Nifty May Open Almost Flat Amid Mixed Global Cues Tracking Fed Dilemma & Strong EUR; EU Market May Come Under Pressure Today; All Eyes May Be On The Bihar Politics & Q1 Earning Optimism

Market Mantra: 27/07/2017 (09:00)

SGX-NF: 10035 (+5 points)

For the Day: NS/NF-Jul & BNS/BNF-Jul

Key support for NF: 10015-9935

Key resistance for NF: 10055/75-10115

Key support for BNF: 24700-24400

Key resistance for BNF: 24800-24875

Hints for positional trading:

Time & Price action suggests that, NF has to sustain over 10075 area for further rally towards 10115-10195/215 & 10265-10315 in the short term (under bullish case scenario).

On the flip side, sustaining below 10055 area, NF may fall towards 9965/9935-9885 & 9825-9780/9765 area in the short term (under bear case scenario).

Similarly, BNF has to sustain over 24800 area for further rally towards 24875-25050 & 25275-25580 area in the near term (under bullish case scenario).

On the flip side, sustaining below 24750 area, BNF may fall towards 24400-24200 & 24100-24000 area in the near term (under bear case scenario).

As par early SGX indication, Nifty Fut (July) may open around 10035, almost flat tracking mixed global cues after Fed delivered a statement, which is more or less as par expected lines of the market with some tinkering of words; overall it seems that Fed is hawkish on QE tapering (from Sep’17?), but dovish/soft on next rate hike In Dec’17.

USD plunged after Fed statement sounded like more dovish as Fed appeared concerned over the US core inflation trajectory and ongoing political drama. Thus, Fed has put some caveats for the QE tapering even from Sep’17 subjected to smooth sailing of US debt limit and no probability of any terrible political events like Trump impeachment.

Thus, Fed may wait for Sep’17 meeting to announce a definitive plan for the QE tapering from Dec’17 instead of another rate hike and may hike thrice in 2018 (1^st hike may be in March’18), if everything from politics & economics has gone well.

Previously, market may be expecting some kind of definitive signal for the QE tapering from Sep’17 itself, but yesterday’s FOMC statement has not indicated such perception with phrasing like “relatively soon, provided that the economy evolves broadly as anticipated”.

Thus, lack of a ultra hawkish & transparent Fed may have disappointed the USD bulls yesterday; but a central bank will never announce any major policy action prematurely; market has to wait for Sep’17 for a definitive action plan by Fed; more signal may come out from the Aug Jackson Hall meet.

USD also sold off on some other minor tinkering of words like core inflation is running below 2% instead of previous phrase of running somewhat below 2%; but all these may be an act of overreaction and long unwinding/fresh shorts as USD has already rallied a bit even before the FOMC.

But, more than Fed & USD, sudden strength of EUR just before the FOMC statement because of hawkish jawboning by ECB’s Nowotny, a known dove may have more bearing on the European markets later on as a strong EUR and a definitive hints of ECB QE tapering form Jan’18 along with Fed’s QT may not be good for the risk assets (EQ).

Overnight, US market (DJ-30) also closed at another record high on Boeing earnings, dovish Fed, lower USD, which is helpful for US corporates, exports and the imported inflation. A lower USD may be also being preferred by Trump & Co to make “America Great Again”.

Back to home, Indian market may celebrate once again today amid upbeat earnings from Yes Bank, HCL Tech, HDFC and also better political prospects for NAMO as oppositions are being washed out one by one; after Bihar, next target of BJP may be WB, but that may not be so easy.

In any way, market may be discounting the 2019 general election win by NAMO and with virtual majority now in RS, Govt should have now no issue to accelerate its reform agenda; now earnings need to catch up with the market rally, which is now almost 28% up since the Dec’16 low marred by DeMo & Trump tantrum.

NF