Nifty "Rallied" By Only 23 Points After "Hawkish/Owlish Cut" Of 0.25% By RBI Amid Tepid Global Cues

Market Wrap: 04/10/2016

Nifty Fut (Oct) today closed around 8802 (+0.26%) after recovering from the session low (8765) post RBI cut and made a high of 8820.

Technically, for tomorrow (05/10/2016), NF need to sustain above 8835-55* zone for further rally up to 8875/8900*-8930/75-8900/9025 area in the immediate to short term.

On the downside, sustaining below 8795-60* zone, NF may fall further towards 8715/665*-8595/30-8475/25 area in the immediate to short term.

Broadly speaking, consecutive closing (3 days) above 8875 area, NF may rally up to 9185-9235 & 9325 zone (Diwali Rally??) and consecutive closing below 8530 area (for any reasons, whatsoever), NF may crash to 8125-8075 & 8000 area in the near term (Brexit & Nov US election uncertainty??).

Today's global cues were tepid after GBP made 31 yrs low as market is slowly catching up with the reality of the UK's exit process from the EU. Though Britain is expecting to strike a number of special trade negotiations with EU and several other countries including US, everything may depend upon the actual outcome of those negotiations. 

As par reports, unless EU authority receives an "official notice for this divorce", no real negotiation is possible. Even UK invokes article-50 by March'17, the complete exit process may take up to 2019 and there will be an environment of uncertainty, especially for the banks & financial sectors, which is the backbone of the UK's economic strength. 

It’s true that the recent huge devaluation of the GBP because of Brexit is helping the UK Mfg sector a lot on the export front, it’s basically a service oriented economy. Although UK is presently enjoying both sides of currency devaluation and EU/EZ trade advantage, it is not possible to go on for longer simply because of other EU countries are suffering (Specially Germany).

Also, there was some report that DB negotiation is still on with the US-DOJ and its CD spiked also, putting some pressure on the "risk trade" again.

Globally, all eyes will be on the Friday's US NFP after yesterday's improved ISM Mfg PMI data (USD is getting stronger for a probable Dec rate hike).

Back to home, all focus of the Dalal St was on the "Mint St" (RBI) today for the much awaited "Diwali Gift" from the new RBI Gov/MPC.

"Mint St" did not disappoint the "Dalal St" and cut the repo rate by 0.25% with corresponding adjustments in the reverse repo/MSF/Bank rate. Subsequently, market rallied by some extent from the day's low and ultimately settled almost flat for Nifty and Bank Nifty closed up by 0.63%. After policy decision, there was some visible rally in the PSU banking space.

Although, majority of the economists were polled for no rate cut this time, a major portion of the market participants was expecting at least 0.25% cut by the RBI, considering the last few days’ price action, especially for the BNF from the "Surgical Strike" day low.

Moreover, the overall RBI commentary may be quite "hawkish/owlish" (cautious), regarding the future inflation trajectory and global geo-political events (like risk/uncertainty of US election). 

Also RBI may be quite concerned about global growth projection by IMF and weak global demand, which is affecting the India's export trade.

RBI is also very cautious on the NPA/NPL situations of the banks and is taking some tough measures with pragmatism. RBI will publish fresh guidelines for effective recognition and resolution of the stressed assets by Oct end.

But, there was a market buzz that going forward, RBI will recognize the portion of stressed assets under SA4 as standard, which may help the banks (specially the PSBS) to lower its provision number and report better bottom line. This may be the primary reason for the rally in PSBS after RBI meet today.

Another point may be that with this Oct rate cut, probability of another cut by 0.25% in Dec'16 is almost nil now as in the recent history, RBI never cut rates twice in consecutive meet except there was a global financial crisis (Black Swan event). 

So, if there is no geo-political shock in Nov (US election risk), RBI may act further only in Feb'17.

At present repo rate stands at 6.25% after the overall 1.75% cut in the last two years or so and CPI sands around 5%. Thus real rate of interest is around 1.25%, already below RBI's policy goal (1.5-2%). 

In order to cut further 0.25%, CPI needs to fall around 4.5%. RBI's own projection of CPI may be 5-5.5% for the rest of FY-17. 

RBI is cautious on the CPI front because of 7-CPC induced liquidity and any short term impact of GST (scheduled to be rolled out by Apr'17). 

Also, food inflation in India is largely structural in nature and unless there is some structural reform (supply side management, storage & logistical issues etc), it may be continue to be seasonal as of now for the foreseeable future.

