Technical & Macro Analysis Of Indian & Global Market----: Nifty Closed Almost Flat At Another Record High Amid Subdued Global Cues As Market Cheered Early Arrival Of Monsoon; Banks, IT, Pharma & Metals Were In Demand

Market Wrap: 30/05/2017 (17:00)

NSE-NF (June): 9615 (+9; +0.10%) (TTM PE: 24.43; Near 2 SD of 25; TTM EPS: 394; NS-9625)

NSE-BNF (June): 23250 (+114; +0.49%) (TTM PE: 31.88; Above 3 SD of 30; TTM EPS: 728; BNS-23307)

For 30/05/2017:

Key support for NF: 9570-9530

Key resistance for NF: 9640-9680

Key support for BNF: 23200-23000

Key resistance for BNF: 23275-23400

Time & Price action suggests that, Nifty Fut (May) has to sustain over 9680 area for further rally towards 9725-9770 & 9825-9865 in the short term (under bullish case scenario).

On flip side, sustaining below 9660-9640 area, NF may fall towards 9570-9530 & 9490-9440 area in the short term (under bear case scenario).

Similarly, BNF has to sustain over 23400 area for further rally towards 23500-23650 & 23875-24000 area in the near term (under bullish case scenario).

On the flip side, sustaining below 23350-23200 area, BNF may fall towards 23000-22900 & 22700-22450 area in the near term (under bear case scenario).

Nifty Fut (June) today closed around 9615, almost flat, but in discount to Nifty Spot (9625), which may be reflecting the Q4 dividend factor on spot prices. NF today made a day high of around 9633 & low of 9582 in a day of consolidation mode amid monsoon cheers & ongoing celebration of NAMO’s three year anniversary in office & overseas tours for seeking FDI.

Indian market today opened in slight red following tepid global cues. There was renewed concern for Greece default & Grexit (?), an early Italian election and probability of a “Hard Brexit” (UK PM has indicated that Britain may not accept any unfair treatment/negotiations with EU for its divorce).

There was also some comments by Japan's ruling party coalition partner earlier in the day, calling for maintaining present neutral policy (no more QQE) after Kuroda(BOJ), which was helping USDJPY (risk trade) to drive lower (Japan coalition partner: any new BOJ governor should avoid dramatic change). As a result, yen was gaining strength and Japanese market (Nikkei-225) was trading lower; China & Hong Kong is closed today. Some dovish comments by Draghi yesterday were also causing EURUSD to drift lower. But, later in the EU session, Greece FM denied any sovereign default probability and EU market recovered slightly. Also better than expected French GDP helped the risk on sentiment to some extent.

Back to home, domestic market was under pressure initially after World Bank’s subdued forecast about prospect of Indian economy & high fiscal deficit/Govt loan (state & center combined). Market was also cautious due to mixed Q4 earnings so far, lack of policy clarity about GST & NPA; but ultimately cheered from the actual arrival of monsoon today. Although, a better monsoon may be already discounted by the market, it’s a fact that the SW monsoon delivers almost 70% of the country’s rainfall and thus prospect of a good monsoon is brightening the farm products output & prospect of rural economy with overall robust economic growth (GDP) of the country. But, all of these effects of good monsoon should be reflected in the earnings trajectory of corporate India, which is so far may be termed as mixed set of numbers.

Looking ahead, domestic market may keenly watch Q1 GDP, PMI, US NFP data, Trump’s impeachment fate/political trouble apart from further developments on GST & NPA policy front; with around 30 days in hand, a smooth GST roll out on 1^st July may be quite challenging and may also cause some initial disruption.

Today Nifty was supported by Auro Pharma (upbeat outlook for its US business despite subdued results), Adani Ports (settlement of royalty issues of its AU coal mine project), Banks (BOB/SBI/ICICI/Axis for any further clarity on the NPA policy by the RBI amid their meeting), Autos (monsoon cheer), Cements, value buying for some bitten down Pharma counters (Lupin/DRL/Sun/Cipla) and IT scrips.

Nifty was dragged by Bhel, BPCL, LT (below expected Q4 EBITDA parameters), ITC, HDFC and telecoms for its pessimistic outlook. Govt today sounded caution against the telecom sector’s huge debt to the banks and has permitted the lenders to impound even the spectrum in case of any serious defaults!!

Incidentally, today ADAG officials/RCOM CFO again came to the media to assure the market and the concerned stakeholders, banks not to panic over their huge debt as they are making necessary arrangements within Sep’17 for some refinancing and de-leveraging (real estate & mobile tower assets sale). Subsequently, ADAG group shares got some boost (short covering) along with mid-caps space. There were reports that almost 10 Indian banks are in the process to classify the RCOM loans as NPA, which were in the SMA-2 stage for the last few months, courtesy R-Jio’s aggressive/almost free marketing policy.

Indian market may be also concerned over some recent steps taken by the SEBI for its P-Note issues; although P-Note backed fund flows has diminished significantly over the last few years due to Govt’s war against black/illegal money, still P-Note may be a sentimental issue for the market. Henceforth, P-Notes may be permitted for use only in hedging purpose and not for any speculation.

Looking forward, Govt may change the FY from April-March to Jan-Dec from 2018 (Jan’18) and may also brought ahead the 2019 general election to 2018 along with the states (common election/state & centre polling) for faster 2/3^rd majority in the RS. In that scenario, Govt may ultimately defer GST implementation to 2019, considering various objections being raised by all the stake holders under the present complex form (??).

Meanwhile, German CPI (May) flashed as subdued at -0.2% (MOM-estimate: -0.1%; prior: 0.0%); YOY: 1.5% (estimate: 1.6%; prior: 2%); EU CPI looks more vulnerable tomorrow.

In the US, core PCE price index (Apr) came as 0.2% (MOM-estimate 0.1%; prior: -0.1%); for YOY: 1.5% (estimate: 1.5%; prior: 1.6%); although on MOM basis, core PCE is somewhat upbeat, it’s still very subdued on YOY basis; PCE being one of Fed’s favourite indicator for its inflation projection, Fed’s goal of 2% PCE may be still far away (negative for USD & risk trade). Moreover, Kaplan’s comments about 2 more hikes by Fed this year may be also termed as dovish as market/USD bulls are expecting more than 3 hikes in 2017.

Technically, SPX-500 (2410), which is hovering around record high need to sustain over 2425 area now for any further rally towards 2475-2490 zone; otherwise it may come down again towards 2355-2320 zone in the coming days; NFP data, actual Fed rate action and Trump’s political/twitter tantrum & impeachment motion (if any) might be the next triggers as Q1 earning season is almost finished.