Technical & Macro Analysis Of Indian & Global Market----: Nifty Gained By Almost 0.24% Supported By Midcaps, PSBS Consolidation Buzz & Better RIL/R-Jio Prospects Ahead Of FOMC Meet

Market Wrap: 14/06/2017 (17:00)

NSE-NF (June): 9638 (+23; +0.24%) (TTM PE: 24.35; Near 2 SD of 25; TTM EPS: 395; NS-9618)

NSE-BNF (June): 23492 (+43; +0.18%) (TTM PE: 29.56; Near 3 SD of 30; TTM EPS: 795; BNS-23499)

For 15/06/2017:

Key support for NF: 9580-9525

Key resistance for NF: 9675-9715

Key support for BNF: 23350-23200

Key resistance for BNF: 23650-23750

Time & Price action suggests that, Nifty Fut (May) has to sustain over 9675 area for further rally towards 9715-9770 & 9825-9865 in the short term (under bullish case scenario).

On flip side, sustaining below 9655 area, NF may fall towards 9580-9525 & 9490-9395 area in the short term (under bear case scenario).

Similarly, BNF has to sustain over 23650 area for further rally towards 23750-23875 & 24000-24100 area in the near term (under bullish case scenario).

On the flip side, sustaining below 23600 area, BNF may fall towards 23350-23200 & 23050-22950 area in the near term (under bear case scenario).

Nifty Fut (June) today closed around 9638, almost 23 points up after trading most of the days in sideways; it made a late day high of 9647 and opening session low of 9598 and made some recovery in the last hour supported by sharp pull back of midcap index and soma PSBS amid consolidation buzz of the sector.

Indian market today opened almost flat amid mixed global cues. Overnight US market, DJ-30 closed in positive (+0.44%) at another record high following better than expected core PPI and some bounce back in tech shares. Also, US AG Session’s senate testimony was positive for the market as he declined to say anything about his or Trump’s alleged link with Russia citing “executive privilege”. But, still we may see more such US political jitters regarding Trump-Russia election link as US senate may be very serious to investigate the actual truth behind it.

Globally, today all focus will be on the deluge of US economic data and Fed, which is poised to hike 0.25%, if it springs no nasty surprise. But more than rate cut, market may emphasize more on Fed’s statement, its future guidance/dot-plots, economic projection etc for another hike in Dec’17 or not as Sep is now being virtually ruled out. So, it may be a dovish hike today by Fed, but Yellen may indicate gradual B/S tapering from Sep/Dec’17 onwards in lieu of further rate hike in 2017 amid soft US economic data & poor visibility of “Trumponomics”. A taper tantrum by Fed may not be good for the risk assets as it will be the indication of real normalization (Fed still reinvests maturity proceeds from the QE bonds in the USTSY & MSBS and selling of those QE bonds may hamper market liquidity seriously)

In the morning today, China flashed an upbeat IIP & Retail data, but China market was trading in negative as better Chinese economic data may not be good for stimulus hungry market; PBOC may continue to keep its present neutral monetary policy except some targeted MLF. Also, fixed investment data from China came below expectation, which may be also not good for the overall Chinese economy. But, later upbeat GDP projection by IMF has supported the China/Asian market sentiment along with India also.

For India, WPI came today at 2.17% for May (YOY) against estimate of 3.11% (prior: 3.85%), which may have also supported the market sentiment as it will keep more pressure on the RBI to cut in August. Also, invocation of IBC act by RBI may have supported some private banks (ICICI) today, although in the short term, banks may have to take huge haircuts. At the same time, IBC may itself face various legal hurdles, times and challenges, which may also raise serious questions of the actual resolution itself.

PSBS were in the limelight after Govt identifies some big PSU Banks (BOB, Corp Bank), having sufficient B/S strength for consolidation with other small PSBS (like Dena bank). RIL was in the limelight after TRAI data shows blockbuster customer acquisitions for April with leadership position in WL BB.

Overall, today domestic market was choppy amid some concern of GST disruptions as Govt is committed for the 1^st July launch with barely 17 days in hand and the nation/business community may not be yet fully yet prepared for the implementation of the same. The present GST format may be too complex and compliance cost may also be significant. The main purpose of this GST launch in a hurry without considering the stakeholders lack of preparation may be Govt’s larger aim to track all the business transactions and stop the revenue leakage loopholes thereby (war against unaccounted money). The GST may be simplified by next few years after initial feedback. But, market may be apprehending some adverse effect on the corporate earnings in Q1& Q2FY18 because of GST disruptions.

Today Nifty was dragged by Yes Bank, ITC, HDFC, ACC, Tata Steel and some Pharma shares (Cipla, Auro Pharma).

Elsewhere, Oil was under pressure after surprised inventory buildup in API data yesterday; today official EIA data will be in focus. Recently, we have seen major divergence between API & EIA oil inventories data. Also, a report from IEA highlighting increased oil production from NOPEC countries and resumption of Nigeria & Libya oil field may be again causing some pressure on oil for the concern of increasing supply glut.

Meanwhile, USD Plunged After Subdued Core CPI & Terrible Retail Sales Data Ahead Of Fed.

US just flashed the data for May as:

Core CPI (MOM): 0.1% (EST: 0.2%; PRIOR: 0.1%)

Core CPI (YOY): 1.7% (EST: 1.9%; PRIOR: 1.9%)

CPI (MOM): -0.1% (EST: 0.1%; PRIOR: 0.2%)

CPI (YOY): 1.9% (EST: 2%; PRIOR: 2.2%)

Core Retail Sales (MOM): -0.3% (EST: 0.2%; PRIOR: 0.4%)

Retail Sales (MOM): -0.3% (EST: 0.1%; PRIOR: 0.4%)

In one word, overall data may be quite terrible and although Fed may hike today, it may be a “dovish hike” and probability for a Sep hike is now plummeted to 18% vs 24% and for Dec, FFR is now showing 46% vs 53% before the data. Market may be now discounting no Fed hike in Sep as also in Dec’17. Fed may shift to neutral stance in the months ahead with some hints of gradual tapering of its huge B/S.

After CPI & retail sales data, USDJPY plunged to 109.30 level and EURUSD jumped to 1.1278 zone. Gold also rallied to almost 1280 level.

Technically, USDJPY (109.25) need to stay over 109.15 now; otherwise it may fall towards 108.15-107.20 & 106.15 before or after Fed depending upon Yellen’s script.