So, we may be at the bottom of this rate cut cycle at present (max another 0.25% cut in Feb'17).

Another issue may be proper transmission of the RBI repo rate cuts by the Banks. Only 50-60% of previous 1.50% rate cuts has been transmitted by the banks so far. It will be interesting to see, how banks lower the borrowing costs for the Indian economy by effective transmissions for this overall 1.75% cut so far.

Thus looking forward, apart from the global cues & Q4FY17 earning session, progress of GST, geo-political tension between India-Pak, all eyes will be on the inflation trajectory for India and existing rate cut transmissions by the banks. 

If banks are not ready for corresponding rate (MCLR) cuts, then what is the benefit for the borrowers/investors/consumers? It may be only beneficial for banks themselves because of bond yields difference.

Although, India's GDP has grown by 7.1% in Q1FY17, the slowest in the last six QTRS, RBI is expecting a revival of growth in the days ahead supported by good monsoon (agri growth & revival of rural demand), a pay bonanza for certain Govt employees (7-CPC) and festival season buying (better consumer spending).

But RBI is also very cautious about 7CPC induced liquidity/house rent, rural minimum wage growth spillover effect on the CPI going forward.

Apart from tepid global cues, renewed & repeated cease fire violations at India-Pak border may also kept the Indian market under some pressure today.

Overall, next few days price action may be vital for an overall direction of the market from here as almost all the "good news" has been priced in.

 SGX-NF

Market Mantra: All Eyes Will Be On The "Mint St" (RBI) Today; Watch Hurdle Of 8825-75 For NF & 19750-950 For BNF

As par early SGX indication, NF may open around 8785, almost flat. 

Technically, NF has to sustain over 8805-8825* zone for further rally up to 8875-8900/25*-8975/95 area in the immediate to short term.

On the flip side, sustaining below 8765-45* zone, NF may fall towards 8705-8675/50*-8550/30 area in the immediate to short term.

 

BNF (CMP: 19706) has to sustain over 19750-950* area for further rally up to 20000-350* and 20750*-950 area in the immediate to short term.

 

On the downside, sustaining below 19700-650* area, BNF may fall towards 19500-300* and 19040*-18550 zone in the immediate to short term.

Overnight US market closed by (-)0.30% after recovering by some extent from the lows. Overall US economic data was positive yesterday and coupled with that morning jawboning by BOJ (Kuroda) has inspired some rally in the USDJPY.

Yesterday's US IMS MFG PMI & vehicle sales data was good/above expectation, but there was some disappointment in the construction data. Also, vehicle sales growth was supported by heavy discount.

On the political front, Clinton & Trump are running almost neck to neck despite advantage of the 1-st debate in favour of Clinton. 

As par some reports, Wikileaks may publish some "secret documents/information" about Clinton today, which may end the present Presidential campaign of Clinton abruptly !!

Yen is getting weaker in the Asian session today, after some reports that BOJ has tapered purchase of 10Y+ JGB on Friday. Also, Kuroda is in some types of testimony before Japan Parliament today and as par him, NRIP is not bad for Japan's banks & financial sector, at least for the short term and will be an advantage for the overall Japanese economy and there are some talks by a Abe advisor that because of "doing all the stupid things", chances of Kuroda getting a 2-nd term looks very thin.

All these BOJ drama is helping USDJPY to get some traction and Yen is getting some weakness as Japanese economy desperately required that at this point of time to get back some of its lost export competitiveness as a result of recent strength of the currency.

Back to home, all focus of the Dalal St today may be on the "Mint St", where RBI/MPC is discussing about Indian economy and likely policy decision, which will be published today at 14:30 instead of traditional 11:00. 

Although any rate cut expectation may be very low, considering the recent divergence of CPI & WPI and issues of previous rate cut transmissions, some analysts are also very hopeful for a 0.25% "Diwali Gift" to the nation this time by the new RBI Gov/MPC as CPI fall (suddenly) by almost 1% in a month !!

Considering the price action of the BNF for the last few days (after surprise "Surgical Strike"), market may also expecting some rate cut/dovish RBI this time and any disappointment, may also result in a last hour extreme volatility today.

While, the brand new MPC & its two day meeting may looks like a Fed meet, what India lacks a proper sets of incoming economic data like US or any advanced economy. Only inflation, GDP, IIP, Core Sector Output data is not sufficient; we need relevant job data, housing and retail sales data as well in order to gauze the proper strength of the Indian economy. Hopefully, once "Digital India" get some traction, economists/policy makers may get more incoming economic data to transform India into "maximum employment with minimal inflation/reasonable price stability" like US-Fed. 

