Technical & Macro Analysis Of Indian & Global Market----: Nifty Closed By 28 Points Higher Following Mixed Global Cues & Tepid China Trade Data Despite An Emphatic Win By Macron In The French Election; Domestic Market Was Supported By Cements, Banks, Telecoms & Real Estates Today

Market Wrap: 08/05/2017 (16:30)

NSE-NF (May): 9345 (+28 points; +0.30%)

NSE-BNF (May): 22781 (+129 points; +0.57%)

For 09/05/2017:

Key support for NF: 9305-9265

Key resistance for NF: 9400-9475

Key support for BNF: 22625-22500

Key resistance for BNF: 22875-22950

Time & Price action suggests that, Nifty Fut (May) has to sustain over 9425 area for further rally towards 9475-9510 & 9550-9600 in the short term (under bullish case scenario).

On flip side, sustaining below 9405-9385 area, NF may fall towards 9305-9265 & 9215-9170 area in the short term (under bear case scenario).

Similarly, BNF has to sustain over 22875 area for further rally towards 22950-23075 & 23200-23475 area in the near term (under bullish case scenario).

On the flip side, sustaining below 22825 area, BNF may fall towards 22625-22500 & 22400-22225 area in the near term (under bear case scenario).

Nifty Fut (May) today closed around 9345, up by almost 0.30% after making a day high of 9336 & low of 9322. Indian market today opened almost flat following mixed Global/Asian cues despite an emphatic win for Macron, the centrist candidate in French election (won by around 66 vs 34% against expectation of 60 vs 40%). Although, margin of win by Macron was better than expected, it was largely discounted by the market after 1^st round of the French election till last week, in which market also rallied quite significantly. Thus, it may be another classic example of “buy the rumours and sell the fact” today in the global market, which is trading in slight red. Despite a better than expected win by Macron, he may face political gridlock in French Parliament and has to also face the growing unemployment situation in France.

Although, EU political risks may be diminished to some extent after Macron win, the fact that the nationalist anti EU candidate Li-Pen still got 34% of vote may be an indication of growing unpopularity of the EU concept in the entire EU zone. France being a conservative country, unlike UK may have voted for stability and not for any uncertainty (Frexit), but there are still considerable EU political risks in the form of real Brexit & forthcoming election in Germany & Italy. Also, Macron is being seen as anti Brexit French Prez (pro EU) and thus, by his election, likelihood of a hard Brexit may have accelerated. Thus, risk on trade may be subdued to some extent today. Attention of the market may shift now from politics to economics in the days ahead.

In Asia, Japan was trading in good gain as Yen got weakened (USDJPY was up) after Macron win; but due to tepid trade balance data and other regulatory tightening, China was trading lower in the morning. Although, headline Chinese trade balance was flashed better than expected at $38.05 bln (estimate: 35.50; prior: 23.93), the underlying export & import data came quite subdued for April. As a result, there was some concern about demand & growth in the world’s 2^nd largest economy (China) and together with that growing supply glut of iron ore may have also kept the overall global market in check from any blockbuster rally. Today, China data showed that export for April has grown by 8% (estimate 10.4%; prior: 16.4%) and imports grew by 11.9% (estimate: 18%; prior: 20.3%).

Among all these ongoing global concerns, Indian market today got support from cement stocks (after merger news of ACC & Ambuja), banks & telecoms to some extent. Banks, specially PSBS & ICICI are in demand as the market is digesting the NPA ordinance giving more advisory power to RBI to force banks to take necessary hair cut in a time bound resolution process of the huge banking NPA.

But, as par some estimates, in this way, banks may have to permanently waive off around Rs.2 tln, which may be a significant amount for the banks (some PSBS) and it may not be so easy to raise further capitals from the market. In reality, RBI is always empowered to enforce any steps for the banks for resolution of the NPA; but the latest amendment may also ensure that, there will be no further investigation of any wrong doing by the banks from any Govt investigative agencies or other dept (3C-CBI, CV & CAG), because it will be a multilayer process, involving all the stakeholders. So there may be considerable delay in actual resolution even after the reorganization of the NPA and the buyers of the stressed assets may also be very difficult to find with an appropriate price tag. As long as the structural problems for the NPA are not addressed properly, then it may be a tough task for the Indian banks for an effective resolution.

Merger in ACC & Ambuja is being seen as positive for the sector/companies involved because of some positive synergies like lower costs and other key operational metrics. Today real estate stocks were also in great demand as RERA kicks in and SBI also cut their home loan interest to some extent (<30L). Telecom (Bharti Airtel, Idea) has also supported the market today apart from ICICI & SBI. There was some news that Essar group is being told by the Govt to pay a token advance amount for a possible OTS settlement with the lenders. SBI & ICICI may be the prime lenders of the Essar group.

Some optimistic comments by the FM and confirmation of a July roll out of GST may have also influenced the market today by some extent in absence of any meaningful domestic triggers. A hurried launch of GST by July-Sep’17 may be seen as another possible economic disruption with so many rules & regulations & multiple levels of taxes. Industry & the traders may be still underprepared for the GST, considering the IT infra & others regulatory requirements.