Nifty Set To Resume The Diwali Week Almost 53 Points Gap-Up In Another Milestone High On Positive Global Cues And Upbeat Macro Data & Mixed Q2 Results (So Far)

Market Mantra: 16/10/2017 (09:00)

SGX-NF: 10245 (+53)

For the Day: updated at 11:30

Key support for NF: 10225-10170/10150

Key resistance for NF: 10275-10325

Key support for BNF: 24625-24300/24000

Key resistance for BNF: 24875-25050

Hints for positional trading:

Technicals indicate that, NF has to sustain over 10275 area for further rally towards 10325-10380 & 10455-10495 area in the short term (under bullish case scenario).

 

On the flip side, sustaining below 10255 area, NF may fall towards 10150-10075 & 10020-9975 area in the short term (under bear case scenario).

Similarly, BNF has to sustain over 24875 area for further rally towards 25050-25250 & 25585-25795 area in the near term (under bullish case scenario).

On the flip side, sustaining below 24825 area, BNF may fall towards 24625-24400 & 24300- 24200/24000 area in the near term (under bear case scenario).

As par early SGX indication, Nifty Fut (Oct) may start the Diwali Week around 10245, gap-up by almost 53 points in another milestone high on positive Global/Asian cues (rally in JP market on Abe win optimism & surge in HK market after upbeat China CPI/PPI) and improved Indian trade data coupled with earnings optimism; so far Q2 report card may be mixed including RIL (inline/slightly below expected earnings from core petchem operations, but better than expected EBITDA from R-JIO largely due to onetime accounting adjustments/new accounting policies).

Overnight on Friday weekend, US market edged up on lower USD, helpful for US stocks after another subdued US inflation for Sep, upbeat consumer confidence, retail sales and Q3 earnings optimism. This is like a goldilocks types of situation for US stock market with an environment of decent GDP growth, lower interest rate, modest real wage growth with no runaway inflation. But most of the recent US economic data including NFP, PPI, CPI, retail sales are all skewed for the dual US hurricane and thus not conclusive.

DJ-30 edged up by almost 0.13%, S&P-500 closed almost flat at 2553 (+0.09%), while NQ-100 was up by 0.22%. Overall US market was helped by telecoms, energies (higher oil on Chinese import data) techs (earnings optimism) while dragged by banks on mixed earnings & subdued guidance, health care stocks on Obamacare/Trumpcare duet/disruptions (proposal to withdraw insurance subsidies for low-income Americans in the Obamacare/ACA by Trump, although it may not be passed at all by the US congress!!).

Overall, US market mood was cautious due to increasing geo-political tensions out of Iran nuke deal, weekend suspense of NK missile tests & “earthquakes” and ongoing earning session. 

USDJPY was down on subdued US CPI coupled with ongoing NK tensions. But it recovered slightly and is now trading around 111.94 after Yellen’s comments about transitory US & global inflation and US Sec’s comments that US/Trump will peruse diplomacy path with NK, until the first “bomb” drops.  

Overall, Yellen sounds less dovish in the IMF speech on Sunday night and basically stressed that despite US inflation “mystery”, which Is the “biggest surprise of 2017”, inflation will eventually pick up on strength of US job market and wage growth.

It now seems that Dec’17 rate hike is almost certain except any terrible geo-political events and is also priced in by the market; but beyond that Fed dot-lots for 2018 is uncertain on US inflation “puzzle”, mixed US economic data, Fed leadership & policy uncertainty after Yellen’s term ends in March’18, poor visibility of Trumponomics and ongoing geo-political issues.

Back to home, Indian market (Nifty Fut/India-50) is now trading around 10200, before EU market opens almost flat (+0.10%) after opening strong and another milestone high of 10261 till now amid initial optimism about Q2 earnings, which is mixed so far. 

The market may be also boosted by a weekend comment of IMF Chief (Lagarde) that Indian economy is now on “very solid track” in the mid & long term despite “a little bit of short term” slowdown due to “monumental” structural reforms of DeMo & GST. Also, upbeat commentary by FM for the Indian economy, GDP on his US/IMF trips and power of domestic liquidity may be helping the overall Indian market sentiment right now in the “Diwali Week” despite stretched valuation.

Recent spate of upbeat macro data (PMI/CPI/IIP/Trade-Export/Import) is also supporting the overall Indian market sentiment; looking ahead WPI for Sep may also be keenly watched, which is slated to come as 3.41% vs 3.24% prior; a higher WPI is negative for Indian GDP as a deflator, which may be also one of the primary reasons behind recent fall in GDP growth as favourable base effect wanes.

All eyes may be also on the Catalonian development on their reply of the Spain notice to explain all the “independence” drama; any adverse reply may affect the EU/Global market sentiment, despite it may be seen as “EUR negative”.

SGX-NF