Technical & Macro Analysis Of Indian & Global Market----: Nifty Surged To Another Record Milestone High On Global “Goldilocks Rally” And Upbeat Indian Macro, IMF Growth Booster & Stable Earnings (So Far)

Market Wrap: 16/10/2017 (17:00)

NSE-NF (Oct):10255 (+63; +0.61%)

(TTM PE: 26.57; Abv 2-SD of 25; TTM Q1FY18 EPS: 385; NS: 10231; Avg PE: 20; Proj FY-18 EPS: 418; Proj Fair Value: 8360)

NSE-BNF (Sep):24757 (+25; +0.10%)

(TTM PE: 28.13; Abv 2-SD of 25; TTM Q1FY18 EPS: 878; BNS: 24703; Avg PE: 20; Proj FY-18 EPS: 961; Proj Fair Value: 19220)

For 17/10/2017:

Key support for NF: 10190-10150

Key resistance for NF: 10275-10325

Key support for BNF: 24500-24300

Key resistance for BNF: 24875-24950/25050

Hints for positional trading:

Technicals indicate that, NF has to sustain over 10325 area for further rally towards 10380 -10455 & 10495-10585 area in the short term (under bullish case scenario).

On the flip side, sustaining below 10305-10275 area, NF may fall towards 10190-10150 & 10060 -10015 area in the short term (under bear case scenario).

Similarly, BNF has to sustain over 25050 area for further rally towards 25250-25585 & 25795-25975 area in the near term (under bullish case scenario).

On the flip side, sustaining below 25000-24950 area, BNF may fall towards 24875-24500 & 24300-24000 area in the near term (under bear case scenario).

Indian market (Nifty Fut/India-50) today closed around 10255, surged by almost 63 points (+0.61%) after making a mid day low of 10197 and opening session high of 10261 in another day of milestone high.

Indian market today opened in positive tone amid upbeat global cues and macro data, stable earnings in Q2 so far coupled with IMF (Lagarde) booster for India’s GDP after terrible official projection few days ago following FM’s US/IMF visit. The market has undergone some mild selling just before WPI data on concern of higher number, coupled with stretched valuation, but later recovered on stable/lower WPI and some strength in EU market as EUR goes down on Catalan tensions.

Also, there was some political concern after thumping win by INC in a Punjab by-poll seat and by SP in a prestigious UP college/university election; all these seats were a known stronghold of BJP. Although, there is nothing serious in NAMO’s bid for the 2019 general election, it may be also an indication that there will be some contest at least between BJP & INC/Oppositions in the forthcoming elections amid DeMo & GST disruptions coupled with muted economic growth & huge un/under employment problem of India.

Thus, forthcoming Gujarat state election may be an acid test for the Govt for DeMo, GST & overall economic slowdown; Govt may also intensify its “war against black money” in the coming days to prove that DeMo & GST are actually intended for “black money holders” and such “surgical strike” is for the interest of the common people.

Indian market may be also boosted today by a weekend comment of IMF Chief (Lagarde) that the Indian economy is now on “very solid track” in the mid & long term despite “a little bit of short term slowdown due to “monumental structural reforms of DeMo & GST”. Also, upbeat commentary by FM for the Indian economy, GDP on his US/IMF trips and power of domestic liquidity may be helping the overall Indian market sentiment right now in the “Diwali Week” despite stretched valuation.

Recent spate of upbeat macro data (PMI/CPI/IIP/Trade-Export/Import) is also supporting the overall Indian market sentiment; India’s exports for Sep, surged by almost 25.7%., fastest in the last six months to $28.60 bln, shrugging off the GST disruptions narratives and helped to the cut the trade deficit to $8.90 bln at seven months low, data showed on Friday evening.

Meanwhile, Indian WPI for Sep, flashed as 2.60% vs estimate of 3.41%; prior: 3.24%; it’s also positive for the market as a higher WPI is negative for Indian GDP, being a deflator (which may be also one of the primary reasons behind recent fall in GDP growth as favourable base effect wanes).

