Market Mantra: 16/11/2017 (09:00)
SGX-NF: 10340 (+76)
For the Day: updated: 09:25
Key support for NF:
10305-10235
Key resistance for NF:
10365-10410
Key support for BNF: 25700-25500
Key resistance for BNF: 25950-26100
Trading Idea (Positional):
Technically, Nifty
Fut-Nov (NF) has to sustain over
10410 area for further rally towards 10460- 10500/10535 & 10575-10675 zone
in the short term (under bullish case scenario).
On the flip side, sustaining below 10390-10365 area, NF may fall towards
10305/10285-10235 & 10190 -10140/10095 zone in the short term (under bear
case scenario).
Technically, Bank Nifty-Fut (BNF) has to sustain over 25950 area for further rally towards
26100-26325 & 26400-26675 zone in the near term (under bullish case
scenario).
On the flip side,
sustaining below 25900 area, BNF may fall towards 25800-25700 & 25550-25325
area in the near term (under bear case scenario).
As par early SGX indication, Nifty Fut (Nov) may open around 10340, soared almost 76 points on
Moody’s “surprised” upgrade for India after PSBS recaps plan by the Govt
coupled with mixed global cues amid
US tax reform optimism & fresh NK tensions.
As expected, US House yesterday passed the RNC backed tax plan
with a majority 22 votes (227 vs 205 with 2 abstain); it may be slightly better
than earlier expectations of around 15 votes.
But USD was largely muted because
it’s a very preliminary move as the main drama has been shifted to the US
Senate now, where Trump/RNC is enjoying an wafer thin majority of 52 vs 48
votes and with 2 influential RNC Senators already expressed their desire to
vote against it; it’s now only 50 vs 48 assuming that no DNC will vote for it.
Market may be concerned that because of various last minute
changes in the Senate Fin Comm version of tax plan, not only DNC will oppose it
completely, but some more RNC members may vote against it for their local
political compulsions because there are issues of Obamacare/AHC linked with it.
Moreover, even it is passed in Senate; the two versions of tax
plan (House/RNC & Senate Fin Comm) will be then reconciled by the US Senate
Ways & Means Comm for final approval by both Houses of US Congress before
goes to Trump for his signature to turn into a law. Thus, there is a long way
to go and market is doubtful about its final legislation by Dec’17/before
Christmas holidays. Market may be also concerned about the US corp tax cut
issue, if it will be implemented in 2018 or 2019.
Overall US economic data was mixed yesterday and various Fed
talks are also indicating that the Dec’17 rate hike is now a done deal; but
beyond that market may be concerned about Fed’s 2018 dot-plots credibility and
any policy mistakes under new leadership of Powell and a relatively less
experienced & professionally qualified FOMC team (as of now).
Today USD got some jolt again in the early Asian session after
news that NK may be in advance stage to
prepare a ballistic missile/Nuke-ICBM enabled submarine, which may put US
security under some threat. US have termed it as “breach of red line” by NK and
have threatened with act of war.
Also there was some USD negative news that Muller has issued
subpoena for Russia related documents from Trump campaign officials.
Fed’s Williams also commented that as present arsenal of Fed
& other global central banks are being exhausted to pop up the elusive
inflation despite lower rates/ZRIP, Fed & other global CB may consider NRIP
to fight against next cycle of recession!! Anyway, Williams sees one hike in
Dec’17 and three more hikes in 2018 and the terminal Fed rate should be around
2.50% by 2019 from present 1.25%; he sees low inflation as “lucky” it allow economy
to grow strongly (concept of goldilocks economy).
Thus, all these geo-political issues & Fed narrative has affected
the USD sentiment today, but it also got some support after US Senate panel
passed the RNC tax plan to advance it to the full Senate in the morning Asian
session today.
Overnight US market rallied quite smartly on solid earnings from Cisco & Wall
Mart coupled with optimism about passage of Tax plan by US House/RNC on the
perception that the proposed cut in corp tax will boost the corporate earnings
(although it’s not sure about the fate of this corp tax cut; will it be implemented
in 2018 or 2019 and with what shape-gradual or at a time).
Back to home, Indian
market (Nifty/India-50) is now trading around 10340, soared by almost 0.90%
and so far made a session high of 10373 on Moody’s rating upgrade boot. Today Moody’s has upgraded
India’s rating to Baa2 form Baa3 with stable outlook from earlier positive.
This sudden unexpected rating upgrade may be due to recent Govt
initiative to recaps the fragile PSBS to kick start lending & private
capex.
After today’s Moody upgrade, it may be easier for the PSBS to
tap capital from the market for their recaps purpose. USDINR plunged by around
0.65% and 10YGSEC yield slumped by almost 1.25% to around 6.974% (rating
upgrade will ease borrowing costs).
Although today’s upgrade by Moody’s may be a “historical” achievement
by the Govt just before GJ election, it has also warned that rating upgrade may
be reversed if NPA surges further. Also another US rating agency S&P is
unfazed by today’s Moody rating action on the ground that India’s fiscal
position is still weak!!
At a glance, rating actions from global rating agencies always
come late with a time lag of 6-12 months; the reasons for which Moody’s has
upgraded India’s rating to two notch above junk (implementation of GST &
other structural reforms and plan of PSBS recaps) were already there in the
last few months and thus may have been done at least 3 months ago.
And in any case, even without a rating upgrade for years despite
Govt’s best effort to convince the global rating agencies (S&P/Fitch/Moody’s),
Indian economy is attracting huge FDI on the attraction of Modinomics &
higher bond yields.
Thus, it may be symbolic, but market may also watch the
Indian bond yield action as a drastic fall in yields may also prompt the FPIS
for an easy exit. Eventually, earnings have to justify the steep market
valuation (PE) irrespective of any rating action.
Meanwhile EU market
may open today subdued on higher EUR amid fresh NK headlines.
SGX-NF
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