Nifty May Resume In Moderate Green Amid Positive Global Cues After “Lighter” UN Sanctions On NK; All Eyes May Be On The Indian CPI & IIP Today To Have A Glimpse Over Growth vs Inflation Equation

Market Mantra: 12/09/2017 (09:00)

SGX-NF: 10050 (+26)

For the Day:

Key support for NF: 10045-10000/9980

Key resistance for NF: 10095-10115/10160

Key support for BNF: 24500-24300

Key resistance for BNF: 24775-24875

Hints for positional trading:

Time & Price action suggests that, NF has to sustain over 10115 area for further rally towards 10160-10205 & 10250-10325 area in the short term (under bullish case scenario).

On the flip side, sustaining below 10095 area, NF may fall towards 10045-10000/9980 & 9940-9850 area in the short term (under bear case scenario).

Similarly, BNF has to sustain over 24775 area for further rally towards 24875-25050 & 25150-25250 area in the near term (under bullish case scenario).

On the flip side, sustaining below 24725 area, BNF may fall towards 24600-24500 & 24300-24125 area in the near term (under bear case scenario).

As par early SGX indication, Nifty Fut (Sep) may open around 10050, up by almost 26 points tracking positive global cues on Irma & NK relief. As Irma did not hit the US cities of Florida & Miami directly, estimated damage may be now around $50 bln against earlier projection of $200-300 bln. Although overall damage from Harvey & Irma is huge, it’s still manageable for the US economy and not catastrophic scenario for US.

Also, yesterday’s US sponsored UN sanction on NK may also be termed as symbolic as it diluted significantly to accommodate China & Russia’s concern by removing an all out oil embargo and freeze of NK’s important foreign assets, such as Air Koryo & Kim’s personal financial assets.

The lighter NK sanction now includes a cap on crude & refined products shipments to NK (2mpd/year), complete ban on LNG import and NK’s export of its textile products. Notably, yesterday NK has issued a “dire warning” to US just before the UN sanction that “US will face the greatest pain & suffering it has ever gone through in its entire history if the sanctions came to pass”.

Thus, market is in risk-on mode in this “great game of chickens” & “war of words” and Trump is also happy to let this game going as NK geo-political tension is now a great instrument to keep USD lower in times of needs in order to make “America great again”. A weak USD may be now good for US economy (export & imported inflation) and also for the corporate earnings & the stock market.

Overnight US market closed above 1% on an average on strength of insurers, financials, and tourism & power sector in a relief rally after plunge on fears of Irma (short covering & bargain hunting). Also, Apple helped the market before launching of its new i-Phone model coupled with Teva (new CEO) & Tesla on optimism about e-car & a free software update for extending the battery life for some of its cars in the Irma/Harvey affected areas.

DJ-30 has gained around 1.19%, while S&P-500 closed around 2488, up by almost 1.08% to end at record high and NASDAQ was in green by almost 1.13%.

US stock future (SPX-500) is now trading around 2485, almost flat (-0.07%) ahead of EU market opening. Looking ahead, USD/US stock market may be driven by Trump’s tax reform talk, US CPI & Fed stance on 20^th Sep apart from geo-political issues. Technically, SPX-500 now need to sustain over 2495-2505 area for further rally; otherwise it may again came down.

Back to home, Indian market (Nifty Fut) is also now being driven by positive global cues on relief from Irma & NK dooms day like tensions on lack of any meaningful domestic triggers. Also, stretched valuation & muted Q1FY18 earnings may be one of the primary reasons for lack of follow up buying and thus market is hovering within a defined range.

Thus, market may look into Q2FY18 earnings & macro data trajectory after some disappointment in Q1 and in that sense, today’s CPI (Aug) & IIP (July) data may be important to have an idea about inflation vs growth equations.

Indian CPI is expected to come as 3.20% for Aug against 2.36% recorded in July; food inflation may surge in Aug; IIP is expected to come at 1.2% in July against -0.1% in June, marked by Pre-GST disruptions. But irrespective of CPI, RBI may not cut again in Oct as it’s very rare for the central bank to cut consecutively in its bi-monthly meet, everything being equal.

Technically, consecutive closing above 10050 area, Nifty Fut may scale 10160 and even 10205 area by 14-15^th Sep, when NAMO will inaugurate India’s dream project of “Bullet Train” with Abe (JP).  

SGX-NF