Nifty May Stay In Green On Global Growth Euphoria & Better GDP Forecast For H2FY18; But Fiscal Dilemma & Earnings Worry May Drag The Market In The Coming Days

Market Mantra: 08/01/2018 (09:00)

SGX-NF: 10625 (+47)

For the Day: updated: 02:50

For 08/01/2018: Jan-Fut

Key support for NF: 10605/10565-10525/10485

Key resistance for NF: 10675/10725-10795/10815

Key support for BNF: 25500/25200-25000/24800

Key resistance for BNF: 25700/25900-26100/26250

Trading Idea (Positional):

Technically, Nifty Fut-Jan (NF) has to sustain over 10675 area for further rally towards 10725-10755/10795 & 10815-10860 zone in the short term (under bullish case scenario). 

On the flip side, sustaining below 10650 area, NF may fall towards 10605/10565-10525 & 10485-10425 zone in the short term (under bear case scenario).

Technically, Bank Nifty-Fut (BNF) has to sustain over 25900 area for further rally towards 26100-26250 & 26325-26615 zone in the near term (under bullish case scenario).

On the flip side, sustaining below 25850-25700 area, BNF may fall towards 25500-25300/25200 & 25000-24800 area in the near term (under bear case scenario).

Indian market (Nifty Fut-Jan/India-50) is now trading around 10620, surged by almost 0.45% on positive global cues& Goldilocks euphoria coupled with an upbeat GDP forecast by CSO for H2FY18 at 7% despite overall FY-18 GDP may come lower at 6.5% amid lingering disruption out of DeMo & GST and certain other structural issues. Overall trading range is very choppy today after initial gap up opening.

But Indian 10Y bond yield is not so much convinced about overall economic optimism amid lingering concern for fiscal deficit breach; it’s now hovering around 7.32% vs 7.29% on Friday after RBI’s green signal for additional dividend, which may help prune fiscal deficit by around Rs.0.13 tln.

USDINR-I today fall to multi-months low at 63.38 on higher IN bond yields & optimism about Indian stock market growth story & huge fund flows; but it’s now recovered slightly to 63.55 on suspected RBI intervention.

Market may be also concerned about LTCGT as Govt may be compelled this time for the sake of muted revenue growth, higher capex to stimulate the economy and subsequent fiscal math mismatch; Govt may also spent significantly more on rural capex this time (FY-19 budget), considering both economical & political compulsion amid rural discontent & state elections in 8 states in 2018 apart from general election in early 2019.

But Govt may prune down urban/infra capex, such as in Railways and may also delay payments to states till FY-18 to prevent fiscal slippages; thus state capex may be also subdued in the coming days.

Lower GDP growth may translate into lower tax receipts; thus Govt may have also instructed CBDT to slow down processing of tax refunds: “CBDT Instructed to Hold Back Each Refund Higher than Rs 50000, Expect Tapering of Refunds to Save Rs 0.30-0.40 tln in FY-18”.

All focus may be on earnings recovery & justification of stretched valuation as corporate India is entering its Q3FY18 result season.

SGX-NF

SPX-500