Nifty May Resume The Week Marked By Fed & BOJ On Upbeat Mode Tracking Positive Global Cues After US Vows To “Peaceful Pressure Campaign” On NK Coupled With better Indian Macro Data

Market Mantra: 18/09/2017 (09:00)

SGX-NF: 10150 (+54)

For the Day:

Key support for NF: 10105-10060/10035

Key resistance for NF: 10160-10205

Key support for BNF: 24700-24500

Key resistance for BNF: 25050-25150

Hints for positional trading:

Technicals indicate that, NF has to sustain over 10205 area for further rally towards 10250- 10325 & 10385-10455 area in the short term (under bullish case scenario).

On the flip side, sustaining below 10180-10160 area, NF may fall towards 10105-10060/10035 & 9965-9925 area in the short term (under bear case scenario).

Similarly, BNF has to sustain over 25050 area for further rally towards 25150-25250 & 25350-25500 area in the near term (under bullish case scenario).

On the flip side, sustaining below 25000-24975 area, BNF may fall towards 24700-24500 & 24400 -24250 area in the near term (under bear case scenario).

As par early SGX indication, Nifty Fut (Sep) may open around 10150, surged by almost 54 points, opening gap-up tracking positive global cues as US vowed for “peaceful pressure campaign” on NK coupled with good Indian macro data on the weekend & supportive PBOC; HK market is up by 1%, basically boosting the regional/Indian market sentiment.

Although, US is keeping all options on the table including a military action on NK, it seems now that Trump will follow the path of pressure diplomacy on the “rocket man” (Kim) with more expected sanction pressure tactics on NK to deter the “hermit state” from further persuasion of nuke capabilities. US has also indicated that Trump’s earlier “Fire & Fury” comments on NK is not a mere rhetoric and also not an “idle threat”.

As par latest reports, SK has indicated that NK is in the final stages of a nuke enabled ICBM (with bigger payload) and thus continue its “provocations” by testing more ICBM & nuke. All eyes now may be on UN general council global meet & Trump’s speech regarding the NK issues tomorrow.

Geo-political events may take more centre stage this week along with Fed & BOJ amid elections in NZ & Germany, while Abe announced a surprised snap election on 22^nd Oct for JP as his political prospect looks better amid prudent handling of NK provocations after a recent corruption scandal.

Fed is expected to announce a BS tapering program this week, which may start with no further reinvestments from maturing bonds and then a monthly selling of QE bonds in its holding at a gradual pace, say $10 bln/month for next 10 years in auto-pilot mode.

As this is a new experiment by a major central banker, never tried before as a precaution, Fed may be refrained from further rate hike in Dec’17. Thus Fed’s revised dot-plot & economic projections may be keenly watched along with Fed’s statement & Yellen’s presser.

BOJ is now already purchasing less QE bonds, but with acute scarcity it’s able to maintain the desired YCC of 10YJGB around 0% even with less purchase; looking ahead it may also formally announce its intentions to keep the YCC under control around 0% without too much focus on the JGB purchase (indirect QE tapering); it may also return to ZRIP from NRIP and target 1% JP core CPI on sustainable basis as 2% is still looking very remote; thus BOJ may also join the global QT bandwagon (Fed/ECB/BOE/BOC).

Overnight, on Friday weekend, USDJPY closed above 111 on hopes of a hawkish Fed on 20^th Sep after surprised hawkish hold by BOE last week and optimism about US tax reform detailed drafts on 25^th Sep; it seems that market is not convinced by latest NK saber rattling unless some serious missteps by any sides!!

US stock market closed around 0.25% higher in another record high, which is quite regular these days; DJ-30 gained by around 0.29%, while S&P-500 closed above 2500 level, up by almost 0.18% and NASDAQ was in green by 0.30%. Telecoms, techs & banks has supported the US market on Friday, while Oracle dragged it by some extent on poor guidance. Banks were in demand for prospect of higher US bond yields on hopes of a hawkish Fed this week, favourable for business models of the banks.

US stock future (SPX-500) is now trading around 2505, up by almost 0.25% on positive Asian cues; technically now it needs to sustain over 2515-2525 area for further record rally towards 2560-2580 zone; otherwise it may come down and sustaining below 2485 zone, may again fall towards 2450-2415 zone in the coming days.

Back to home, Indian market (Nifty Fut) is now trading around 10175, up by almost 0.75% on positive global/Asian cues coupled with better macro data on the weekend; FX reserve was swelled to above $400 bln for the first time in the history; external debt was down by around 3% to $472 bln on decrease in NRI deposits and external commercial borrowings; exports was up by almost 10.30% supported by higher growths in petroleum products, engineering & chemicals shipments; but gold imports also raised by 69%.

But despite all the green shoots, valuations may be quite stretched amid muted Q1FY18 earnings. Also hopes of earnings recovery in Q2FY18 & H2FY18 may be low amid subdued consumption, tepid credit growth & private investments.

Thus FIIs are in selling mode over stretched valuations & falling GDP growth after DeMo & GST disruptions. So far, Indian market shrugged off the FII selling on the power of domestic liquidity, but going ahead that domestic liquidity flow may be also in doubt as Govt is intensifying its “war on black money” & shell cos.

SGX-NF