Thursday 17 August 2017

Nifty May Open Almost Unchanged Tracking Muted Global Cues & Weak USD Amid Trump’s Ongoing Political Jitters & A Dovish FOMC Minutes; Indian Market May Focus On RBI/Govt’s Farm Loan Sops & A Hawkish RBI Minutes Coupled With Muted Q1FY18 Earnings



Market Mantra: 17/08/2017 (09:00)

SGX-NF: 9915 (+8)

For the Day: 

Key support for NF: 9900/9860-9825

Key resistance for NF: 9930-9980

Key support for BNF: 24475-24375

Key resistance for BNF: 24600-24725

Hints for positional trading:

Time & Price action suggests that, NF has to sustain over 9930 area for further rally towards 9980-10030 & 10095/10115-10160 area in the short term (under bullish case scenario).

On the flip side, sustaining below 9900 area, NF may fall towards 9860-9825 & 9775/9760-9705 area in the short term (under bear case scenario).

Similarly, BNF has to sustain over 24525 area for further rally towards 24600-24725 & 24900-25025 area in the near term (under bullish case scenario).

On the flip side, sustaining below 24475 area, BNF may fall towards 24375-24275 & 24090-23950/23850 area in the near term (under bear case scenario).

As par early SGX indication, Nifty Fut (Aug) may open around 9915, almost flat (+8) tracking muted global cues after Trump dissolves all his business advisory council in an epic turn of US politics & the tragic VG incident following resignation of all the leading members (prominent business heads & CEO) amid an environment of intolerance, racism & violence and Trump’s stance on the whole VG affairs.

This may be a huge blow to Trump & his narratives of Trumponomics as these business councils were one of his strength despite daily political drama. These councils were formed with much fanfare after Trump took charge of the oval office to guide the administration in areas of trade, tax reforms, deregulations, investments in US to help US employment etc to “make America great again”.

Thus, this disbanding of Trump’s strategy & policy council may be a serious blow to his presidency and eventually, he may resign coupled with rising pressure on his alleged Russian links investigation. Although, a resignation or an impeachment of Trump may be a temporary black swan event for the marker (risk assets), it may be positive in the long term as an element of daily political entertainment & uncertainty may be removed in his resignation from WH.

Also, yesterday’s FOMC minutes may be termed as dovish as several members are concerned over lower trajectory of US inflation for not only short/midterm, but also for longer term (2 yrs), which is a surprise as Fed thinks the current subdued inflation is transitory & also idiosyncratic.

Fed has also concerned over rising asset (stock) prices as it has eased financial conditions despite multiple rate hikes by 3 times in the last 6 months. But, FOMC minutes yesterday also virtually confirmed a gradual BS tapering in the “upcoming” policy meets, most probably from either Sep or Dec’17, starting with no reinvestments of the matured bond amount principle and then gradually selling un-matured bonds in the market.

Thus, Fed may not take the risk of dual QT (both rate hikes & BS tapering) in Dec’17 and will go for gradual QE/BS tapering first, which may be also equivalent to a rate hike for the US economy as bond yields will surge on the back of greater US TSY bond supplies and if everything from economics (inflation, GDP, employment/wage growth etc) to politics (Trump & Co) are fine, then Fed may go for further 3 rate hikes in 2018 starting from March (Q1).

All these US economics & politics has made the USD lower despite some hawkish effort from Fed’s Mester later in the day arguing for another 2017 rate hike inspite of lower inflation and ECB’s dialing back of Draghi’s QE signal talk at the Jackson Hole Symposium next week.

A lower USD may be now bad for global markets, most of which are dependent on exports, but it may be also good for US market & economy. Thus, despite so much US political headwinds, US market (DJ-30) yesterday closed almost flat around 22024 (+0.12%); SPX-500 is now trading AROUND 2465, almost flat (-0.05%) on weaker USD ahead of ECB minutes today.

Back to home, Indian market may today focus on RBI/Govt sops for some categories of farm loan (discounts in interest rate), which may be positive for PSBS and also some selected private banks having relevant farm loan portfolio.

But, muted Q1FY18 Nifty earnings, down by almost 8.5% (YOY) due to adverse report cards from PSBS, Pharma, IT for various reasons including a common Pre-GST disruption may be highly disappointed as Nifty EPS continue to be under the 400 mark for several years despite so called green shoots.

Also, a hawkish RBI minutes released yesterday may have dashed the hope of any further rate cuts by RBI in 2017 and coupled with that, US political risk, Trump’s NK narratives to divert attention from his political drama, ongoing border tensions with China-India and an eventual Fed/ECB QT from 2018 may be some of the headwinds for the Indian market despite power of domestic liquidity, which may be also in question amid Govt’s war on black money, eyeing for the 2019 general election.

A higher EUR may not be also good for EU as well Indian market later in the day today.



SGX-NF

No comments:

Post a Comment