Technical & Macro Analysis Of Indian & Global Market----: Nifty Jumped By Over 68 Points Despite Mixed Global Cues As Market Cheered Better Monsoon Prospect By IMD Amid Less Impact Of El-Nino

Market Wrap: 10/05/2017 (17:00)

NSE-NF (May): 9419 (+68 points; +0.73%)

NSE-BNF (May): 22868 (+105 points; +0.46%)

For 11/05/2017:

Key support for NF: 9390-9340

Key resistance for NF: 9475-9550

Key support for BNF: 22825-22675

Key resistance for BNF: 22950-23075

Time & Price action suggests that, Nifty Fut (May) has to sustain over 9475 area for further rally towards 9510-9550 & 9600-9680 in the short term (under bullish case scenario).

On flip side, sustaining below 9450 area, NF may fall towards 9390-9340 & 9295-9245 area in the short term (under bear case scenario).

Similarly, BNF has to sustain over 22950 area for further rally towards 23075-23200 & 23405-23475 area in the near term (under bullish case scenario).

On the flip side, sustaining below 22900 area, BNF may fall towards 22825-22675 & 22500-22400 area in the near term (under bear case scenario).

Nifty Fut (May) today closed around 9419, rallied by almost 0.73% after making an opening minutes low of 9358 & late day high of 9424. Indian market today opened almost flat following mixed global cues. Overnight US market closed in slight negative (-0.17%), but off the highs after NK announced that they are determined for the 6^th Nuke test. Although US is trying to persuade the country, it’s enough for the sudden “risk off” mood and USDJPY nosedived from the vital resistance zone of 114.50 ( next hurdle is 115.50 area).

Also, sudden termination of FBI director by Trump for the Clinton e-mail fiasco and most probably also for the ongoing investigation of Russian link with him in the election period may have also caused the global market sentiment “risk off” as such administrative/political squabbling in the WH may also have an adverse effect on the pro-growth (Trumponomics) agenda of US Govt.

Overall, although global market is relatively stable on the hopes of Trumponomics despite so much political concerns, the ongoing FBI director fiasco may also invite a serious constitutional confrontation in the US congress (RNC & DNC), which in turn may also jeopardy the core theme of Trump’s agenda to make “America Great” again. The resultant repercussion in the US consumer sentiment & spending may also affect the H2 GDP growth of US economy.

Looking ahead, US political risks like Trump’s alleged Russian connection may be one of the serious headwinds for the global market & “risk on” trade. As a result of ongoing political controversy, it may be also very tough for Trump & Co to peruse economic reform agenda (Trumponomics) properly and reflation trade may be in doubt as well.

Meanwhile, gold rebounded to some extent on the back of flow to safety (renewed NK tensions). Oil also moving sideways amid concerns for increasing supply glut out from US and subdued demand along with ongoing jawboning effort by the OPEC to limit the downfall (production cut agreement may be extended by another six months after June).

Amid all these ongoing global concerns, Indian market today jumped by 68 points as market cheered better monsoon prospects as indicated by IMD yesterday after market closing. As par reports, IMD forecasted “above normal monsoon” (100-106% of LTA) on the back of easing concern for El-Nino against their earlier forecast of “just normal” monsoon (at 96% of LTA). But, it may be too early as the private weather forecaster (Skymet) today said that the monsoon may be near normal and may not be surplus this year as weak El-Nino condition is expected to be in later pat of July-Aug. In any way, rather than actual quantum of monsoon, distribution and time may be more important for the rural economic growth for India.

As a result of upbeat monsoon forecast, FMCG, consumer durables, tractors/2W, rural & fertilizer sector has performed quite well today on the hope of economic recovery in rural areas which was greatly affected by DeMo earlier this year. Today Nifty was also supported by RIL, Bharti Airtel (better than expected Q4 report card) & Auto scrips (Maruti, Tata Motors), but dragged by IT (renewed concerns after reports of mass layoff), PSBS (skepticism about the NPA reform policy) and some cement counters (consolidation after recent steep rally).

Apart from better monsoon projections, a report that investors/FII(s) are now looking for a contra pair trade (short SPX-500/US market and long EM) may be also responsible for today’s rally (FII are net buyer yesterday after a short pause). However, investors may be quite cautious at such higher level of Nifty at 9400 as valuations are looking quite stretched around TTM PE of 24; technically a weekly closing above 9475-9510 area may decide the trend for the market in the months ahead.

IT employment may be a great support for the Indian economy and retail banking lending activities so far. But the trend of ongoing mass lay off due to cost cutting, automation, lack of relevant skills and Trump phobia, whatever may be the reason could be turned into a serious crisis in the months ahead.