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 19^th 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 3^rd 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.

SGX-NF