Nifty May Open Edged Down Amid Subdued Global Cues After NK Tests A H-Bomb & Nuked The Risk-On Market Sentiment; Indian Market May Focus On Sunday’s Cabinet Reshuffle

Market Mantra: 04/09/2017 (09:00)

SGX-NF: 9990 (-14)

For the Day:

Key support for NF: 9960-9895

Key resistance for NF: 10050-10090

Key support for BNF: 24300-24200

Key resistance for BNF: 24575-24675

Hints for positional trading:

Time & Price action suggests that, NF has to sustain over 10050 area for further rally towards 10090/10120-10160 & 10205-10275 area in the short term (under bullish case scenario).

On the flip side, sustaining below 10030 area, NF may fall towards 9960/9940-9895/9875 & 9815- 9750 area in the short term (under bear case scenario).

Similarly, BNF has to sustain over 24575 area for further rally towards 24675-24775 & 24875-25075 area in the near term (under bullish case scenario).

On the flip side, sustaining below 24525 area, BNF may fall towards 24300-24200 & 23950- 23850-23700 area in the near term (under bear case scenario).

As par early SGX indication, Nifty Fut (Sep) may open around 9990, slightly edged down by almost 14 points, tracking subdued global cues after NK tests a powerful H-bomb yesterday and subsequent risk aversion. Although, Nifty has opened almost flat, but it’s well off the SGX Nifty high of 10048 mapped on weekend Friday evening session after US NFP payroll and optimism about Indian cabinet reshuffle coupled with blockbuster auto sales, recovery in Mfg PMI and hopes of an Oct rate cut by RBI.

As we all know, on Sunday NK tested an unprecedented powerful H-bomb (?) much above the expectations of nuke analysts & experts. Although, response from Trump & US authorities are extremely measured, market may be concerned over another nuke capable ICBM test over JP airspace towards US pacific military base Guam on 9^th Sep, the foundation day of NK, which is also under some suspect for testing an unreported controlled fusion device explosion on its liberation day in the last week of Aug.

Risk aversion sentiment got some further boost today in the early Asian mooring after SK tested a ballistic missile stimulated to hit the NK nuclear site. Although, there is no such probability of a war between NK & US-SK simply because of nuke insurance of NK and the perception that even if US attack NK with conventional weapons, the later could hit SK in a matter of minutes, killing millions of civilians.

The NK geo-political issues are getting more complex after Trump threatened China for trading relationship with NK. Trump may be also planning to scrap trading relationship with SK over trade related issues and also getting involved with diplomatic & sanction row with Russia.

But, overall in a sense, this NK geo-political issues may be a boon for US economy as Kim is helping Trump to lower the USD and US is also able to sell more of its military hardware to SK & JP; it may be positive for reflation trade also, as both JP & SK is boosting their defence budget to “counter” NK and is acting some sort of fiscal stimulus for both US & JP-SK. Now, defence spending may be the main agenda of Trump on lack of poor visibility of other aspects of Trumponomics.

Thus, market may be cool as long as the NK tensions are limited within “war games & war of words” and not any types of “real war”.

Overnight US market closed almost flat after a terrible NFP report; although the overall US NFP numbers were shocking, USD recovered to some extent after plunging initially on the perception that the Aug job numbers are always bogged down by seasonal factors and it may be revised upwards in next review on Oct reading; DJ-30 was up by around 0.20%, while S&P gained by almost 0.20% at 2477 and NASDAQ closed at 0.10% higher.

USD got further boost after a ECB trail balloon that it’s not yet prepared to discuss any QE tapering strategy until Dec’17; thus it may be clear now that ECB is not comfortable to let EUR go above 1.20. Thus now all the eyes will be on ECB statement & Draghi’s presser on 7^th Sep.

US stock future (SPX-500) is now trading around 2465, down by almost 0.32% on risk aversion & flows to the safety of Yen, CHF, Gold, BTC; technically now 2455-2440 maybe the immediate support zone after NK nuked the market.

Back to home, after opening subdued, Indian market may watch the actual reactions after EU market resumes the week as US & Canada is closed today for “labour day” holiday. Domestic market may focus on cabinet rejig on yesterday by the Govt/BJP, keeping an eye on the 2018-19 state & general elections and also to counter growing skepticism about Modinomics, as GDP has plummeted to 3 yrs low, almost down by around 1.5% over last GDP growth recorded under UPA’s era of so called policy paralysis.

Although, defence & railway stocks may get some boost after the latest cabinet reshuffle, overall market sentiment may be subdued as FM portfolio was is kept unchanged by NAMO; market sentiment got some boost on Friday after buzz that Goyal may be appointed as FM.

But, Govt/NAMO may have taken a right decision by nor rejig the FM post as AJ is the senior most minister of team NAMO and may also be termed as an “unofficial” Dy-PM of the present Govt, being face & spokesperson of the same and also a practical man, managing all sorts of political crisis, be it DeMo or GST disruptions.

Although, Aug auto sales were blockbuster, it may be also transient and came on the back of slump in sales in July for GST disruptions; Aug sales may be also boosted by favourable GST effect, festival demand & from 7-CPC arrears (Govt employees & army personnel) and thus may not be repeated in the months ahead.

Apart from geo-political tensions, stretched valuations, muted Q1FY18 earnings & Govt’s war on black money may continue haunt the Indian market sentiment in the days ahead; 10150-10200 may be an intermediate top of the market already formed; 9700-9650 may be the 1^st positional support as of now.

SGX-NF