Q2FY18 earnings are mixed & stable so far including RIL (inline/slightly below expected earnings from core petchem operations, but better than expected EBITDA from R-JIO largely due to onetime accounting adjustments/new accounting policies).; RIL today rallied by 1.7% on opening trade but later succumbed to profit booking (selling) & closed 0.17% lower, dragging the overall market.

Today, Nifty was supported by VEDL, Tata Motors, Bharti Infratel, Bharti Airtel, HUL, M&M, Bosch, ICICI Bank, Infy & TCS by around 55 points altogether, while it was dragged by Bajaj Fin, Indusind Bank, Axis Bank, HDFC, IOC by around 17 points cumulatively.

Overall, Indian market was today supported by telecoms (hopes for further consolidation & deleveraging after Bharti Airtel & Tata Tele and buzz of ITC rationalization), selected auto (festive season sale & e-car optimism), metals (upbeat China data & production curb there), FMCG, pharma, property developers/reality while it was dragged by selected Private Banks, PSBS (SBI/BOB).

Bharti Airtel jumped by over 5% on top of yesterday’s rally of 8% (M&A with Tata Tele) on another reports that Airtel & Tata may consolidate (merge) their DTH business. There was also news that Airtel has formed a JV with Millicom S.A in Ghana for telecom operations.

Axis bank was down by around 2% on concern of muted report card (higher stressed assets) to be released tomorrow. Indusind Bank was down by around 2% on equity dilution concern after merger announcements with Bharat Financial (+1.6%) as expected on Saturday. Bajaj Fin lost around 3.6% on muted report card, while Federal bank surged by almost 7% amid better than expected report card, although still has significance increase in NPA.

Nifty “Diwali Target” May Be 10495-10585 On Consecutive Closing Abv 10195 (If NK Does Not Test Another ICBM!!):

Looking at the chart, Nifty Fut-Oct may be under EW-C now and the extended target of the same may be around 10500 by “Diwali”/next few trading days under normal circumstances, if NK does not test any ICBM in the meantime; 10195 is now a vital support.

Morning Recap:

Globally, almost all the major Asia-Pacific stock markets except China are in moderate to deep green today and scaled another mile stone highs tracking positive global/US cues, clear Abe win optimism in the forthcoming JP election, an upbeat China PPI data and improved macro data coupled with earnings & growth optimism.

Overnight on Friday weekend, US market edged up on lower USD, helpful for US stocks after another subdued US inflation for Sep coupled with upbeat consumer confidence, retail sales and Q3 earnings optimism. This is like a goldilocks types of situation for US stock market with an environment of decent GDP growth, lower interest rate, modest real wage growth with no runaway inflation. But most of the recent US economic data including NFP, PPI, CPI, and retail sales are all skewed for the dual US hurricane and thus may not be conclusive.

DJ-30 edged up by almost 0.13%, S&P-500 closed almost flat at 2553 (+0.09%), while NQ-100 was up by 0.22%. Overall US market was helped by telecoms, energies (higher oil on Chinese import data) techs (earnings optimism) while dragged by banks on mixed earnings and fall in US bond yields & subdued guidance.

Health care stocks were also weak on Obamacare/Trumpcare duet/disruptions (proposal to withdraw insurance subsidies for low-income Americans in the Obamacare/ACA by Trump, although it may not be passed at all by the US congress!!).

Overall, US market mood was cautious due to increasing geo-political tensions out of Iran nuke deal, weekend suspense of NK missile tests & “earthquakes” and ongoing Q3 earning season. US stock future (SPX-500) is now trading around 2553, almost unchanged, before the EU market opening.

USDJPY was down on subdued US CPI coupled with ongoing NK tensions. But it recovered slightly and is now trading around 111.94 after Yellen’s comments about transitory nature of US & global inflation and US Foreign Sec’s comments that US/Trump will peruse diplomacy path with NK, until the first “bomb” drops.

Overall, Yellen sounds less dovish in the IMF speech on Sunday night and basically stressed that despite US inflation “mystery”, which Is the “biggest surprise of 2017”, inflation will eventually pick up on strength of US job market and wage growth. Almost all the other key central bankers has the same opinion about their battle on the muted inflation & growth.

