Market Mantra: 12/12/2017 (09:00)
SGX-NF: 10330 (-22)
For the Day: updated: 13:20
For 12/12/2017: Dec-Fut
Key support for NF: 10295/10270-10230/10190
Key resistance for NF: 10355/10375-10395/10425
Key support for BNF:
25200-25100/24850
Key resistance for BNF:
25575-25775/25875
Trading Idea (Positional):
Trading Idea (Positional):
Technically, Nifty Fut-Dec (NF) has to sustain over 10395 area for further
rally towards 10425/10475 -10510/10535 & 10575-10640 zone in the short term
(under bullish case scenario).
On the flip side, sustaining below 10375-10355 area, NF may fall towards 10295/10270-10230
& 10190-10150 zone in the short term (under bear case scenario).
Technically, Bank Nifty-Fut (BNF) has to sustain over 25575 area for further
rally towards 25775-25875 & 26050-26200 zone in the near term (under
bullish case scenario).
On the flip side, sustaining below 25525 area, BNF may fall towards 25200-25100
& 24850 & 24750-24650 area in the near term (under bear case scenario).
As par early SGX indication, Nifty Fut (Dec) may open around 10330, edged down by almost 22
points tracking muted Global/Asian cues on lower USD and renewed
China deleveraging concern amid news of Govt crack down on hedge funds there
couple with overall Fed tightening worries and outcome of a major China planning
conference.
Additionally Indian market is under pressure on higher Brent Oil
above $65 following temporary shutdown of a vital Oil pipe line in UK (North
Sea-Forties) amid discovery of a hairline fracture coupled with concern of
renewed geo-political jitters after a failed NY suicide blast yesterday.
Indian 10YGSEC yield jumped to almost 7.23% early today, the highest
in last 16 months on concern of higher fiscal deficits amid surge in Oil and
reduction in GST for a number of daily usage items. All eyes will be now on CPI
for Nov, which is slated to come as 4.20% vs prior 3.58%.
Also, IIP, cumulative
industrial production and Mfg Output data may be keenly watched to gauze the
underlying strength of the economy after DeMo & GST blues.
USD edged down ahead of Fed tomorrow amid improved JP economic data
today (PPI & Industry activity index). Also, NY Fed survey of inflation expectation
came muted yesterday along with JOLTS Job openings; overall USD bulls may be
concerned over a high probable “Dovish Hike” by Fed tomorrow. A satellite image
also shows increasing activity in the NK nuke testing site and all these are
affecting USD sentiment to some extent despite US tax reform & no Govt shut
down optimism.
Overall, equity market may be also concerned over
global QT in 2018-19, where on an average interest rate is poised to be higher
by almost 1% as most of the G-20 central banks will be forced to hike to keep
pace with Fed irrespective of their own macros. Thus, the era of “easy money”
may be ending at well, which was the primary factor for today’s “Goldilocks”
market rally.
Fed is poised to hike 5-6 times in 2018-19 for
higher inflation expectations, synchronized global growth & US tax reform
(to offer higher US yields to finance higher tax/fiscal deficits); ECB will
start to hike gradually from Q1/Q2CY2019 after its QE tapering ends in Dec’2018;
BOJ is also thinking about some strategy for its backdoor QQE tapering in 2018
followed by an eventual normalization of its policy rates.
PBOC is also taking various steps including rate
hikes, FX intervention, tighter capital controls and other measures to counter
the Fed hike cycle and US tax cut & stem any heavy USD outflow.
As US is cutting its corp tax drastically to lure
US & Non-US corporates, other DMs as well as EMs will be compelled to
follow Trump’s tax cut and may also offer such incentives to the corporates to
do business from their respective countries and thus overall global tax
deficits may bound to increase, prompting central banks to hike more
pro-actively.
Already Japan has offered 20% discount in corp tax
to its corporates against some pre-determined wage hikes to its employees. EU
has lodged a strong protest to US for its tax reform proposals, which is
equivalent to double taxation for US cos doing business in EU and may be also
against WTO rules.
Overnight US market edged up as worries receded
after a failed pipe bomb blast in NY subway (suspected terrorist attack);
market was helped by energies (higher oil), techs (Apple, Chip Makers &
CYC/BTC optimism), healthcare (successful new trials) & telecoms (M&A
deal) and overall optimism about “Goldilocks economy-solid global synchronized
economic growth, yet lower inflation” ahead of expected Fed hike tomorrow; but
dragged by financials & industrials.
DJ-30 rose by 0.23%, S&P-500 gained 0.32% and
closed around 2660, while NQ-100 surged by almost 0.51%. US index future (SPX-500) is now trading
around 2565, almost flat (+0.03%) on muted Asian cues ahead of EU market
opening. Technically, now above 2575, SPX-500 will gain more strength;
otherwise may fall again.
Most of the Asia-Pacific markets trading lower
today; China (SSE) trading almost 1% lower despite net injection of 40 bln Yuan
by PBOC today. There was report that CSRC will scrutinize incoming IPOs more vigorously
before grating approvals, but will speed up the whole process. HK (HKG-33) also
down by almost 0.50% on China deleveraging & Fed tightening concern apart
from heavy selling in techs (Tencent), but energies are helping.
Japan (Nikkei-225) closed 0.32% lower on higher Yen,
but energies helped. AU (ASX-200) also edged up on higher Oil price today.
Overnight, EU stocks edged down in Stoxx-600
(-0.10%) on techs, utilities, telecoms (loser in high interest rate regime),
exporters (higher EUR) despite supports from Banks & Financials (BASEL-III
& higher yields/interest optimism) and energies.
FTSE-100 surged by 0.70% on exporters/MNC (lower
GBP on pessimism about latest Brexit deal or no deal at all), energies (higher
oil), banks & financials, miners (higher metals yesterday following renewed
China optimism/upbeat trade data). EU index future is now trading 0.20% higher
on flat EUR & GBP.
Back to home, Indian
market (Nifty-Fut/India-50) is now trading around 10290, slumped by almost
0.55% and so far made an Asian session low of 10283 on muted Asian cues and
concern of fiscal slippages amid surge in Brent Oil and higher CPI slated to
come in the evening today. Also, OMC & paint cos are in pressure on higher
Crude Oil.
Market may be also worried for FY-19 fiscal math
as favourable base effect of I-GST revenue may disappear and thus higher
borrowing costs (higher Indian bond yields) may be a major headwind for
stressed Indian corporates.
A higher bond yields may be also bad for most of
the PSBS as almost 50% of their EBITDA comes from their GSEC bond holdings and
a drastic fall in bond prices (higher yields) will affect their MTM (P/L).
Apart from concern of fiscal slippages because of higher oil, increasing fiscal
stimulus package, higher inflation, and probable rate hikes by RBI in FY-19 to
counter Fed hikes, greater supply of GSEC bonds may be also responsible for
higher Indian bond yields despite Moody’s upgrade.
SGX-NF
SPX-500
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