Friday, 22 December 2017

Nifty Set To Trade In Green On Global Santa Mood & Domestic Thrust On Rural Economy

Market Mantra: 22/12/2017 (09:00)

SGX-NF: 10460 (+2)

For the Day: updated: 13:50

For 15/12/2017: Dec-Fut

Key support for NF: 10425/10390-10350/10300

Key resistance for NF: 10495-10550/10580

Key support for BNF: 25400/25200-24950/24800

Key resistance for BNF: 25775/25875-26050/26200

Trading Idea (Positional):

Technically, Nifty Fut-Dec (NF) has to sustain over 10550 area for further rally towards 10580/10640- 10695 & 10745-10795 zone in the short term (under bullish case scenario). 

On the flip side, sustaining below 10525-10495 area, NF may fall towards 10425/10390-10350/10300 & 10250-10190 zone in the short term (under bear case scenario).

Technically, Bank Nifty-Fut (BNF) has to sustain over 25775 area for further rally towards 25875- 26050 & 26200-26325 zone in the near term (under bullish case scenario).

On the flip side, sustaining below 25725 area, BNF may fall towards 24300/25200-25100/24950 & 24800-24650 area in the near term (under bear case scenario).

As par early SGX indication, Indian market (Nifty Fut-Dec/India-50) may open around 10460, almost flat on positive Global/Asian cues and domestic optimism about Govt’s fiscal stimulus to revive the rural economy after disappointing result in the recent GJ election, where rural voters has basically shunned the Govt/BJP for un/under employment issues and DeMo & GST blues.

Overnight US market closed in positive supported by energies and banks & financials and tax reform optimism but off the high on concern for tax/fiscal deficits and higher US bond yields after the passage of the tax reform bill, which is now almost discounted by the market. 

A higher US bond yields/USD may not be good for the US economy & the market, although it may be good for the banks & financials as they can charge higher interest (NIM) on their loans; i.e. positive for their business models.

Although, US Q3 GDP came muted at 3.2%, its still above the 3% mark consistently, which is positive for energy demand and tax reform could also accelerate the US economic activities (growth) in the months/years ahead.

DJ-30 rose by 0.23%, S&P-500 added 0.20% and closed around 2685, while NQ-100 edged up by 0.06% as techs were seen less beneficiary of US corp tax cut worth $1.5 tln in next 10 years. Market is quite optimistic that US corp tax cut will prompt US corporates for more private capex, new projects & wages, dividends, buy back (shareholder return).

All focus was on Govt shut down rhetoric too, which was later extended by the House/RNC by another 3 weeks till 19th Jan’18 amid intense political drama; now US Senate will have to pass it by today, where Trump is enjoying a wafer thin margin of 52-48 seats.

Regarding the final version of the tax bill, Trump will take some time for any modification of his own plan and will sign the “Trump tax bill” on 3rd Jan, presumably after extension of the US debt limit.

Overall US economic data was mixed yesterday; US GDP for Q3 came muted at 3.2% vs est/prior: 3.3%; core PCE was also subdued at 1.3% vs est/prior: 1.4%. But Philly Fed Mfg index came upbeat at 26.2 vs est 21.5; prior: 22.7; USD edged down on small decline in consumption and concern for higher fiscal deficits.

Overnight, EU market (Stoxx-600) also rose by 0.60% after a moderate volatile day led by gains in exporters (lower EUR), energies & basic materials (renewed China optimism after PBOC affirmed for prudent & stable monetary policy), but dragged by utilities. Market was also very optimistic on US tax reform and thus banks & financials also helped.

Spain (IBEX-35) surged by 1% from earlier loses as opinion poll shows “close contest” between pro & anti independence parties in the Catalan regional election.

FTSE-100 zoomed past the “Santa target” of 7600 and closed 1% higher, supported by exporters/MNC (lower GBP amid intense UK political jitters & ongoing Brexit saga, muted UK consumer confidence & private consumption; subdued auto mfg & sales; GDP downgrade by IMF); but real estate drags on new Govt rule (ban of renting new ground floor due to land issue); utilities was also down, while commodity related stocks surged.

Most of the Asia-Pacific markets are also trading in moderate to deep green (Santa Rally) on positive overnight US & EU cues and stable USD. But China edged down as financials & consumer shares dragged, while energies helped.

But, today EU stocks are poised to open lower in a holiday shortened session after Catalan separatists won the election by an absolute majority, which may boost their morale for renewed “separation” bid; although a lower EUR could help also.

Back to home, Indian market (Nifty Fut-Dec/India-50) is now trading around 10495, surged by another 0.30% on rural theme and optimistic outlook for the Indian economy in 2018 by IMF.

As par IMF, “DeMo & GST brought short-term pain but long-term benefits; Expect growth in India to be 6.7% this year (2017) & 7.4% next year (2018); India not growing as fast as the rest of world is an aberration; GST is a work in progress but the economy is adjusting to it; See growth gradually increasing in the next fiscal year; Costs of DeMo are temporary; See permanent & substantial benefits due to DeMo; Govt has taken very important first steps to resolve the NPA problem”.

IMF- “IBC has prompted the world bank to raise the ease of doing biz score of India; PSU banks need more from the Govt in the form of reform; India has done a lot wrt opening up of foreign direct investment”.

But very slow pace of resolution of India’s huge corporate NPA/NPL may be a big headwind and the economy needs to grow by over 8%, if not in double digit to generate adequate quality jobs to the vast pool of educated & skilled young work force.


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