Tuesday, 6 June 2017

Nifty May Open Almost Flat Following Subdued Global Cues And Hopes Of A Dovish RBI & GST Optimism; The “Feel Good Rally” May Extend Further Only Sustaining Above 9750-9865; RBI Disappointment & Apprehension Of A GST Disruption May Drag Amid Mixed Q4 Earnings

Market Mantra: 06/06/2017 (08:30)

SGX-NF: 9690 (+5 points)

For the Day:

Key support for NF: 9645-9585

Key resistance for NF: 9700-9750

Key support for BNF: 23400-23200

Key resistance for BNF: 23550-23650

As par early SGX indication, Nifty Fut (June) may open around 9690, almost flat following subdued global cues and hopes of a dovish RBI tomorrow along with GST optimism. Overnight US market closed in slight negative (-0.10%) as market turned cautious ahead of ECB meet, Comey’s testimony and UK election amid mixed US economic data (ISM Non-Mfg PMI came slightly tepid but employment portion was upbeat). There was also some talk that some influential opposition DNC members are ready to co-operate Trump for the health care & infra spending plan and tax reforms; if there is no terrible outcome from Comey’s testimony this week, one can expect for some progress of the US tax reform plan in July-Sep’17.

As of now Fed is scheduled to hike in June; but the big question may be its future stance (hawkish/dovish) and considering the overall soft US economic data, Sep hike may be in doubt now. Although, US stock market is rallying on optimism of a reflation trade (US infra/fiscal spending), bond yields are not yet convinced and are diverging quite q lot.

In the morning Asian session today, some hawkish comments by Japan’s FM about reducing debt/GDP ratio has strengthened the JPY and thus Japan is trading lower. China & HSI is trading higher, after PBOC has done an unexpected big MLF operation.

Back to home, Indian market may continue its “feel good rally” to some extent although valuations are now quite stretched amid mixed Q4 earnings; market may be looking for a dovish RBI tomorrow, if not an unexpected rate cut. Although, there is immense GST optimism, especially for the sectors on which GST rates are apparently favourable, there are also some serious concerns of a GST disruption, even for a short term as the overall rules, regulations and compliances are quite complex, confusing and also challenging. Govt may also now giving its full focus on the hassle free GST roll out and may look into the NPA resolution & PSBS revival after GST episode next QTR.

Hints for actionable trading ideas:

Time & Price action suggests that, Nifty Fut (May) has to sustain over 9750 area for further rally towards 9825-9865 & 9930-10100 in the short term (under bullish case scenario).

On flip side, sustaining below 9730-9700 area, NF may fall towards 9640-9585 & 9540-9480 area in the short term (under bear case scenario).

Similarly, BNF has to sustain over 23550 area for further rally towards 23650-23875 & 24000-24100 area in the near term (under bullish case scenario).

On the flip side, sustaining below 23500-23450 area, BNF may fall towards 23300-23200 & 23050-22900 area in the near term (under bear case scenario).

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