Nifty Closed The Day 0.15% Higher Amid Hopes Of A June Rate Cut By RBI (After Tepid GDP) & Upbeat Global Cues Ahead Of US NFP Job Data

Nifty finished the week by almost 0.60% higher at another record closing high; what’s Next?

Market Wrap: 02/06/2017 (17:00)

NSE-NF (June): 9645 (+15; +0.15%) (TTM PE: 24.44; Near 2 SD of 25; TTM EPS: 395; NS-9653)

NSE-BNF (June): 23337 (+45; +0.20%) (TTM PE: 29.40; Near 3 SD of 30; TTM EPS: 795; BNS-23376)

For 05/06/2017:

Key support for NF: 9645-9595

Key resistance for NF: 9700-9770

Key support for BNF: 23300-23200

Key resistance for BNF: 23400-23500

Time & Price action suggests that, Nifty Fut (May) has to sustain over 9700 area for further rally towards 9750-9825 & 9865-9930 in the short term (under bullish case scenario).

On flip side, sustaining below 9680 area, NF may fall towards 9645-9595 & 9540-9495 area in the short term (under bear case scenario).

Similarly, BNF has to sustain over 23400 area for further rally towards 23550-23650 & 23875-24000 area in the near term (under bullish case scenario).

On the flip side, sustaining below 23350 area, BNF may fall towards 23200-23050 & 22950-22750 area in the near term (under bear case scenario).

Nifty Fut (June) today closed around 9645, almost flat (+15 points) around session low of 9643, well off the opening high of 9672 in a last minute wave of selling/profit booking. Indian market today opened in gap up, almost 40 points higher following upbeat global cues; but at the end almost lost all the initial gains.

Overnight US market rallied by around 0.65% and closed at another record high after blockbuster ADP job data & upbeat ISM Mfg employment component. Also, Trump’s decision to go out of Paris Climate accord to make “America great again & to save US jobs” may be also viewing as another booster for US economy (Trump also took the credit of record high US market few hours ago by his own tweet!!). But going forward, Trump’s own political fate (impeachment?), Fed’s actual rate  & B/S tapering action may decide the fate of the US/global markets. In the morning Asian session, Japan was trading higher at as Yen lose its recent strength (higher USDJPY).

Although, Indian market today opened gap up in synchronization of the positive global market cues, it failed to keep the momentum as valuations may be quite stretched and market may be also apprehending some GST disruptions; India may not be ready yet for a 1^st July GST roll out under the present complex structure, lack of preparedness and poor IT infrastructure.

Indian market today got some boost, especially some private banks, financials, NBFC and rate sensitive scrips after news that RBI Gov is in the customary meeting with the finance ministry ahead of RBI policy on 7^th June; there was some strong market buzz about a surprise rate cut by RBI this time after terrible GDP data.

Also, there were some reports that JSW group may foray into NBFC space with Rs.100 bln investments and may buy out some NBFC (inorganic diversification). This may be one of the reasons apart from RBI rate cuts hopes behind today’s rally in the NBFC space.

But, market may be also disappointed that till date, RBI has not come out with a definitive NPA resolution policy; thus it may be further delayed. But RBI may clarify this NPA policy (haircuts mechanism) in its 7^th June policy meeting also.

Domestic market sentiment was also supported today by IMD’s statement that SW monsoon is progressing well and we may have wide distribution of rains in the next two weeks. Today, ITC, Indusind Bank & HDFC alone contributed 27 points rally in the Nifty.

Meanwhile, US NFP just flashed terrible & much below market expectations after yesterday’s blockbuster ADP job data:

NFP (May): 138k (EST: 173k; prior: 174k-R)

Unemployment rate: 4.3% (EST: 4.4%; prior: 4.4%)

Avg. hourly earnings (MOM): 0.2% (EST: 0.2%; prior: 0.2%-R)

Avg. hourly earnings (YOY): 2.5% (EST: 2.6%; prior: 2.5%)

Participation rate: 62.7% (prior: 62.9%)

Thus, better unemployment rate of 4.3% is also accompanied by fall in participation rate and thus, the overall NFP data may be big disappointment for USD bulls as Fed may be forced to stay in sideline not only in June, but may be also in Sep’17. USDJPY is on the verge of breaking the 110 level and risk trade is off. Next week may be vital for the market considering Comey’s testimony.

 SGX-NF

BNF 

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