Market Mantra: 02/08/2017 (09:00)
SGX-NF: 10070 (-9)
For the Day:
Key support for NF: 10030-9990/9945
Key resistance for NF: 10100/10155-10205
Key support for BNF: 24940-24740
Key resistance for BNF: 25275-25485
Hints for positional trading: Strategy-SELL ON RISE
Time & Price action suggests that, NF has to sustain over
10205 area for further rally towards 10275-10325 & 10380-10455 in the short
term (under bullish case scenario).
On the flip side, sustaining below 10185-10155 area, NF may fall
towards 10100/10030-9990 & 9945-9895 area in the short term (under bear
case scenario).
Similarly, BNF has to sustain over 25275 area for further rally
towards 25485 -25695 & 25865-26030 area in the near term (under bullish
case scenario).
On the flip side, sustaining below 25225-25150 area, BNF may
fall towards 24990/940-24740 & 24625-24350 area in the near term (under
bear case scenario).
As par early SGX indication, Nifty-Fut
(Aug) may open around 10070, almost flat tracking subdued global cues and a
neutral RBI. Overnight US market closed almost flat; although DJ-30 closed at
another record high above the 22k milestone at around 22016 (+0.24%), primarily
on strength of upbeat earnings & guidance from Apple; despite so much US
political uncertainty and poor visibility of Trumponomics, US market is not
showing any signs of fatigue, may be because of upbeat earnings & some
weakness of USD.
In Q2, almost 72% of US corporates have
reported better than estimated earnings, while overall US economic data may be
quite soft. Thus a weak USD may be definitely helping export/overseas earnings
of the US corporates; since Nov’16 (Trumpism), from the panic low of 17400,
DJ-30 yesterday scaled the Mt’ Everest peak of 22039, thus registered a growth
of almost 26.7% in 9 months, while USDX (dollar index) has fallen from around
103 to 92 YTD; i.e. almost 10.7% in 6 months, since Trump took charge the Oval
office.
This USD devaluation by Trump’s talk
down effort coupled with Fed’s dilemma & recent dovish stance regarding the
subdued US inflation issue may be Prez Trump’s achievement, which has helped
the US corporate profits quite a lot. Trump himself tweeted day before yesterday
about this great achievement of Dow from 18k to 22k under his regime and also
lamented that the US main stream media does not acknowledge that; instead they
are busy with his alleged Russian links.
EU markets also closed in red after
reversal from early gain yesterday due to late strength in EUR and some soft
earnings from banking majors, such as Soc Gen, Stanc apart from stress in
commodities related companies due to plunge in oil & slide in iron
ore/metals.
In the morning, most of the Asian
markets were in pressure after tech shares slide in the South Korean markets as
valuations may be now looking extremely stretched after Dow hits the 22k
milestone. Also subdued China Service PMI data today may have affected the
Asian market sentiment as it’s indicating cost cutting measures & job cuts
by the manufacturers.
Back to home, Indian market may also
focus on the Service PMI today after terrible July Mfg PMI due to GST
disruptions; June service PMI was at 53.1.
Market may continue digest implications
of yesterday’s RBI policy; but one thing may be very clear that banks has to
transmit more in the form of base lending rate (BLR) irrespective of their past
MCLR/PLR and RBI cuts for the last two years or so; now RBI repo rate at 6%,
banks may have to adjust their BLR around 8% minimum and should provide 100%
secured loan such as HBL or even car loan at this rate and business loan below
9%.
Till now, Indian banks are enjoying
perhaps the highest NIM in G-20 economies as over the last several years they
have not transmitted the full benefit of RBI repo cut or their lower cost of
funds; RBI was also a mute spectator on the earlier years considering their B/S
stress due to the issue of NPA/NPL; but now the situation may be changing first
and banks have to transmit more, which may affect their high NIM and eventually,
they may be rerated.
Another point may be that the present
CPI series is of 2011-12 and the lower CPI of 1.54% may be primarily for the
favourable base effect; as par RBI, in the old series, the same may be around
4% for June; thus looking ahead, if both growth/GDP & inflation accelerates
in the months ahead, then RBI will not cut rates further; but if both decelerates
then RBI may consider another rate cut. RBI is very much optimistic on both
inflation & growth in the days ahead, being convergent in nature without
any statistical jugglery.
Meanwhile, Indian Service PMI for July
flashed as terrible at 45.9 vs 53.1 in June (lowest since Sep’2013) and
composite PMI came at 46 against 52.7 in June (lowest since Dec’2009); this
data may further aggravate the debate of DeMo & GST disruptions in the
economy, which a RBI cut simply can’t resolve as it may be structural in nature.
SGX-NF
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