Technical & Macro Analysis Of Indian & Global Market----: Market Mantra (Nifty Fut/Bank Nifty Fut/USDINR/SPX-500): 26/10/2018

The Indian market opened in deep red Friday on terrible global cues as overnight Dow rally of +400 points on hopes of a blockbuster report card turned into a panic of -300 points in the early Asian session amid mixed report card and China’s Yuan slump to almost 7 levels against the US dollar. The “risk-on” trade now hates two things-lower US/global bonds (higher yields-higher borrowing costs) and lower Yuan.

The US market (SPX-500) is now already in the “bear” territory as it’s sustaining well below the 200 DEMA level of 2800 and in market terms, is in correction territory as it’s down by almost 10% from the recent top of around 2945. It now seems that China and the US market is now competing, who fell more ahead of the November mid-term US election. China, Russia and also Japan are steadily reducing their US Treasury holdings, which may be the primary reason behind the recent surge in US bond yields and market plunge. A few months ago, China has already warned about a Dow plunge as one of its “nuclear options” to confront “Trump trade war”.

Apart from negative global cues, the Indian market is under stress on lingering “liquidity” (default) issues of various NBFC/HFC as housing and infrastructure are in deep trouble for higher borrowing costs, price escalation, subdued real wage growth, and worsening macros.

The combined fiscal deficit of India is surging at an alarming rate ahead of the election as various state governments and also the federal government is now implementing pay commission recommendations for higher salary/pensions for government employees.

The political populism coupled with a devalued currency (INR), higher borrowing costs and surging oil would be negative for the Indian economy and corporate results will bound to affect in the coming days in addition to various corporate governance issues.

Updated: 09:55

Nifty-SGX-NF: 10050 (-110; -1.20%)

Bank Nifty-BNF: 24725 (-225; -0.90%)

USDINR-I: 73.35 (+0.08.; +0.11%)

SPX-500: 2660 (-28; -1.00%)

Fut-I (Key Technical Levels)

Support for NF:

10030/10000*-9950*/9850-9700/9650-9550/9450

Resistance to NF:

10100/10155*-10200*/10225-10260/10305-10345/10395

Near-term broad range: 9950-10600

Support for BNF:

24650*/24450-24250*/24100-24000/23800-23600/23300

Resistance to BNF:

24925*/25050-25200*/25400-25600/25700-25950/26100

Near-term broad range: 23600-26075

Support for USDINR-I:

73.45/73.00*-72.55*/72.25-72.00/71.50-71.25/70.95-70.70/70.35

Resistance to USDINR-I:

74.05/74.35*-74.75*/75.00-75.65/76.00-76.55/77.00-77.50/79.70

Near-term broad range: 73.00-75.00

Support for SPX-500:

2675/2650*-2620*/2590-2570/2535-2505/2475

Resistance to SPX-500:

2715/2735*-2775*/2795-2815/2845-2875/2890

Near-term broad range: 2535-2760

Technical View (Nifty, Bank Nifty, USDINR-I, SPX-500):

Technically, Nifty Fut-I (NF) has to sustain over 10225 for a further rally to 10260/10305-10345/10395-10445/10550 in the near term (under bullish case scenario).

On the flip side, sustaining below 10200-10155 NF may fall to 10030/10000-9950/9850-9700/9650-9550/9450 in the near term (under bear case scenario).

Technically, Bank Nifty Fut-I (BNF) has to sustain over 25050 for a further rally to 25200/25400-25600/25700-25950/26100 in the near term (under bullish case scenario).

On the flip side, sustaining below 25000-24925 BNF may fall to 24650/24450-24250/24100-24000/23800-23600/23300 in the near term (under bear case scenario).

Technically, USDINR-I has to sustain over 73.25-73.45 for a further rally to 74.05/74.35-74.75/75.00-75.65/76.00-76.55/77.00 in the near term (under bullish case scenario).

On the flip side, sustaining below 73.00, USDINR-I may fall to 72.55/72.25-72.00/71.50-71.25/70.95-70.70/70.35 in the near term (under bear case scenario).

Technically, SPX-500 has to sustain over 2715 for a further rally to 2735/2775-2795/2815-2845/2875 in the near term (under bullish case scenario).

On the flip side, sustaining below 2705-2690, SPX-500 may fall to 2675/2650-2620/2590-2570/2535-2505/2475 in the near term (under bear case scenario).

Valuation metrics:

Nifty-50: 10000; Q4FY18 EPS: 402; Q4FY18 PE: 24.88; Avg FWD PE: 20; Proj FY-19 EPS: 425-450; Proj Fair Value: 8500-9000

Bank Nifty: 24600; Q4FY18 EPS: 519; Q4FY18 PE: 47.40; Avg FWD PE: 20; Proj FY-19 EPS: 961-1000; Proj Fair Value: 19220-20000 (assuming NPA recovery).

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