Market Mantra: 01/11/2017 (09:00)
SGX-NF: 10405 (+33)
For the Day: updated at 12:00
Key support for NF: 10360-10290
Key resistance for NF:
10450-10505*
Key support for BNF:
24800-24600
Key resistance for BNF: 25150-25250
Trading Idea (Positional):
Technically, NF has to sustain over 10450 area for further rally towards 10505*-10575
& 10625-10675 zone in the short term (under bullish case scenario).
On the flip side, sustaining below 10425-10405 area, NF may fall towards
10330-10280 & 10195-10150 zone in the short term (under bear case
scenario).
Technically, BNF has to
sustain over 25150 area for further rally towards 25250-25500 & 25600-25775 zone
in the near term (under bullish case scenario).
On the flip side,
sustaining below 25100 area, BNF may fall towards 24800-24600 & 24450-24300
area in the near term (under bear case scenario).
As par early SGX indication, Nifty Fut (Nov) may open around 10405, gap-up by almost 33 points
on positive global cues as USD &
US stock market edged higher on hopes of a favourable corporate tax cut plan by
Trump & Co coupled with upbeat/inline Mfg PMI from Japan to China and mixed
yet stable earnings. Overall risk-on sentiment was also improved visibly after
Catalan pro-independence leaders “fled” the country to peruse their political careers
from Brussels, the EU capital.
USD got some boost yesterday after Trump indicated about his
personal preference about no gradual (phase-in) cut in US corp tax cut as
earlier indicated by the House Ways & Means committee, which are now
drafting the tax reform bill. Also, overall US economic data released yesterday
were good and supported the greenback.
But, whatever be the personal preference of Trump, it’s not easy
for any Govt to cut corporate tax by
a whopping 15% at one go without arrangement of an alternate means of revenue
and thus US may cut this corp tax by 15% over next 5 years or at least 3 years
either @3%/pa or 5%/pa. Thus market will focus on tomorrow, when the draft of
this “historic” US tax reform bill may be released after accommodation of
various ambiguities/differences among lawmakers.
Trump will sign any format of the tax reform bill, which is put
on his table by the US congress and thus market may be disappointed after
release of the final draft, which will keep the corporate tax cut in a phased
manner over next 5/3 years; a three years time period for “phased-in” effect may
be ideal, considering the high expectations of the market for a one time cut
with retrospective effect from Jan’17 and US Govt’s concern on revenue loss.
Apart from this US tax reform suspense; market will focus on Fed suspense today for an assessment of
a “hawkish hold” or “dovish hold” and probability of the Dec’17 rate hike; as
of now FFR is showing around 85% probability of a Dec rate hike with almost 0%
chance for today’s “live meet”; if it’s a “dovish hold” stance today by Fed,
then expect some plunge in USD, while in the case of “hawkish hold”, USDJPY may
rally slightly for 114.65-115.65 zone as Dec rate hike is almost discounted.
Market will also focus of Fed
leadership suspense on tomorrow; as of now Powell is the front runner for
the Fed Chair for the policy continuity issue. But Taylor may be also inducted
into the Fed as Fed VC and the dual combination of Powell & Taylor might be
more hawkish than Yellen & Fischer earlier.
But overall, current FOMC structure may not also allow any new
Fed leadership to change the current policy stance of “gradual hike” abruptly
and thus market will focus on new Fed leadership stance to assess their appetite
for the 2018 dot-plots advocating for 3 more hikes. In any way, Trump will not
like USD above 115 level under any circumstances for the “interest of America”.
In that scenario, ongoing Muller’s
“investigation” for Trump’s alleged Russian links related to US election
saga may come handy for Trump as long as it do not establish any direct link of
Trump or his immediate family members with Putin & Co, especially at a
time, when Kim (NK) is silent now
for over a month without any missile or nuke game. Muller & Kim are now two
geo-political headwinds for USD, helping Trump to keep it lower, even when Fed
is going for a dual QT & US tax reform is also visible.
Overnight US market closed in positive on hopes of favourable US tax reform
proposal, earnings & growth optimism and month end flows (portfolio
adjustments) coupled with signs of truce in Catalonia; DJ-30 edged up by almost 0.12%, S&P-500 was almost unchanged at 2575 (+0.10%), while NQ-100 gained by around 0.40% at
another milestone high. For the month of Oct’17, DJ-30 gained by around 4.3%,
S&P-500 was up by almost 2.2% and NQ-100 rose by around 3.6%.
Overall, yesterday US market was helped by consumer staples (Kellogg, Mondelez on upbeat earnings & guidance)
but dragged by poor report card/guidance by Under Armour (-22%) and health
insurer Aetna and chip makers Qualcomm (-6.7%) on buzz of diversion of Apple orders
to Intel (+2.5%) & Media-Tek (+2.4%). US
stock future (SPX-500) is now trading almost flat around 2578 before EU
market get opens.
Back to home, after opening upbeat on “ease of doing business”
boost, Indian market
(Nifty/India-50) is now trading around 10460, up by almost 0.90% and Nifty Spot
has also achieved another milestone high of 10441 so far; yesterday’s data
shows that India’s core sector growth
hits 6-month high at 5.2% in Sep supported by solid performance of coal, NG and
refinery segments against 5.3% last year; economy may be limping back into
normal after GST disruptions.
Market sentiment may be also boosted by India’s jump of 30
points to 100 in “ease of doing business” index by WB
out of 190 countries; China ranked at 78,
Russia at 35, Brazil at 125, while South Africa is now at 82. Thus among 5
BRICS nations, India ranked 4th after Brazil as of now and Govt is
aiming for 50th position by next few years through some other
structural reforms, like GST & real estate simplification, judicial, land
& labour reform etc with the mantra of “reform, perform & transform”.
An improvement of “ease of dosing business” in India is very
important for attracting FDI, but ground realities may also need to improve significantly
as there is no lack of political or administration will now. But all these optimisms
need to reflect in corporate earnings now as valuations are already quite
stretched on sky-high expectations from the market.
Meanwhile, India’s Mfg
PMI for Oct flashed as subdued and just above the boom/bust mark (50) at
50.3 vs est 51.5; prior: 51.2; clearly manufacturing activity may be losing
momentum even after Post-GST implementation disruptions. Also, overall export
activities may be stagnating since Sep’2013, much before the DeMo, indicating
some structural issues here; only employment portion of the PMI report may be
encouraging as of now
So far Oct auto sales numbers are mixed and also may be termed
as muted overall, considering the festival season & 7-PCA arrears boost. Technically, for NF, 10505 area may be now
a big hurdle in the days ahead.
SGX-NF
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