Yesterday sentiment of the Indian market was further buoyed by the Nikkei Markit MFG PMI data (Sep), which came at 52.1 (against expectation of 52.4; prior: 52.6). Although the PMI data came lower and may be an indication of lower demand, RBI may look at it for a rate decision. But, it's still above the 50 boom/bust line for 9 consecutive months.

As par McKinsey's latest report, India is poised for incremental growth now and by 2030, may be the 3-rd largest economy in the world in terms of absolute GDP (After US & China). The huge opportunities for India are being supported by rapid urbanization, a rising middle class and increasing consumer spending. Also ongoing effort of "Digital & Make In India" and implementation of GST will make India one of the super power in economy globally. India's huge population and favourable demography will also help a lot. While these are some of the tailwinds, uneven monsoon and external global shocks are also some of the headwinds as par the report.

But, another headwind may be the lack of proper jobs for India's huge young demographic (demographic division). As par some report, almost 33 lacs people are entering job market in India every month (close to 4 cr people every year) and fresh job creation by the Govt/Pvt sector is much below that. Also, in a city like Mumbai, average fixed per capita income may be 50k/month which is almost equivalent monthly fixed expenditure for a small middle class family living outskirt of the main city area. So, unless there is visible improvement in real income, scope of incremental growth in discretionary spending may be very limited except from some of the pockets (like Govt employees/beneficiary of the 7-CPC).

Another point is that India traditionally is an economy of "black/unaccounted" money and presently its transforming to "white/accounted" economy. India's subdued capacity utilization and tepid consumer demand may be an indication of this transformation process for the last few years.This may be also one of the reason for overall tepid EPS for Nifty which saw only 3% YOY growth in Q2FY17 and now stand around 375 in spite of all the so called "green shoots" in the Indian economy.

The recent IDS declaration of around Rs.65250 cr and an expected tax collection of around Rs.30000 cr by FY:17-18 (@45%) indicates that its the common people on the street (mainly businessman & forced declaration may be around Rs.52000 cr), who has declared in the IDS under immense pressure from the Income Tax Dept; where as there are no big/small politicians, Govt servant, or big business name.

Any way, the huge success of this IDS may be another reason of improved market sentiment (Govt revenue collection buoyancy), but  in the short term, it may also affect the consumer sentiment of the so called "black money holders".

Analytical Charts:

SGX-NIFTY

 

 

 NSE-BNF

Nifty Rallied By 145 Points And Almost Catches Up The "Pre-Surgical Strike” Level Amid Hopes Of RBI Rate Cut, Truce In Border, Better Auto Sales & Positive Global Cues

 Market Wrap: 03/10/2016

Nifty Fut (Oct) today closed around 8785 (+1.67%), just below last minute high (8788), after an opening session low of 8656.

Technically, for tomorrow (04/10/2016), NF has to sustain over 8805-8825* zone for further rally up to 8875-8900/25*-8975/95 area in the immediate to short term.

On the flip side, sustaining below 8765-45* zone, NF may fall towards 8705-8675/50*-8550/30 area in the immediate to short term.

Indian market today opened in positive tone after overnight (Friday) rally in US market amid talks of Deutsche Bank settlement negotiation by US-DOJ to much more lower amount ($5.4 bln) from the original fine of around $14 bln. 

But, this is not confirmed yet and as par some reports, DB may face similar fines of a suspected Russian money laundering case ($10 bln). So, going forward, global market may be extreme volatile because of this DB & other EU banking issues.

Also, "Real Brexit" & US election outcome uncertainty may be some of the headwinds in the coming days. 

As par UK PM, Great Britain will invoke the Article-50 as early as March'17 for beginning of the official exit procedure from the EU. It appears that UK is focusing more on the immigration & own economic independence issues rather than EU trade freedom at present. Thus UK may face considerable slowdown in the months ahead despite advantage of a depreciated currency (GBP).

On the other side, "Real Brexit" related contagion (if any) may be another excuse for the Fed to stay at the side lines, even in Dec'16 despite Clinton wins the next US presidency.

Also ECB & BOE may step in with more "Bazooka"; but it will be interesting to see, if Central Banks QQE will be able to contain any "real contagion" effect of the "Real Brexit".

Globally, all eyes will be on the US ISM MFG PMI data today ahead of Friday's NFP report to gauze the real strength of the US economy before Fed's action in Dec'16. As US election is getting nearer, overall US economic data may be portrayed as "good/above expectation" and USD may see some bids.

