Technical & Macro Analysis Of Indian & Global Market----: Nifty jumped on exporters amid higher USD and short covering ahead of FNO expiry coupled with reports of FPIS limit hike for the Indian bond market

Market Wrap: 21/02/2018 (17:00)

NSE-NF (Feb):10389 (+45; +0.44%)

(NS: 10397; Q2FY18 EPS: 391; Q2FY18 PE: 26.59; Abv 2-SD of 25; Avg FWD PE: 20; Proj FY-18 EPS: 418; Proj Fair Value: 8360)

NSE-BNF (Jan):24916 (+56; +0.23%)

(BNS: 24937; Q2FY18 EPS: 867; Q2FY18 PE: 28.76; Abv 3-SD of 30; Avg FWD PE: 20; Proj FY-18 EPS: 961; Proj Fair Value: 19220)

For 22/02/2018: Feb-Fut/SPOT (Key Technical Levels)

Updated: 07:55

SGX-NF: 10335; (-54 points)

(Gap down on negative global cues amid surging US bond yields)

Expected BNF opening: 24790

Feb-Fut/SPOT (Key Technical Levels)

Support for NF: 10290/10245*-10160/10070

Resistance for NF: 10435/10495*-10535/10585

Support for BNF: 24800/24650*- 24450/24200

Resistance for BNF: 25000/25200-25500/25650

Trading Idea (Positional):

Technically, Nifty Fut-Jan (NF) has to sustain over 10455 area for a further rally towards 10495-10535 and 10585-10625 zone in the short term (under bullish case scenario).

On the flip side, sustaining below 10435-10395 area, NF may fall towards 10300-10245 and 10160-10070 zone in the short term (under bear case scenario).

Technically, Bank Nifty-Fut (BNF) has to sustain over 25200 area for a further rally towards 25500-25650 and 25875-26075 zone in the near term (under bullish case scenario).

On the flip side, sustaining below 25150-25050 area, BNF may fall towards 25000-24800 and 24650-24450/24200 area in the near term (under bear case scenario).

The Indian market (Nifty Fut-Feb/India-50) closed around 103389 on Wednesday (21^st Feb), jumped by almost 0.45% after a sharp recovery from the day low of 10341 on exporters amid higher USD and short covering ahead of FNO expiry after recent steep corrections on PNB “loot” (theft/loan fraud).

Almost 60% of Nifty earnings are now export-heavy and thus a stronger USD is good for the Nifty, although it may be bad for the overall Indian economy being import oriented. Indian market made an opening high of around 10410 on positive Asian cues earlier in the day on higher USD.

The Indian market was also boosted by reports of FPIS limit hike for the GSEC bonds:

The smart recovery in the Indian market also came after reports that RBI may ease (increase) the FPIS (foreign portfolio investors) limit by March-April for the Indian bond markets, which is now under intense bloodbath and offering the highest yield among the Asian emerging markets (EM). The current FPIS limit is now at 5%.

On Wednesday, benchmark Indian 10YGSEC bond yield soared to 7.710%, the highest in two years on the concern of shrinking banking liquidity, the huge burden of NPA, recurring state bailouts of the PSBS and the breach of fiscal deficit. The Indian bond market was also worried about a hawkish RBI minutes, set to be released after the market hours.

But the market is also concerned about surging US bond yields, now eyeing the 3% level, which may prompt FPIS to shift their attention to fund the fiscal deficit of US rather than an EM or India as EM currency may also devalue significantly.

The Indian market may have also boosted by upbeat comments from the UP investor conference attended by the PM and leading business houses of the country. Apart from higher USD, tech (IT) stocks were also boosted by optimistic outlook by NASCOM.

After the market hours, RBI released its February MPC minutes, which may be also termed as hawkish. RBI is clearly concerned about higher inflationary pressure on the economy amid an ongoing surge in oil, abnormal wage growth (HRA-house rent allowance) for the government workforce, higher MSP (minimum support price for the agro-commodities) and fiscal slippages. RBI is also worried about subdued capacity utilization.

RBI also thinks that as India’s real rate is now hovering around 1% (repo rate-CPI) there is not so much scope of any rate cut (policy action) in the coming days as inflation trajectory is also expected to be on the elevated side.

On Wednesday, Nifty was supported by TCS, ITC, RIL, HDFC, HCL Tech, Infy, SBI, Tech-M, ICICI Bank and Eicher Motors by almost 58 points altogether.

Overall, on Wednesday Indian market was supported by banks and financials (short covering in PSBS), FMCG, exporters (techs/RIL), media, energies (higher oil), while it was dragged by automakers (interest rate sensitive), metals (concern of US protectionism and import duties), pharma (renewed concern about US FDA inspection), reality and infra stocks.

Gold/USD View: