Nifty May Consolidate On Global New Year Rally & Higher Oil/Macro Worries

Market Mantra: 05/01/2018 (09:00)

SGX-NF: 10550 (+18)

For the Day: updated: 14:30

For 05/01/2018: Jan-Fut

Key support for NF: 10525/10490-10460/10395

Key resistance for NF: 10585/10610-10650/10695

Key support for BNF: 25400/25200-25000/24800

Key resistance for BNF: 25550/25600-25800/25900

Trading Idea (Positional):

Technically, Nifty Fut-Jan (NF) has to sustain over 10610 area for further rally towards 10650-10695 & 10745-10795 zone in the short term (under bullish case scenario). 

On the flip side, sustaining below 10585 area, NF may fall towards 10525/10490-10460/10395 & 10325-10275 zone in the short term (under bear case scenario).

Technically, Bank Nifty-Fut (BNF) has to sustain over 25600 area for further rally towards 25800/25900- 26100/26200 & 26325-26615 zone in the near term (under bullish case scenario).

On the flip side, sustaining below 25550 area, BNF may fall towards 25400/25200-25000 & 24800-24525 area in the near term (under bear case scenario).

Indian market (Nifty Fut-Jan/India-50) is now trading around 10550; gained by almost 0.25% mirroring global Goldilocks& extended New Year rally on global growth optimism; but overall sentiment may be cautious on higher oil as Brent is hovering around $68, which is a serious headwind for Indian macro.

Indian bond yield is now hovering around 7.32%, still significantly higher on concern for fiscal slippages; as par reports, PSBS recaps bonds by the Govt may offer interest as high as 7.75% to attract investors to participate in PSBS recaps.

As PSBS recaps news is now almost discounted, market will now focus on fiscal math and corporate lending recovery & any subsequent boost to private capex, which is still muted for various reasons. 

It’s not that leading PSBS are now starved of funds to lend fresh to the corporates- there are plenty of funds to lend, but there may be distinct lack of credible, quality & eligible corporate borrowers with viable projects in hand, willing to borrow funds from the Indian banks at high rates and then face the insolvency process, when business plan go haywire; R-COM may be an exceptional case although it may be a stark example of project failure despite promoter being healthy.

All eyes may be now on earning season starting from next week; but a strong INR & surging Indian bond yields may not be good for the Nifty EPS as almost 60% of Nifty earnings is export heavy; banks/PSBS earnings may also suffer due to MTM loss of bond portfolio as almost 50% of EBITDA is dependent on this GSEC bond holdings due to higher SLR obligation after DeMo led liquidity push. 

On the other side, a dual combination of higher oil & higher USD may not be good for the overall Indian economy & its macro stories; above $65-70 Brent, India may be re-rated despite some green shoots in the economy.

SGX-NF

SPX-500