Nifty Soared By Around 1% Amid “French Relief Rally” & Govt’s Efforts For NPA Policy & Some Upbeat Earnings

Market Wrap: 24/04/2017 (19:00)

NSE-NF (April): 9225 (+98 points; +1.08%)

NSE-BNF (April): 21844 (+303 points; +1.41%)

IN 10Y G-SEC: 6.943 (+0.29%)

USDINR (Apr): 64.45 (-0.29%)

For 25/04/2017:

Key support for NF: 9180-9115

Key resistance for NF: 9255-9310

Key support for BNF: 21800-21700

Key resistance for BNF: 21975-22150

Time & Price action suggests that, Nifty Fut (Apr) has to sustain over 9255 area for further rally towards 9310-9375 & 9425-9505 in the short term (under bullish case scenario).

On flip side, sustaining below 9235 area, NF may fall towards 9180-9115 & 9060-8995 area in the short term (under bear case scenario).

Similarly, BNF has to sustain over 21875 area for further rally towards 21975-22050 & 22150-22305 area in the near term (under bullish case scenario).

On the flip side, sustaining below 21825 area, BNF may fall towards 21700-21600 & 21450-21300 area in the near term (under bear case scenario).

Nifty Fut (Apr) today closed around 9225, up by almost 98 points after making an opening session low of 9130 & day high of 9234, primarily boosted by global “risk on” rally as a result of favourable election outcome in the 1^st round of French election.

In France, Macron (centrist & globalist) won the 1^st round of polling defeating his nearest arch rival Li Pen (rightist & nationalist) by 2% as expected yesterday; more over latest opinion poll for the 2^nd round of election to be held on 7^th May also indicating that Macron is leading by around 20% over Li Pen and all these has removed the fear of a “Frexit”.

Although traditionally, France is always governed either by left or right wing political parties/presidents, Macron having a non-political background and a former investment banker, is expected to govern France with a practical approach in this time of growing geo-political risks in EU, especially after Brexit. All these has ignited a risk on rally as smart money is now reversing from the safety of US TSY bonds and other safe heaven assets like Yen & Gold to the riskier assets of EQ & USD. But it may be too early as market may also watch keenly the 2^nd & final round of French election and Li Pen may also bounce back.

Global market sentiment was also boosted by renewed optimism about Trump’s much awaited Tax & Health Care reform bill that may be unveiled this week. As par some buzz by Trump & Co, they soon publish a “massive” tax cut plans as a part of first 100 days of Trump in WH (on 29^th April). Trump is also trying for a passage of a compromised “Trumpcare” bill & repel of “Obamacare” this week. But, all these tax & health care bills may be just outline of the actual bill in progress and the real bill & the passage of that may take significant time. Also, Trump has to pass the spending bill by 28^th April in order to avoid a symbolic US Govt shut down.

Overall, there may be significant divergence between optimism about US soft economic data with hard data and Q1 GDP is expected to be very tepid. This, along with continuous squabbling about Trumponomics and increasing geo-political risks (NK/Syria) may have made the Fed to be on hold in June’17 & Sep’17 and thus USD may be now in a “sell on rise” mode; reflation trade may also be in considerable doubt now. Also, there is still overhang of NK related of geopolitical tensions & “war of words”.

But, China market fall today despite global euphoria due to regulatory clampdown on some Wealth Management products & asset bubbles, Govt tightening on shadow banking & excess capacity (deleveraging effort) etc. In fact, China is falling consistently for the last few weeks and increasing PBOC tightening may also be one of the primary reasons.

Apart from the French relief rally, Indian market today also boosted by optimism about an effective NPA policy, when FM hinted that Govt is in the process to pass a “prevention under corruption act-PCA” legislation in the forthcoming monsoon session of Parliament, aiming to safeguard the banking industry for any loan, which may have gone wrong & turned into a NPA for a pure failure of commercial decision. This may also help the banking industry (PSBS) to take a call for necessary haircuts (waive off) for a NPA for a speedy resolution under OTS settlement. As a result, Bank Nifty reacted quite positively today.

But, these OTS settlements with some haircuts (25-50%) are not new for the Indian banking system/PSBS, but the process may be stalled after the KFA fiasco and fear of various Govt investigative agencies. Thus, if the PCA bill is passed, then bankers may take swift decision about the actual resolution of a NPA without any fear of investigative agencies in future. Govt is aiming for an effective resolution of the top 30-50 large NPA in infra sector as this mess is mostly confined to those large accounts rather than innumerable small accounts.

Apart from banks, Nifty was supported today by cement counters after upbeat results & guidance by ACC, Ultratech. Also, there was some M&A news of ACC with Ambuja Cement. HDFC bank was also in demand after a robust Q4 report card. Automobiles (Tata Motors, M&M etc) also rallied by some extent after reports of a probable review petition in SC against the adverse BS-III order for a temporary 3 months time to dispose of the BS-III vehicles (CV/LCV).

After market hours today, RIL flashed its Q4FY17 numbers. At a glance, except Petrochem, all the other numbers including GRM came upbeat & above/in line with market expectations.

Technically, RIL (LTP: 1417) has to sustain above 1455-1475 area for further rally towards 1525-1630 & 1710 zone in the short to long term; otherwise it may correct and sustaining below 1380-1345 zone, may fall further towards 1265-1235 & 1145 area in the near term.

NF

BNF

 RIL