[www.niftyviews.com:26493] Nifty Scaled Another Record High As Bulls On Rampage Tracking Positive Global Cues Amid Dovish Fed, Upbeat China Trade Data & Hopes Of Aug Rate Cut

[Asis Ghosh]

*Indian Market Wrap*: 13/07/2017 (17:00)

NSE-NF (July): 9885 (+63; +0.64%) (TTM PE: 25.04; Near 2 SD of 25; Avg 
PE: 18; TTM EPS: 395; NS: 9892)


NSE-BNF (July): 23866 (+145; +0.61%) (TTM PE: 30.05; Near 3 SD of 30; 
Avg PE: 20 TTM EPS: 795; BNS: 23889)


For 14/07/2017:

*Key support for NF: 9855-9790*

*Key resistance for NF: 9930-9975*

*Key support for BNF: 23900-23750*

*Key resistance for BNF: 24000-24115*

*Time & Price action suggests that, NF has to sustain over 9930 area for 
further rally towards 9975-10050 & 10100-10195 in the short term (under 
bullish case scenario).*


*On the flip side, sustaining below 9910 area, NF may fall towards 
9855-9790 & 9715-9670 area in the short term (under bear case scenario).*


*Similarly, BNF has to sustain over 24000 area for further rally towards 
24115-24250 & 24250-24450 area in the near term (under bullish case 
scenario).*


*On the flip side, sustaining below 23950-23900 area, BNF may fall 
towards 23750-23650 & 23450-23300 area in the near term (under bear case 
scenario).*


Nifty Fut (July)/India-50 today closed around 9885, almost 0.64% up 
after making an opening session low of 9857 and late day high of 9893 
and thus it closed at a record closing high for the fourth consecutive 
session on the back of forced short coverings in P-Notes FNO coupled 
with hopes of a RBI rate cut, Q1 earning optimism, good monsoon, smooth 
roll out of GST so far and an apparent dovish Fed coupled with strong 
DII inflows; really bulls are on the rampage.


Indian market today opened aroundaround 9872, almost 43 points gap up 
tracking upbeat global cues. Almost all the Asian markets were in deep 
to moderate green around 2 years high cheering a “Dovish Fed”, 
advocating for a gradual pace of future rate hikes amid concern of soft 
US inflation; overall global cues are upbeat as investors celebrate a 
dovish or rather than a less hawkish Fed (Yellen) and subsequent fall in 
global bond yields.


Overnight US market (DJ-30/US-30) rallied by almost 0.57% on Midas touch 
of Yellen as it appears a goldilocks situation for equity in the 
backdrop of a higher US growth & lower rates!!


Although, Yellen may be sounded less hawkish in her testimony yesterday, 
on closer scrutiny she has said nothing new, which market does not know 
already except some dovish outlook on the US inflation; i.e. Yellen 
suddenly appeared as an “inflation dove” contrary to her earlier stance 
as an “inflation hawk/owl” terming the subdued US CPI as pure transitory 
and lower prescription drug & mobile plan charges are primarily 
responsible for the tepid US inflation.


As par Yellen, the above two line items may be replaced in calculating 
US CPI basket in the next revision and after that there should be a fair 
assessment of US inflation. Overall, it seems that Fed is going for 
gradual QE tapering from Sep’17 onwards for its holding of nearly $3.5 
tln QE bonds out of total B/S size of $4.5 tln and depending upon the 
outcome of it on the overall US economy & market in next 6-12 months, 
Fed may either increase or decrease the pace of QE tapering and by 2022, 
it may complete the overall B/S normalization process.


Regarding further rate hikes in 2017, Fed may closely follow the 
trajectory of US inflation and if it’s satisfactory, Fed may go for 
another hike in Dec’17 or otherwise it may defer it to 2018; in that 
sense, tomorrow’s US CPI may be vital to assess Fed’s QT path going ahead.


Previously, Fed was supposed to hike US rate to around 3% by 2019 
assuming US CPI will hit 2% by then leaving the US RRI (real rate of 
interest) around 1%. Now it seems that Fed is going to change that 
perception as it may be difficult for US CPI to sustain consistently 
above 2% in the days ahead. But, QE unwinding itself may pose major 
threat to the risk-on trade in the days ahead.