Back to home, Indian market today got some boost from high expectation of a rate cut by RBI tomorrow and reports that India & Pak has agreed to maintain "peace & tranquility" in the LOC areas (despite repeated incidents of cease fire violations & attempt to attack another army camp in Baramullah-J&K). Also, better Sep auto sales growth has supported the market today significantly.

The core sector output data on Friday may also help the Indian market today as growth in production of steel & cement may be an indication of better construction/ real estate and infrastructure activities. 

Also, as par some reports, India's CAD is now in a much more comfortable position of 0.06% of the GDP whereas it was around 6% in 2012. 

Although market is looking for a "Diwali Gift" from the new RBI Gov this time after the "Surgical Strike" incident, the very "owlish" (inflation warrior) nature of Patel and some other hawkish MPC members may take note of the CPI's "sudden fall from the clip"  (from 6.03% to 5.05% in a month) and spike of WPI (3.74%). 

Thus, the divergence in CPI & WPI may keep the RBI to be in "wait & watch" with a dovish commentary this time and depending on the inflation trajectory for Sep-Nov'16, RBI may cut by 0.25% in Dec'16. 

There may be some upward tick in CPI in the days ahead because of 7-CPC induced liquidity and some deficiency in final rain counts in selected parts of the country.

Rather than rate cut, RBI may focus more on the actual transmission of the previous rate cuts by the banks & effective resolution (not mere recognition) of the huge NPA/stressed assets with the Indian Banking system, specially for the PSBS. So far, only around 50-60% of previous repo rate cuts (1.50%) by Rajan were transmitted by the banks to the borrowers/economy.

Another point may be that, If banks are not able to pass on the benefit of RBI repo rate cuts (for any reason, what so ever), then what is the point of further rate cuts by the RBI? 

As par previous commentary of RBI, it intends to keep RRI (real rate of interest) at 1.5-2% level. At CPI around 5% and repo rate of 6.50%, the RRI is now almost 1.50% and thus for any rate cuts CPI needs to go below 4.75% in the coming months.

But, there is also immense pressure on RBI (direct / indirect) to cut rates this time after "Rexit" and it will be interesting to see RBI/MPC's maiden policy and tone and market's reaction tomorrow. 

In any way, market is expecting an overall rate cut of 0.50% by FY-17 and full transmission of previous rate cuts by the banks, which will make Indian economy a rare combination of "higher growth & lower interest rate" and make it an ideal destination of the investors. 

But, for effective transmission of rate cuts, Indian small & fixed savings rate need to go lower also, which may be a more structural & political issues in nature rather than Bank/RBI’s domain.

Today Nifty was supported immensely by rate sensitive stocks (rate cut expectation), autos (better sales numbers amid festival season) and lagged by the IT scrips to some extent (weak USD & concern of Brexit).

Stock specifically, Nifty was supported by ZEEL (buzz of M&A activity with Reliance and denial of any UAE acquisition), Eicher Motors (better sales growth and buzz of split), Maruti (record festival season sales), Coal India (better Sep production figure), Bhel (new order), Axis Bank (sales of Essar steel NPA to Edelweiss ARC).

SGX-NIFTY

Market Mantra: "Real Brexit", Confusion Over DB Settlement & Lingering Concerns About Indo-Pak Tensions May Keep The Market On Edge

As par early SGX indication, Nifty Fut (Oct) may open around 8660, almost flat. 

Technically NF need to sustain above 8675 zone for further rally up to 8705/25-8755/85-8825/75* area in the immediate to short term. 

NF need to sustain over 8825 area in the short term to regain its upwards momentum towards 9000 zone.

On the other side, sustaining below 8625 area, NF may fall towards 8560/30*-8470/40-8380/50 in the immediate to short term.

Below 8530-8470, NF will be weak further and may target 8000 area in the coming days.

On Friday, overnight US market rallied by almost 1% amid speculation of Deutsche Bank settlement by US-DOJ by much more lower amount of $5.4 bln against original fine of $14 bln. But, later as par some other reports, this is not confirmed and negotiation is still going on.

But, it was not so much unexpected considering the status of  DB ("too big to fall") and overall systemic impact of a failure for EU as well as for the global financial market. Apart from the DB, some other prominent banks of EU like Credit Suisse, Barclay are also in the dock for this 2008-09  US mortgage related fines by the DOJ. Eventually, DB may be bailed out, but there may be some serious lack of confidence in the minds on the investors also.