It now seems that Dec’17 rate hike by Fed is almost certain except any terrible geo-political events and is also priced in by the market; but beyond that Fed dot-lots for 2018 is uncertain on US inflation “puzzle”, mixed US economic data, Fed leadership & policy uncertainty after Yellen’s term ends in March’18, poor visibility of Trumponomics and ongoing geo-political issues.

EURUSD is now trading around 1.1793, down by almost 0.25% amid increasing EU geo-political tensions. All eyes may be now on the Catalonian development on their reply of the Spain notice to explain all the “independence” drama; any adverse reply may affect the EU/Global market sentiment, despite it may be seen as “EUR negative”, which is usually stock market positive (export heavy EU index).

So far, some reports suggest that Catalan leader has indicated his willingness for a dialogue with Spanish Govt in the next two months, but still did not confirm about his “independence” bid and the political uncertainty may remains in Spain, at least for the short term, which in turn may also help ECB to announce the QE tapering without worrying for the EUR strength too much as Catalan problem will now act as a “new QE” to help EUR down.

Also, a weekend exit poll suggests that Merkel’s CDU party may be defeated by her political opponent SDP in a regional by-poll election, which may also in tern affect the “Jamaican” coalition Govt prospect/talks of Merkel on the day after tomorrow. But CDU/Merkel is keeping a brave face for their coalition Govt prospect, terming this a regional issue, should not affect the coalition Govt bid on national level.

ECB’s trial balloon that they may reduce the QE bond purchase by 50% to EUR 30 bln from Jan’18 till Sep’18 may be positive for the EUR as it confirms at least gradual QE tapering intention in 2018; no one expects Draghi to stop QE outright; thus gradual removal of accommodative monetary policy is on the expected line, but quantity & time may be still not confirmed; ECB may keep overall QE limit of around EUR 2.5 tln as par some “unnamed ECB source”.

GBPUSD is now trading around 1.3291, almost unchanged on ongoing Brexit squabbling. As par some reports, UK PM Theresa may make an unscheduled visit to Brussels along with Brexit minister Johnson for Brexit talks with EU Chief Negotiator Barnier & Prez Juncker to resume the negotiation, which is practically stalled for several months for various issues ranging from Brexit payments and a two yrs transition period.

As par some earlier reports, EU may Offer UK a two year transition period subjected to the payments of divorce fees, but this payment of huge Brexit bill will also be a hot political issues in UK as it will involve tax payer’s money ultimately, majority of them may be also against the whole “Brexit soap opera”.

Elsewhere, Australian market (ASX-200) closed around 5847, up by almost 0.60%, around nine years high on upbeat China PPI & trade data and rally of metals & oil. AU market was today helped by mining, basic materials, energy and banks & financials.

AUDUSD is almost flat today, now trading around 0.7882 (-0.04%) on upbeat China economic data, upbeat metals & higher US bond yields.

Japan (Nikkei-225) closed around 21256, up by almost 0.47% in another milestone high on election win optimism of Abe, slated to get the 2/3^rd majority in the forthcoming JP snap poll, which may pave the way for the much needed constitutional & structural reform, vital for the JP economy.

JP market was today supported by exporters, banks & finances (higher US bond yields), upbeat corporate earnings energies, and Soft bank merger deal between Sprint & T-Mobile, shrugging off the Kobe steel falsified data scandal. JP IIP data today came as 2% for Aug vs estimate of 2.1%; prior: 2.1%, although slightly below estimate, it’s still good. Kuroda’s tone at IMF yesterday was dovish as usual, fighting for the lost battle against inflation.

China (SSE) closed in negative around 3378, down by almost 0.36% and bucking the overall regional/global trend ahead of party congress despite an upbeat China PPI data flashed today for Sep at 6.9% vs estimate/prior of 6.3%; CPI on MOM also came as 0.5% vs estimate/prior of 0.4%. An upbeat China PPI/factory gate price index is good for the global reflation rhetoric, China being the global manufacturing power house; it also confirms no immediate China slowdown.

