Nifty May Open Almost Flat Tracking Similar Global Cues Ahead Of BOJ’S Kuroda & ECB’s Draghi; All Eyes May Be On The RIL Q1 Earnings & NPA/IBC Cases As Real Resolution May Take Significant Time

Market Mantra: 20/07/2017 (09:00)

SGX-NF: 9925 (+2 points)

For the Day:

Key support for NF: 9905/9870-9835/9810

Key resistance for NF: 9960/9985-10005

Key support for BNF: 24000/23950-23850

Key resistance for BNF: 24250-24350

Time & Price action suggests that, NF has to sustain over 10005 area for further rally towards 10050-10115 & 10195-10250 in the short term (under bullish case scenario).

On the flip side, sustaining below 9985-9960 area, NF may fall towards 9905/9870-9835/9810 & 9770- 9715 area in the short term (under bear case scenario).

Similarly, BNF has to sustain over 24250 area for further rally towards 24350-24500 & 24700-24875 area in the near term (under bullish case scenario).

On the flip side, sustaining below 24200 area, BNF may fall towards 24000/23950-23800 & 23650-23500 area in the near term (under bear case scenario).

As par early SGX indication, Nifty-Fut (July) may open around 9925, almost unchanged tracking flat global/Asian cues ahead of BOJ Kuroda’s presser; BOJ has hold its monetary policy (unchanged) as expected with a virtual admission to defeat in deflation.

BOJ has lowered its inflation projection, but upgraded the economic outlook and projected the much elusive 2% CPI at 2019 now; they are constantly moving their goal posts (inflation target & timing) for the last few years and now Kuroda’s extension looks tough. All eyes will be now on his presser and Q&A for further trajectory of Abenomics; USDJPY is inching upwards after BOJ with some risk-on momentum.

Overnight US market (DJ-30) was closed in green (+0.31%), breaking another record high amid hopes for Trumpcare and supported by upbeat earnings from MS and renewed optimism over FANG/Tech stocks; it seems that passage of US healthcare bill is now a “do or die” situation for Trump, whose administrative & political credibility may be now facing serious question marks.

Apart from apprehension over US health care bill and poor visibility of Trumponomics, all focus may be also on Trump & Co’s scheduled senate testimony on 24-26^th July in the alleged Russian link controversy and US political jitters may take ugly turn in the days ahead.

Overall, despite so many headwinds about political risk of Trump & his policy of protectionism and failed narratives of Trumponomics, US market is unnerved, may because of visible improvement of earnings over the past one year as global reflation momentum is going on amid ongoing flow of easy money.

In that sense, today’s Draghi presser may be more important than anything less as Draghi & Fed may signal a gradual & coordinated QE tapering in the next month’s Jackson Hall symposium; any official indication of Draghi’s participation in the Aug Jackson Hall meet may confirm this QE intention.

As risk assets (EQ) are now hovering around life time high, breaking record after record every day, it may be the ideal time for global policymakers (central banks) to go ahead with the coordinated QT/QE tapering in order to avoid a disorderly and one sided market volatility; global stock market capitalization may now over 102% of global GDP, which is itself a sign of extreme bubble.

Eventually, all the major G-10 central Banks has to normalize their B/S in order to prepare for the next cycle (8-10 yrs) of economic recession; this time US student & subprime Auto debt may be the next triggers for such recession as subprime housing loan crisis in 2008-10.

Back to home, Indian market may focus on RIL & other Q1 earnings trajectory and also on the ongoing legal tussles of NPA/IBC cases, which may take significant time frame for any actual resolution.

NCLT/HC has raised some uncomfortable questions for the banks such as their lack of seriousness to resolve these issues prior to NPA ordinance act and the overall restructuring policy/practices by the banks, which seemed as a big ponzi scheme for the chronic loan defaulters (like paying a old ICICI credit card loan with a new SBI credit card).

Indian banks now need huge capital as excess provisions & hair cut (waive off) obligations for this mammoth NPA and thus, there is significant risk of future equity & EPS dilution on poor visibility of the underlying credit growth.

SGX-NF