Wednesday 6 December 2017

Nifty Set To Trade In Red On Muted Global Cues Ahead Of RBI



Market Mantra: 06/12/2017 (09:00)

SGX-NF: 10110 (-36)

For the Day: updated: 12:50

For 06/12/2017: Dec-Fut

Key support for NF: 10090-10050/10010

Key resistance for NF: 10185-10210/10245

Key support for BNF: 25100-24950/24700

Key resistance for BNF: 25300-25450/25700

Trading Idea (Positional):

Technically, Nifty Fut-Dec (NF) has to sustain over 10210 area for further rally towards 10245-10285 & 10340-10385 zone in the short term (under bullish case scenario). 

On the flip side, sustaining below 10185 area, NF may fall towards 10090-10070/10050 & 10010-9970 zone in the short term (under bear case scenario).

Technically, Bank Nifty-Fut (BNF) has to sustain over 25300 area for further rally towards 25450-25700 & 25875-26050 zone in the near term (under bullish case scenario).

On the flip side, sustaining below 25250 area, BNF may fall towards 25100-24950 & 24700-24600/24400 area in the near term (under bear case scenario).

As par early SGX indication, Nifty Fut (Dec) may open around 10110, gap down by almost 36 points mirroring muted Global/Asian cues amid slide in techs & commodities (Copper) on concern of US corp tax cut structure, AMT and China slowdown (higher Copper inventories). Samsung plunged by almost 28% on plan of rights issue to raise further funds and muted guidance for 2018.

Most of the major Asia-Pacific markets plunge in deep to moderate red today on techs & commodity sell off coupled with lower USD and concern that PBOC may hike in the days ahead to continue its war against excessive leveraging. Market is also concerned about increasing China regulatory action against small caps manipulation like bonus share pay outs.

Market may be also worried about net neutral liquidity injection by PBOC for the last few days despite stock & bond market routs which is very “unusual”; but China bond yields now also fell below 4% and trading around 3.90%, providing some respites.

USDJPY is now trading around 112.13, plunged by almost 0.43% on concern of US corp tax cut structure and overall effect of the tax reform on US economy; bond yield curve flattening (concern of slower growth amid Fed tightening), US Govt shut down drama, some dovish comments by Fed’s Evans questioning hurriedness of Fed rate hikes, ongoing investigation by Muller on Trump’s alleged Russian links and renewed fear of NK situations amid a heavy war drill in the Korean peninsula by US-SK joint military forces.

As par reports, NK is now ready to negotiate with US, provided Russia remains a guarantor of the agreement or its safety from any US aggression and NK is also ready to abandon any Nuke/ICBM test for two months, if US stops its war drill in the Korean peninsula.

But it seems now that Trump is less interested to negotiate with NK at this moment as Kim is a great source of support for USD devaluation & military exports for the US. But, Russia has also expressed great concern for any unavoidable war escalation in the Korean peninsula.

A lower USD is not good for export savvy Asian as well as EU market, although it may be good for US market.

Overnight, US market slumped from earlier gains on bread base selling in techs, utilities, telecoms, industrials (unfavorable tax treatment & application of AMT), home builders (muted earnings by Toll Brothers).

DJ-30 sinks by 0.45%; S&P-500 slumped by almost 0.40% and closed around 2630, while NQ-100 reversed earlier gains of 0.6% and edged down by almost 0.20% on renewed selling in FANG/tech stocks; but Mastercard, Regal Entertainment helped on stock buyback & deleveraging news, while Amazon was also green on optimism about AU launch.

US index future (SPX-500) is now trading around 2623, edged down by almost 0.18% on muted Asian cues ahead of EU market opening. Technically, now sustaining below 2620 zone, expect more corrections towards 2605-2595 area; for any recovery, it has to sustain above 2635 zone.

EU market is also signaling a gap down opening of around 0.60% in DAX-30 on tech sell off, higher EUR, German political squabbling and pain in commodities (metals & oil are down). FTSE-100 is also poised to open lower around 0.5% despite lower GBP; market may be more concerned about ultimate fate of Brexit & UK Govt as Irish wall debate & special status heats up, prompting similar demands from other potential autonomous areas such as Scotland & London city.

Back to home, Indian market (Nifty Fut/India-50) is now trading around 10090, slumped by almost 0.55% tracking subdued Global/Asian cues coupled with concern about GJ election outcome & RBI stance today; it has so far made a session low of 10067, testing the vital support zone of 10050 ahead of RBI today.

As par reports, LIC will go slow for the rest of FY-18 in stock market for various reasons. Govt may be also planning to reform the Indian direct tax system (deregulation & simpler tax structure) in line with US peer; Govt is committed to bring down Indian corp tax to 25% (with limited tax deductions) from earlier level of 30% (with various tax deductions) by March’19 and then further to 20-18% gradually subjected to satisfactory GST collections.

Although, simpler corp tax structure with lower effective rate is great news for Indian corporates/MSMES, it’s not good for the country’s fiscal math; thus market may be also worried. But these are all budget wish lists by different industry groups and Govt is not committed to implement it either. But, as US is reducing its corp tax rate, we may see similar competitive cut in corp tax not only in India, but also across the globe (like competitive currency devaluation to promote exports).

All eyes now will be on RBI policy stance, statement and Q&A; if it’s a “hawkish hold”, then expect some more pain in the market till 10010-9970 zone; otherwise expect some relief rally till 10250-10300 in the coming days.



SGX-NF


SPX-500

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