Yesterday, UK PM confirmed about invoking Article-50, which will kick start the official "divorce" process from the EU. Although, this is also expected & GBP already reacted for the last few weeks, we may see some volatility after EU spot market opens in the noon. 

Overall, global market is not fully discounted yet for a "Real Brexit", considering the widespread possible contagion effect of it on some other EU nations and uncertainty in the UK itself. Few corporates will invest fresh and expand in UK, until it reaches fresh trade agreement and the overall environment of uncertainty clears. All eyes will be on the forthcoming Italy referendum in the coming days. ECB & other central banks may not have any "real bazooka" for this probable contagion effect of  "Real Brexit".

Yesterday, there was another serious attack on the Indian BSF post in J&K (Baramulla) by Pak sponsored terrorists in a series of such recent attempts and several cease fire violations. The fact that Pak Army/Govt has denied officially India's "surgical operations" on the POK terror hubs, it may be an indication that Pak Army will not prefer an "official retaliation" (direct war) for the time being.; instead it may take the path of terrorist attacks more vigorously in the days ahead. As par some reports, they are activating its sleeper terrorist cells at various locations of India and may be planning some targeted attacks in the festive times of India (Oct). 

Another point is that, to be very decisive, India may need to destroy the whole "terror machines" in POK and for that one "surgical strike" may not be enough. India need to take control of the POK and has to destroy all the "terror hubs" systematically (like US did in Afghanistan/Laden after 9/11 attack). But, under the present geo-political scenario and considering the lack of hi-tech warfare by India (unlike US), it may not be possible in the foreseeable future.

So Pak sponsored terror hubs may continue their hilarious attacks at time & place in India of their chosen in response to the "surgical strike" and that may be some of the bigger headwinds for our market and confidence of FPIS. 

All eyes will be on the RBI/MPC policy announcement tomorrow. Although, there are strong market talks about 0.25% "Diwali Gift" (rate cut) this time, RBI may also be on hold with a "dovish/owlish" outlook simply because of divergence between the Aug CPI & WPI. 

RBI may prefer to watch more evidences on the ground about actual inflation trajectory in the Oct-Nov and depending upon that, may cut by 0.25% in Dec'16. 

Also, RBI may prefer to give more focus on existing rate cut transmissions by the banks & effective resolutions of the overall NPA/NPL situations of the Indian Banking system, specially for the PSBS. Any disappointment by the RBI tomorrow may trigger some volatility, specially for the rate sensitive stocks.

SGX-NF

Nifty Closed Almost Flat Supported By Short Covering Amid Lingering Concern About Indo-Pak Geo-Political Tension And Tepid Global Cues On EU/DB Banking Jitters

Nifty Fut (Oct) today closed around 8650 (+0.14%) after a very range bound trading most of the day; It made a session low of 8593 and high of 8669. 

With this, Nifty closed the eventful week led by Indian “Surgical Attack” on POK terror hubs by almost 2.55% lower and gave 1-st weekly lower closure since Aug last week.

Looking ahead for Monday (03/10/2016), technically NF need to sustain above 8675 zone for further rally up to 8705/25-8755/85*-8815/75 zone in the immediate to short term.

On the other side, sustaining below 8625 area, NF may fall towards 8560/30*-8470/40-8380/50 in the immediate to short term.

Today Indian market opened gap down by almost 50 points following overnight fall in US market triggered mainly by concerns of the Deutsche Bank (DB) despite some rally in oil. 

As par market talks, DB is in serious capital problem as some prominent hedge funds/large derivative traders are withdrawing cash from it and investors are also fast loosing faith. But its not only DB, there are some other big banks in the docket like Credit Suisse & Barclays for the US-DOJ fine issues. 

Although both German Govt & the DB management are denying any official talks of bail outs, its hard to believe that DB, being the 4-th largest bank globally,  will be allowed to fall as it poses a systematic risk not only for Germany/EU, but also globally. 

In the meanwhile, DB is perusing various legal options & discussions for this lingering US-DOJ issues and US-DOJ may eventually agree for smaller fines for all these banks as a package considering the vital implications (both political & economical), but investors in the meanwhile seems to be not taking any risk at such “Lehman Moment” and abandoning the DB. 

Also, there were some concerns about Saudi Arabia's financial health and proposed 9/11 incident sues by the US citizens; SWF may sell huge amount of US TSY, if this proposal goes on.

There were also some concerns about falling real estate prices in China, specially in smaller cities, where supply is much more than actual demand.