Indian market may now focus on RBI rate cut after yesterday’s lower CPI 
for June @1.54%; but that may be more of a favourable base effect and 
sudden fall in food inflation and may also be at the lower end of the 
CPI trajectory and may again shoot up in the months ahead because of GST 
implementation & 7-CPC HRA (arrears); core CPI came at 3.8% which was 
previously hovering around 4.5-5% and was quite sticky as par RBI.


Again, considering the overall stance of global central Banks looking 
for QT and domestic factor of limited transmissions & higher small 
savings interest rates & India’s attraction of higher bond yields, RBI 
may not oblige to cut in Aug or at best it may be an one off cut for 
2017 (hawkish cut) unless other parameters are resolved.


In India, RRI is historically very high and it may be also due to the 
factor of high small savings rate, which can’t be cut drastically as it 
involves public mood (politics) and the nation lacks basic social 
security system as in the developed country. But legacy of exorbitant 
RRI may be also responsible for today’s Banking NPA mess.


India is at the opposi

[www.niftyviews.com:26495] Nifty May Open In Green Tracking Mixed Global Cues; All Eyes May Be Now OnThe 10K; But Subdued Earnings, QT By Global Central Banks & Growing US Political Jitters May Also S

[Asis Ghosh]

Market Mantra: 14/07/2017 (08:30)

SGX-NF: 9910 (+25 points)

For the Day:

*Key support for NF: 9875/9855-9790*

*Key resistance for NF: 9930-9975*

*Key support for BNF: 23900-23750*

*Key resistance for BNF: 24000-24115*


*Time & Price action suggests that, NF has to sustain over 9930 area for 
further rally towards 9975-10050 & 10100-10195 in the short term (under 
bullish case scenario).*


*On the flip side, sustaining below 9910 area, NF may fall towards 
9855-9790 & 9715-9670 area in the short term (under bear case scenario).*


*Similarly, BNF has to sustain over 24000 area for further rally towards 
24115-24250 & 24250-24450 area in the near term (under bullish case 
scenario).*


*On the flip side, sustaining below 23950-23900 area, BNF may fall 
towards 23750-23650 & 23450-23300 area in the near term (under bear case 
scenario).*


As par early SGX indication, Nifty Fut (July) may open around 9910, 
almost 25 points up following mixed global cues. Overnight US market 
(DJ-30) also closed almost flat (+0.10%) amid mixed PPI data and QT & 
valuation concern by Fed & ECB.; but supported by Banks & Financials 
ahead of key earnings today.


As par reports, Draghi may appear in the Aug Jackson Hall meet and 
signal the QE tapering of ECB IN 2018; thus it may be a co-ordinated QT 
move by Fed & ECB and subsequently all the other major G-10 central 
Banks including BOJ & BOE may also join; BOC has already hiked by 0.25% 
day before yesterday after 2010 and may further hikes in 2017-18.


Also, as par some reports, BOJ may downgrade its inflation target in its 
forthcoming meet on 20^th July and thus it may also be preparing for an 
eventual QT just to follow Fed to keep the parity between JPY & USD at 
present ideal level.


US market yesterday also came under some stress after Yellen sounded 
less dovish in her 2^nd day of testimony and another influential Fed 
member (Brainard) commented about stretched valuation of US equity 
assets. All eyes now may be on the US CPI report today after mixed PPI 
report yesterday as subdued inflation may be the prime concern for Fed 
now to hike further in 2017; although it may start the QE tapering from 
Sep’17 itself.


Back to home, although Indian market is now eyeing for the 10k Mt’ 
Everest, valuations may be already very stretched and the Q1FY18 
earnings may not help too much this time also. There are various 
disturbing signs that Indian/Global bull market cycle may be at its peak 
and going forward subdued earnings, QT chorus by global central banks 
and growing US political jitters (high probability of a Trump 
impeachment) & poor visibility of Trumponomics might be some of the 
triggers.





 SGX-NF

--
Thanks & Regards,

Asis Ghosh

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