Technical & Macro Analysis Of Indian & Global Market----: Market Mantra (Nifty Fut/Bank Nifty Fut/USDINR/SPX-500): 09/10/2018

The Indian market under stress Tuesday on the old story of the trifecta of higher USD, higher bond yield, higher oil coupled with a possible revenue shortfall on account of GST, disinvestment, and lower dividend from OMC. Although the Indian DEA denied report of lower disinvestment target and dividend from OMC as pure “fabricated”, the market may be not so much confidence.

From the version of the RBI and also the government, it now seems that they have no problem if USDINR goes past to 75 levels for 80 in the short term, considering China’s ongoing currency devaluation. The USDCNH is currently trading around 6.90 and China may be targeting 7.00 level; i.e. almost 12% devaluation since June low of 6.25 “to fight” with Trump tax of 10%. Similarly, India may be also targeting 12% devaluation level of around 77 from 69 level a few months ago (around June’18). India could be also a target of Trump trade war as far its IT and pharma exports are concerned.

The difference is that China is an export-oriented country, while India is largely an import-oriented economy. Looking ahead, the forthcoming festival fuel demand would also keep the CAD/BOP elevated along with a shortfall in revenue. Thus it may be a challenge for the government to achieve a 3.3% fiscal deficit target without sacrificing expenses (government infra capex). With around 10-months of import cover with the existing FX reserve, the situation may turn critical if FPI’s outflow accelerates amid ongoing rupee carnage.

Updated: 13:25

Nifty-SGX-NF: 10360 (-20; -0.18%)

Bank Nifty-BNF: 24682 (-30; -0.12%)

USDINR-I: 74.42 (+0.17.; +0.22%)

SPX-500: 2887 (-6; -0.22%)

Fut-I (Key Technical Levels)

Support for NF:

10275/10190*-10160/10105-10000/9950*-9850/9700-9650/9600

Resistance to NF:

10425*/10485-10540/10600-10660/10725*-10775/10790-10835/10895

Support for BNF:

24650/24400*-24200*/24100-24000/23900-23800/23650-23600/23300

Resistance to BNF:

24800/25050*-25200*/25300-25400/25575-25675/25750-25875/26050

Support for USDINR-I:

73.45/73.00*-72.75/72.25-72.00/71.50-71.25/70.95-70.70/70.35

Resistance to USDINR-I:

74.05/74.25-74.50/75.00-75.65/76.00-76.55/77.00-77.50/79.70

Support for SPX-500:

2905/2880-2865/2845-2835/2810-2790/2780-2765/2735

Resistance to SPX-500:

2925/2935-2945/2960-2990/3010-3035/3070/3095/3155

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

Technically, Nifty Fut-I (NF) has to sustain over 10425 for a further rally to 10485/10540-10600/10660-10725/10775-10790/10835 in the near term (under bullish case scenario).

On the flip side, sustaining below 10405 NF may fall to 10275/10190-10160/10105-10000/9950-9850/9700 in the near term (under bear case scenario).

Technically, Bank Nifty Fut-I (BNF) has to sustain over 24800 for a further rally to 25050/25200-25300/25400-25575/25675-25750/25875 in the near term (under bullish case scenario).

On the flip side, sustaining below 24750 BNF may fall to 24650/24400-24200/24100-24000/23900-23800/23650 in the near term (under bear case scenario).

Technically, USDINR-I has to sustain over 73.00-73.45 for a further rally to 74.05/74.25-74.50/75.00-75.65/76.00-76.55/77.00-77.50/79.70 in the near term (under bullish case scenario).

On the flip side, sustaining below 72.75-72.25, USDINR-I may fall to 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 SPX-500 has to sustain over 2920 for a further rally to 2935/2945-2950/2960 and only sustaining above 2960, it could further rally to 2990/3010-3035/3070-3095/3155 in the near term (under bullish case scenario).

On the flip side, sustaining below 2915-2905, SPX-500 may fall to 2880/2860 and only sustain below 2860, it could further fall to 2840/2810-2795/2765 in the near term (under bear case scenario).

Valuation metrics:

Nifty-50: 10300; Q4FY18 EPS: 402; Q4FY18 PE: 25.62; 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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