic data may be mixed amid tepid consumer spending & inflation, US market is basically hoping for a “huge” tax cut plan by Trump tomorrow ahead of his 100 days at WH. Although, there is still considerable geo-political tensions with NK and Trump’s actual tax reform may take some concrete shape only in late 2017, market is on a “risk on” mode as sentiment is quite upbeat after Macron’s win in 1^st round of French election. Macron, who is a globalist & centrist candidate, is also poised to win big in the 2^nd round of French election on 7^th May and thus fear of a “Frexit” and any anti establishment move (EU political risk) has almost reduced to nil now.

Technically, SPX-500 (LTP: 2380) has to sustain over 2395-2410 area for further rally towards 2445-2465 & 2500-2550 zone; otherwise it may correct and sustaining below 2360 zone, may further fall to 2335-2315 & 2270-2245 area in the short to mid-term.

Apart from upbeat global cues, Indian market sentiment was further boosted today by upbeat results from RIL & Indian Bank. Although, RIL result was largely in line with estimates and the stock came under some profit booking after gap up opening, upbeat result of Indian Bank may be significant, considering it’s one of the fragile PSBS. The bank reported a Q4FY17 PAT of around Rs.320 cr against 94 cr (YOY) and NII of 1385 against 1135 (YOY) with better NNPA at 4.39% vs 4.76% (QOQ).

The result may be one of the reasons for rally in other PSBS as market may be assuming that NPA/provisioning by the PSBS may be at its peak. Going forward, we may see some improvement/actual resolution rather than incremental surge of NPA in the PSBS, supported by Govt/RBI’s new NPA policy giving greater freedom to the banks to decide on their own hair cuts on a case to case basis without fearing of any future legal action by various Govt agencies. But, at the same time, Banks has to permanently waive off significant portion of the NPA in order for a definitive resolution and thus Govt/PSBS has to take some pain also for future gain.

Also, RBI Gov’s comments about consolidation of week PSBS with stronger ones for a few, but strong PSBS in India may have also ignited some hopes for an imminent M&A activities in the Indian banking sector. Incidentally, Axis Bank may be one of the prime M&A target in the private banking space with Kotak Bank (?) and several other small banks such as KTK, DCB may be also on the M&A watch list.

After market hours today, LICHSGFIN flashed its Q4 numbers and at a glance, the result may be mixed or in line with expectations. Technically, LICHSGFIN (LTP: 674) has to sustain over 685-705 zone for next leg of rally towards 725-750 & 785 area; otherwise it may correct and sustaining below 650 zone may further fall towards 615-560 area in the short to mod-term.