Market Mantra: 23/10/2017 (09:00)
SGX-NF: 10183 (+37)
For the Day: updated at 12:00
Key support for NF: 10150-10100/10060
Key resistance for NF: 10225-10275/10325
Key support for BNF: 24000-23850
Key resistance for BNF: 24200-24400
Hints for positional trading:
Technicals indicate that, NF has to sustain over 10225 area for
further rally towards 10275 -10325 & 10380-10455 area in the short term
(under bullish case scenario).
On the flip side, sustaining below 10205 area, NF may fall
towards 10150-10100/10060 -10015-9970 area in the short term (under bear case
scenario).
Similarly, BNF has to sustain over 24200 area for further rally towards
24400-24600 & 24875-25050 area in the near term (under bullish case
scenario).
On the flip side, sustaining below 24150 area, BNF may fall
towards 24000-23850 & 23600-23400 area in the near term (under bear case
scenario).
As par early SGX indication, Nifty Fut (Oct) may open the exp week around 10183, gap-up by
almost 37 points on positive global cues
as USD goes higher on hopes of a hawkish Fed chair/vice-chair, renewed optimism
about US tax reform after preliminary progress in US legislation coupled with a
“monster win” by Abe in the JP election (negative for Yen for accommodative BOJ
monetary policy).
On Thursday (19/10/2017), Indian
market (Nifty Fut/Ondia-50) plunged by almost 130 points in a brief “Diwali
Muharat” evening session on muted global cues amid “ghost of the 1987 crash”
& PBOC warning of a “Minsky Moment” & concern for domestic earnings,
stretched valuation, surging NPA and closed around 10146, down by almost 0.90%
after recovering slightly on similar trends in the global market and closed around
10146.
USD is
higher on US tax reform hopes
after senate passed the tax blueprint on Friday by a narrow margin; although
this is a very preliminary progress and just a beginning for overall complex
legislation passage of the bill amid various US political permutations & combinations,
but a significant progress on part of Trump amid political games of ping-pong
within his own RNC colleagues.
Again on Friday weekend, at late NY session Trump indicated that he may bring both
Taylor (an ultra hawk) & Powell (a known dove like Yellen) to Fed as Chair
& VC (?) as a balancing act; appointment of Powell as next Fed vice chair
(?) will ensure present Fed policy continuity of gradual hikes & credibility
of the dot-plots for 2018 (3 rate hikes).
Appointment of Taylor as next Fed chair (?) may
also ensure new out of box ideas in Fed and some hawkish stuffs for overall
balancing act, even if Fed does not apply the “Taylor rule”. Thus buzz of combination
of Powell & Taylor at Fed is positive for USD; due to some past political
controversies, Powell may not be nominated as Fed Chair and in that scenario,
Taylor will be given the post and Powell will be nominated as Fed VC (as this
post id also vacant after Fischer).
Trump is supposed to clear this Fed chair suspense by next few days
before 3rd Nov ahead of his long Asia trip.
USD also got some boost in the early Asian session
today after Abe almost secured a 2/3rd super majority in the JP
election yesterday as highly expected. Abe is expected to continue Abenomics
and ultra accommodative monetary policies; but as par some reports, he may also
raise the sales tax of JP and spend it towards Child education & certain
others JP social security system.
Looking ahead, BOJ may also target 5YJGB bond instead
of 10YJGB for its YCC target even with decreased 10YJGB bond buying; i.e. it
may be a backdoor BOJ QE tapering in line with ECB & Fed. Thus, overall
impact of the landslide Abe victory on USDJPY is quite limited and it may
another “buy the news & sell the fact” narrative also. Abe may also focus
on JP constitution reform & NK “peace formula” after his “monster win”’ in
the backdrop of a optimistic economic outlook like a goldilocks scenario.
USDJPY is now trading around 113.75, up by almost 0.19%
after making an opening minute high of 114.07 on JP election boost. Technically, USDJPY now need to sustain
above 114.30 area for 114.65-115.60 zone; otherwise sustaining below 114.15 zone,
it may fall towards 113.70/113.25-112.50 in the coming days.
Overnight,
on Friday weekend, US market
closed in positive on US tax reform & earnings optimism and hopes for stock
market friendly policy continuity by Fed under new leadership (gradual rate
hikes). DJ-30 was up by almost 0.71%, S&P-500 gained by almost 0.50% and
closed around 2575, while NQ-100 rose by around 0.40% in another trifecta of
new closing highs.
Overall, US market was helped by banks &
financials on higher US bond yields favourable for their business model; market
is also being supported by strong earnings for the last few quarters and hopes
for a decent earnings growth (+4.5%) in Q3; GE revered the early plunge of 6.3%
caused by muted earnings on news of deleveraging on Friday.
Support of earnings has thus made the US market
like a “Teflon Market”, with an evergreen “goldilocks” rally and now with
visibility of Trump’s tax reform, this “nonstick coating” is getting even
thicker day by day. Another factor may be that lack of alternative “attractive”
assets is making US stock market increasingly attractive. But, considering the
recent stellar rally and stretched valuation, market may be also cautious as
around 25% of S&P-500 cos has topped earnings estimates so far.
US stock
future (SPX-500) is now trading
around 2574, almost unchanged before EU market opening; looking ahead; market
may focus on deluge of big US earnings including that of Caterpillar and development
of Catalan & NK issues amid heightened “war of words”. Technically, SPX-500 now needs to sustain over 2580 area for
2595-2620 zone; otherwise it may come down.
Back to home, Indian
market (Nifty Fut/India-50) is now trading around 10150, almost flat after
positive opening amid upbeat global cues; but muted China property prices data
and subsequent fall in HK market may be also affecting the overall
regional/Indian market sentiment.
Market may be also concerned about additional
banking NPA to the tune of Rs.0.40 tln after Axis Bank’s NPL reporting involving
9 common cos in metals & power sector and RBI’s divergence issue with Bank’s
reported GNPA figure in FY-17 B/S.
Also, as par some reports, due to lower growth
& revenue for GST & DeMo blues, Govt’s fiscal health may not be good
enough for a fresh fiscal stimulus and on the contrary, Govt may be forced to
cut its capex (FY-18) to stick with the fiscal discipline (3.2% fiscal deficit
for FY-18) narrative.
Overall, stretched valuations, mixed earnings so
far in Q2, higher USD & higher oil may be affecting the Indian market
sentiment despite supportive global cues. Nifty EPS has to support the
expensive market valuation irrespective of any other narratives!! Distribution
is clearly happening in mid-caps & banks, which may be followed by Nifty
later on.
SGX-NF
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