Technical & Macro Analysis Of Indian & Global Market----: Nifty Tumbled By Almost 1% Amid Global Sell Off Following “Trump Tremor” & US Political Turmoil

Market Wrap: 18/05/2017 (17:00)

NSE-NF (May): 9435 (-99; -1.04%) (TTM PE: 23.93; Near 2 SD of 25; TTM EPS: 394)

NSE-BNF (May): 22695 (-236; -1.03%) (TTM PE: 31.17; Above 3 SD of 30; TTM EPS: 728)

For 18/05/2017:

Key support for NF: 9415-9360

Key resistance for NF: 9465-9535

Key support for BNF: 22625-22450

Key resistance for BNF: 22725-22900

Time & Price action suggests that, Nifty Fut (May) has to sustain over 9535 area for further rally towards 9600-9640 & 9680-9770 in the short term (under bullish case scenario).

On flip side, sustaining below 9515 area, NF may fall towards 9465-9415/9385 & 9360/9310-9280/9240 area in the short term (under bear case scenario).

Similarly, BNF has to sustain over 22900-23000 area for further rally towards 23075-23200 & 23325-23450 area in the near term (under bullish case scenario).

On the flip side, sustaining below 22850 area, BNF may fall towards 22725-22625 & 22450-22300 area in the near term (under bear case scenario).

Nifty Fut (May) today closed around 9435, down by almost 99 points after making an opening session high of 9503 and closing minutes low of 9433 in a risk-off day marred by US political concerns. Indian market today also opened around 9475, almost 60 points down following “Trump Tremor aftershock” as a fall out of intervention with FBI (Comey’s) investigation over the alleged Russian link with his close aide (former NSA chief).

This is being seen as “obstruction of justice” and an “impeachable offence” by Trump. Thus, opposition DNC members are calling for Trump’s impeachment and it seems that even his own RNC members are distancing from Trump directly or indirectly for all such controversies. Yesterday, US speaker has indicated that although US congress is supporting Trump in this hour of crisis, it also want an impartial investigation of the whole matter and US congress may push its own bill for tax reform, health care, infra spending, deregulation etc.

After opening gap down today, domestic market tried to recover a bit, but lack of any meaningful fresh domestic triggers & concerns of stretched valuation may have limited any significant short covering in the 1^st half. After EU market opened in a similar subdued note following “Trumpdump”, it also attempted some recovery; but some reports from Reuters that “TRUMP CAMPAIGN HAD AT LEAST 18 UNDISCLOSED CONTACTS WITH RUSSIAN OFFICIALS AND OTHERS CLOSE TO KREMLIN BETWEEN APRIL AND NOVEMBER 2016” may have affected the global market risk-on sentiment further and subsequently, Indian market also tumbled more towards the closing session. Also, amid this ongoing high US political risk, news that US DOJ has appointed a special prosecutor (Ex-FBI-Mueller) may have further affected the risk-on sentiment.

Looking forward, ex-FBI chief Comey’s testimony in the US congress & further development of the impeachment motion by the DNC next week will shape the US/Global market; for now politics is playing bigger role than economics and all these US political chaos are making USD/US bond yields lower in a flight to safety to US TSY bonds, Yen, Gold etc. The whole idea of “Trumponomics” may be in serious doubt now. Also, recent spate of soft US economic data may be affecting the overall sentiment and FFR is now showing only 60% of a June hike probability; Fed may be on hold in June’17.

In the morning, Japanese GDP data flashed upbeat/better than expected (2.2%-YOY; 0.5%-QOQ); but a better JP economic data is good for JPY and it may also help BOJ to taper its huge QQE gradually. Thus, a strong Yen is making further pressure on the JP market (Nikkei-225). Also Brazilian political scandal has affected the global market sentiment today.

Technically, USDJPY (110.75) now need to sustain below 110 area for an immediate target of 108; on the other side, it may gain some strength only sustaining above 112.15 area for target of 114.50 in the short term.

Similarly, SPX-500 (2350) need to stay below 2340 area for further fall towards 2285-2265 zone; on the other side, sustaining above 2355-2375 area, it may again target the 2400-2430 area in the short term.

Amid all these US political chaos, Indian market also suffered some set back today; but IT scrips limited the downfall. An impeachment for Trump (?) may be good for IT scrips because of the perception of “Trump Free” America & his stance of protectionism & “America First” policy. Also, rally in USDINR, contrary to the global trend may have helped the IT counters today.

Nifty was dragged by private banks, metals, cements and PSBS counters. But ICICI bank has recovered some loss because of reports that JPA group is in the process of debt deal with the JLF (Banks) and may have soon release some payments to the banks prior to the Ultratech cement deal.

All eyes are also on the two day GST council meeting at Srinagar started from today. But as par some reports, almost all the states are now demanding some specific tax rate for some specific commodities as par their convenience; e.g. Kerala is now demanding 5% tax on Gold. So, the overall process may be delayed further till there is consensus. Also, as par some reports that GST council may announce officially Sep’17 as roll out day instead of Jully’17 because of various challenges in its implementation. A further delay in GST implementation may be also not good for the Indian market sentiment.

Looking ahead, apart from deluge of earnings in the coming days, Indian market may also focus on the GST meet today & tomorrow for a confirmation about implementation date & various other rules & regulations. A July or even a Sep’17 roll out may be proved as disruptive for the economy in the short term, considering the under preparedness of the stake holders and concerns for input tax credit transmissions & lower inventories/sales. It may affect the Q2FY18 earnings. Thus GST may be acting as a “double whammy” for the domestic market sentiment as of now.