Amid these tepid global cues, Indian market has its own concern for the ongoing Indo-Pak geo-political tension. 

After the “Surgical Attack”, it seems that it will be only “war of words” keeping in view both the country’s domestic compulsion and pressure of audience. All may depend upon the Pak’s Govt/Army's actual response in the days ahead as India already described it as “one & off”. 

But, there were still some concerns among the market participants, as Indian Govt is taking some pre-cautionary measures by emptying the Punjab border area with Pak and there are some increasing  border firing incidents (cease fire violations) in the last two days.

Apart from the global concerns and geo-political tension, sentiment of the Indian market was supported by the FM’s comments that Govt is on the right schedule to roll out the GST by April’17.

Indian market will now focus on the RBI meet (MPC), which will start from 3-rd Oct and RBI may publish the policy/rate decision/comments at 14:30 in its website (like Fed of US). It’s not clear that the new RBI Gov will address the press or attend the customary Q&A session after the RBI policy or not. 

Going by various analysts, now almost 50% is expecting a 0.25% rate cut by RBI this time. Any disappointment in this regard, may also dampen the sentiment of the market/rate sensitive stocks by some extent as well.

Today Nifty was supported by Oil & Gas (ahead of gas price decision by the Govt), PSBS (ahead of RBI rate decision); but some selling pressure were seen in FMCG & HDFC twins, which capped the upside of the overall market. 

Broadly, midcaps over-performed well as usual.

Cipla today fall significantly amid concern of US-FDA inspection reports. Some buying interest was there in the liquor stocks, after Patna HC gave a stay on the Bihar’s anti-liquor law.

Overall, if there is no fresh geo-political tension (Indo-Pak) over the weekend and EU banking jitters,  Nifty may see some more short covering/value buying. Globally, all eyes will be on the Yuan’s (China) inclusion in the SDR also on 1-st Oct.

Technically, watch NF level of 8540-8675 for any decisive movement of the market. 

Update:  Overnight US market rallied nearly by 1% on the unconfirmed rumour that DB may have to pay only $5.4 bln as fine to the US-DOJ instead of earlier figure of $14bln. Market was expecting a figure of between $7-10 bln after negotiation ans subsequently DB rallied by around 14% from its life time low.

After this DB & other EU banking issues, global market may focus on the NFP data next week and ongoing US political battle, in order to assess Fed's probability of a Dec rate hike.

Oil was also under some selling pressure after 7% rally in the last two days because of unexpected OPEC deal in production cut. But, some sections of the market are also very skeptical about effectiveness of the OPEC agreement after Nov'16. 

Domestically, India's fiscal deficit touched almost 76.4% of the FY-17 BE in the April-Aug periods, which may raise some concern (YOY:66.5%). All eyes will be on the Q2FY17 tax collection figure and the ongoing telecom spectrum auction. 

Last minute rush yesterday for the Income Declaration Scheme (IDS) has put the amount to around Rs.65000 cr, which help the Govt to boost its tax coffers. 

But, increasing amount of defense expenditure by India and geo-political tensions with Pak & China may be some of the concerns for fiscal deficit, going ahead. As par some reports, India may be now the biggest customer for defence related procurement ( arms & ammunition).

As par reports, till last week, telecos furnished a bank guarantee of around Rs.15000 cr, which is far below the Govt's BE of around Rs.1 lac cr. The burgeoning fiscal deficit may force the Indian Govt to cut infra capex in H2FY17 and may delay any immediate requirements of PSBS capital infusion requirements. One of the main reason behind the higher fiscal deficit may be 7-CPC pay outs with one time arrears and that may be viewed as "one time exceptional" by the market.

India yesterday reported a core sector output growth of 3.2% (Aug) against revised figure of 3% in July'16. The Aug growth was supported by surge in production of steel, fertilizers, cement, refinery products and partly by electricity. It was dragged by coal, crude oil and natural gas. Because of the old series, this core sector out put data may have little impact on the market, but it may give RBI some room to be on hold in Oct as well.

Unless, there is visible improvement in capacity utilization because of revival of consumer demand in an incremental way, India's problem of "twin balance sheet issues" may be unresolved in the days ahead. India's present capacity utilization may be now around 75% and unless dynamics of demand & supply matched, it may give some headwinds in the months ahead.

India yesterday cut in domestic Natural Gas price from $3.06 to $2.5/mmbtu in line with the average international price.The move may be slightly negative for scrips like ONGC, OIL. RIL and positive for IGL, GAIL. 

 SGX-NIFTY