*Market Wrap: 23/12/2016 (17:30)*
*Technically Nifty Fut (Dec @8000) has to sustain over 8075-8165 area
for further rally towards 8210-8315 zone in next week for any year end
“NAV” rally.*
*On the other side, sustaining below 7940-7900 zone, NF may further fall
towards 7840-7645 area in the weak ahead.*
*Looking at the chart, 8200 zone may be now a big technical challenge
for the NF and consecutive closing below that, it may fall towards
7525-7425 area by next few weeks, when volumes (FII) return to the market.*
*Similarly, for BNF (LTP: 17918), consecutive closing below 18000 zone,
it may fall towards 17800-17300 by next few weeks & 16365-15300 area in
the next few months and present down trend may change only consistent
closing above 18750-18850 zone.*
Nifty Fut (Dec) today closed around 8000 (+4 points), almost flat after
a late day high of 8037 and an opening session low of 7953; with today’s
“positive” flat close, Nifty snapped the 7 days losing streak and closed
the week almost 1.80% lower amid consistent selling by FII(s) on the
back of strong USD, perception of “Trumponomics”, year end portfolio
profit booking and ongoing domestic headwinds of economic & political
disruptions as a direct result of demonetization and some renewed
concerns about FPI taxation issues.
Today Indian market opened in a negative note following tepid
global/Asian cues amid overnight mixed US economic data. European market
also was quiet in a holiday thinned trade. There was some positive news
as DB & Credit Suisse has reached an agreement with DOJ for a $7.2 bln &
$5.28 bln settlement, which may be nearly half of the original fine
imposed on them and is also in line with market estimates. The deal may
be also helpful to settle a major uncertainty; but another bank
(Barclays) was not able to reach a deal and it may now legal recourse.
The Italian Bank Monte Paschi has meanwhile “applied” officially for a
EUR 5 bln bail out from the Govt and the Italian Govt may be preparing
for a EUR 20 bln overall bailout packages (indirect nationalization) for
its fragile banking system; although an amount of around EUR 52 bln may
be required as par some estimates.
China market was also under renewed pressure after recent bond market
turmoil, devaluation of Yuan, capital outflow controls & some other
regulatory measures by the PBOC.
Looking ahead, weak Yuan coupled with increasing PPI & housing prices
may force PBOC to tighten its monetary policy or at least prevent it for
more stimulus. Chinese authority may also be ready to accept GDP growth
below official projection of 6.5% for the sake of stability in the
economy. A weak Yuan and higher trajectory of real inflation may also
increase the cost of Chinese manufactured products and this inflation
may be disseminated all over the world, which may in turn also force
other major central banks to tighten their policy more rapidly. Thus, a
healthy Chinese economy may be most vital for the global financial
market stability.
Apart from China jitters, EU banking crisis & various geo-political
issues and also uncertainty nature of Trump& his “twitter tantrum”,
conflict of interests of his core team (US political risk) might be the
biggest headwinds in 2017.
Back to home, a strong USD, strong oil above $60, huge banking NPA,
stressed corporate balance sheets, tepid private investments, high Govt
debt/GDP ratio, FPI taxation issues and demonetization led economical &
political disruptions may also be some of the major headwinds for Indian
market in 2017.
Against these backdrops, there are hopes of some “stimulus” (farm loan
waiver & some transfer of money to zero balance JDY accounts by the Govt
from any windfall/seized/IDS gain after demonetization; rationalization
of direct taxes with simplifications, both personal & corporate) and a
“dream budget” to reduce the demonetization “pain” apart from 0.25-0.50%
RBI cut.
Still, there may be too much headwinds against too few tailwinds for the
Indian market in 2017 and it may be a tough year for passive investors
as huge volatility on both sides of the market will be there. Thus,
investors have to act also like a professional without any underlying
emotion for a particular stock and should know when to sell or book profit.
Today, domestic market got some boost in the 2^nd half after some
positive news about progress of GST was flushed regarding draft laws of
CGST/SGST etc. But, eventually the most vital part of “dual control
mechanism” still remains inconclusive for the lack of political &
bureaucratic consensus as both centre and state levels ST officials are
not ready for any loss in their “client base” (more governance & more
corruptions ??).
The next meeting for resolving this “dual control” issues may be on
4-5^th Jan’17 and it’s almost impossible now to implement GST from
April’17 and as par some reports, Govt may announce a tentative “next
date” of July’17 for the same for the sake of “constitutional compulsion”.
It remains to be seen, which “compulsion” (economical, political or
constitutional) will get priority next time as everything remains the
same, GST should have been implemented from April’17, if Govt did not
surprise the nation on 8^th Nov by announcing sudden demonetization just
ahead of winter session of the Parliament and in the process, further
vitiated the overall political & economical atmosphere.
Almost all the states are now suffering huge revenue deficit as a direct
outcome of demonetization led economic slowdown and most of them may not
be ready for implementation even by Sep’17. Thus, it’s high time to
introspect, if the Govt/BJP is really ready to implement GST or not as
its continue to be a political game of “ping pong” between Cong & BJP
going on almost for the last decade.
It’s almost certain that demonetization led economic disruption is
transitory by & large once full remonetization will be done in next few
months. As par some unconfirmed reports, Govt may introduce again a new
1000 note and demonetize the existing 2000 note shortly; but it may add
more chaos at least for the short time, if the report is true.
But, there may be long term impact on Indian consumption/demand by at
least 30% because of “war on black/unaccounted money”. Traditionally,
India is a mix of formal & informal economy and even before this
“surgical strike” on the “informal economy”, there was gradual
transition from “black” to “white” economy taking place as a result of
various steps taken by the Govt in the last few years. Precisely, it may
be one of the reasons for delayed earning recovery of the Indian
corporates as consumption is being affected to certain level. It may
also be another reason for tepid private investments apart from
excessive regulatory and judicial intervention in some cases (2G/Coal &
mining etc).
Thus, it may take a few years more for visible resumption of private
investments & an overall economic recovery and till that time
Govt/Public capex may be vital. But, for that Govt has to create an
atmosphere so that FPI(s) will stay in India rather than invest in their
own country (US/DM); otherwise who will fund the “Shinning India” story?
<https://4.bp.blogspot.com/-IlZXg_jTNFY/WF1CjTv7KGI/AAAAAAAAJ6c/uJX0b5sF6REZM8UCgyoCqnAyaTAg8DjMQCLcB/s1600/SGX-NF-WK-23-12-2016.png>
SGX-NF(WEEKLY)
--
Thanks & Regards,
Asis Ghosh
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