But market may be concerned about any abrupt policy & political changes in the China party congress, scheduled to start from 18^th Oct despite upbeat growth forecasts by PBOC yesterday at IMF meet. Also, PBOC has warned about China debt & leveraging.

Today China market was dragged by techs on muted guidance apart from general factors such as PBOC tightening despite higher China banks credit growth, some concern of slowdown in the housing market and forceful, but planned steel/metals production curbs ahead of winter season to make a smog free clear sky (environmental production curb).

Today, PBOC fixed mid-point of USDCNY at 6.5839 vs 6.5866, a little lower with neutral OMO. Overall, China market is continuing to trade in a narrow range for the last few days ahead of the Party congress, in which Prez XI may be amassed with greater power along with other political elites. China security regulator has also warned any “dumping of stocks” during the politically sensitive Party congress.

China may grow modestly in the next six months and all the upbeat growth & economic data may be already priced in, considering the steep rally recently. All eyes may be now on China GDP, to be released on 19^th Oct.

Hong-Kong stock future (HKG-33) is now trading around 28705, at ten years high, rallied by almost 0.80% and driving the overall regional market sentiment amid upbeat China economic data & growth forecast.

Meanwhile, Crude Oil (WTI) is now trading around 52.15, up by almost 1.38% on Iraq-Kurdish conflict news along with Trump’s Iran nuke deal squabbling. Also, upbeat Crude import data from China is helping the “black gold” to some extent coupled with some drops in US oil rigs data on Friday.

European Stocks Almost Flat On Duet Between Madrid & Barcelona (Catalonian Political Uncertainty) & Lower EUR:

EU stocks are trading almost flat in Stoxx-600 (+0.04%) on political uncertainty in Spain-Catalonian duet and a lower EUR, helpful for export savvy EU economy & the market.

All eyes were today on Catalonian reply of the Spain notice to explain their “independence” stance; So far, some reports suggest that the Catalan autonomous Prez has indicated their willingness for a face to face dialogue with Spanish Govt/PM in the next two months, but still did not confirm or deny about their “independence” bid and Spain Govt has rejected the Catalan letter and give them until 19^th Oct to denounce the “independence” bid clearly.

Thus, political uncertainty in Spain/Catalonia may continue as it may be a “double sword” situation there; if Catalonia does not deny their independence referendum & secession bid clearly, then Madrid (Spain) may apply its article-155 of Spanish constitution and regain the control over Barcelona (Catalonia) with arrest of several top Catalan leaders including Prez & the police chief, which may also cause huge unrest/political instability in the region, despite significant support in favour of “unity”.

On the other side, if Catalan Prez dials back the “independence” referendum, the political leadership may be in trouble and the Govt may split causing more political & administration chaos in Catalonia, which contributes significantly to the GDP of the whole country (Spain). But, in this scenario Spain Govt may also impose central rule more easily on Catalonia and bring the overall situation under control.

Thus, these political events at Spain/Catalonia, Germany and also some shift of political landscape in Austria is keeping EUR under pressure today despite less than expected dovish ECB talks, basically upbeat about EU economy prospect despite sluggish wage growth & inflation. A lower EUR is good for export savvy EU market and thus DAX-30 edged up by almost 0.13%, CAC-40 has gained by almost 0.20%, while IBEX-35 slumped by around 0.95%.

Overall EU market is today dragged by Catalonian banks & financials, while helped by basic materials/miners/metals (upbeat China data) and some retailers (supermarkets) stocks; Siemens RE SA plunged by around 7%.

FTSE-100 is almost flat (-0.02%) on dilemma between Soft & Hard Brexit concern and some fall in GBP; earlier it goes higher on news that Theresa may visit Brussels for an unscheduled negotiation along with Johnson. Metals & miners have supported the overall UK market today on upbeat China PPI and other weekend economic data. Utilities & consumer stocks dragged the market today to some extent along with mixed energies.

USDJPY Hovering Below 112 On Fed Uncertainty In 2018 & Korean Tensions Despite A Brave Yellen: