Technical & Macro Analysis Of Indian & Global Market----: Market Mantra (Nifty Fut/Bank Nifty Fut/USDINR/SPX-500): 01/11/2018

Updated: 09:00

The Indian market (Nifty Fut) slips early Thursday on the concern of RBI-Government duet over the question of central bank independence and NBFC bailout. But the market recovered to some extent from the session low of around 10371 and is currently trading around 10425, edged up by almost +0.25% on better than expected October Manufacturing PMI, which rose to 53.1 from prior 52.2, higher than the consensus of 51.9.

The Indian market recovered from a deep slump on Wednesday as the government dials back its RBI rhetoric, seeing the adverse market reaction. Nifty recovered from 10105 and jumped to a high of 10396 as the government acknowledged explicitly that the central bank’s autonomy, within the framework of the RBI Act, is an “essential and accepted governance requirement”.

The market was also boosted by another report that Iran may accept Rupee payment mechanism for its oil export to India to avoid Trump/US sanction. The market is also boosted by India’s jump in “ease of doing business”.

In brief, as the “war of words” between the government and RBI broke out, there are reports that RBI governor and the entire MPC may resign on the issue of political (government) interference in RBI’s autonomy. This is an unprecedented situation in India, where the government is also eyeing the RBI surplus of around Rs.3T to fund fiscal deficit.

Apart from NBFC/HFC funding (bailout), the government is also pressurizing the RBI to ramp up MSME funding (ahead of the election) and asked the central bank to let some PSU banks out of PCA, so that they could resume lending. The government is apprehending that India’s growth could slow down as NBFC almost stops lending due to “lack of liquidity”.

The RBI said it’s not a liquidity issue but it’s an NPA/NPL problem with the NBFC/HFC. Both the government and RBI may be right as the yield of the commercial bond market (CP) is now abnormally high and there are growing stressed assets in the NBFC/HFC sector involving business as-well-as personal loan accounts.

If the present RBI governor Patel and his team (MPC) quits, then it could be a “doomsday” like a scenario for the Indian financial market in the coming days. All eyes will be now on RBI/MPC meeting on 13^th November.

Nifty-SGX-NF: 10423 (+43; +0.41%)

Bank Nifty-BNF: 25275 (+125; -0.50%)

USDINR-I: 74.10 (-0.10.; -0.15%)

SPX-500: 2719 (+8; +0.30%)

Fut-I (Key Technical Levels)

Support for NF:

10400/10360*-10325/10300*-10250/10190-10155/10120-10050/10000

Resistance to NF:

10450/10495*-10555/10595*-10625/10650-10700/10725-10765/10785

Near-term broad range: 9950/10000-10450/10725

Support for BNF:

25200/24900*-24650/24550-24250*/24100-24000/23800-23600/23300

Resistance to BNF:

25300/25450*-25575/25725-25875*/25950-26150/26300-26500/26650

Near-term broad range: 23600/24250-25450/25875

Support for USDINR-I:

73.70*/73.45-73.00*/72.55*-72.25/72.00-71.50/71.25-70.70/70.35

Resistance to USDINR-I:

74.05/74.35*-74.75*/75.00-75.65/76.00-76.45/77.00-77.50/79.70

Near-term broad range: 73.00-76.45

Support for SPX-500:

2715/2700*-2680/2650*-2620/2590-2570/2535-2520/2470

Resistance to SPX-500:

2755/2780*-2810/2825*-2855/2880-2905/2925-2945/2960

Near-term broad range: 2570/2600-2735/2780

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

Technically, Nifty Fut-I (NF) has to sustain over 10475-10495 for a further rally to 10555/10595-10625/10650-10700/10725-10765/10785 in the near term (under bullish case scenario).

On the flip side, sustaining below 10455 NF may fall to 10400/10360-10325/10300-10250/10190-10155/10120 in the near term (under bear case scenario).

Technically, Bank Nifty Fut-I (BNF) has to sustain over 25350-25450 for a further rally to 25575/25725-25875/25950-26150/26300-26500/26650 in the near term (under bullish case scenario).

On the flip side, sustaining below 25300 BNF may fall to 25200/24900-24650/24550-24250/24100-24000/23800 in the near term (under bear case scenario).

Technically, USDINR-I has to sustain over 73.45-73.70 for a further rally to 74.05/74.35-74.75/75.00-75.65/76.00-76.45/77.00 in the near term (under bullish case scenario).

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

Technically, SPX-500 has to sustain over 2755 for a further rally to 2780/2810-2825/2855-2880/2905-2925/2945 in the near term (under bullish case scenario).

On the flip side, sustaining below 2745-2735 SPX-500 may fall to 2715/2700-2680/2650-2620/2590-2570/2535 in the near term (under bear case scenario).

Valuation metrics:

Nifty-50: 10400; Q4FY18 EPS: 402; Q4FY18 PE: 25.87; Avg FWD PE: 20; Proj FY-19 EPS: 425-450; Proj Fair Value: 8500-9000

Bank Nifty: 25300; Q4FY18 EPS: 519; Q4FY18 PE: 48.75; Avg FWD PE: 20; Proj FY-19 EPS: 961-1000; Proj Fair Value: 19220-20000 (assuming NPA recovery).

SPX-500: 2700; TTM Q2-2018 EPS: 123; TTM PE: 21.95; Proj 2019 EPS: 150-160; Avg FWD PE: 18; Proj 2019 EPS: 150-165; Proj Fair Value: 2700-2970

GLOBAL MARKET ANALYTICS: https://iforex.in/news

FOLLOW ME: http://twitter.com/ASISIIFL