*Market Wrap: 13/03/2017 (18:00)*
*NSE-NF: 9098 (+140 points; +1.56%)*
*NSE-BNF: 21132 (+334 points; +1.61%)*
*Time & Price action suggests that, Nifty Fut (March) has to sustain
over 9155 area for further rally towards 9195-9235 & 9275-9350 in the
short term (under bullish case scenario).*
*On the other side, sustaining below 9135 zone, NF may fall towards
9075-9035 & 8985-8915 and 8865-8790 area in the short term (under bear
case scenario).*
*Similarly, BNF (LTP: 21132) has to sustain over 21350 area for further
rally towards 21500-21675 & 21855-22050 area in the near term (under
bullish case scenario).*
*On the other side, sustaining below 21300 area, BNF may fall towards
21150-21000 & 20900-20700 zone in the near term (under bear case scenario).*
Nifty Fut (March) today closed around 9098, almost 1.56% higher after
making an opening minutes high of 9158 and session low of 9078. Although
Nifty Spot was able to scale the life time high marginally and made a
top of 9123, Nifty Fut-I was not able to scale its previous life time
high of around 9185 as heavy selling instantly caused the index to slide
soon after the gap up opening today.
Despite an unexpected margin of victory by BJP/NAMO in UP and hopes of
big bang reforms by the Govt amid political stability till at least
2019-2024, concerns of stretched valuations and various geo-political
events including an impending Fed rate hike might caused some long
unwinding(profit booking) and fresh shorts at such record high level of
index.
After today’s Nifty high of 9123, the benchmark index rallied almost 33%
from the Feb’16 budget day low of around 6835 and completes the journey
of around 2288 points in almost one year. So, is the index now topping
out as almost all the positive domestic news flow has been discounted by
the market and now it’s time for the Govt to deliver & Nifty to show at
least 15-20% CAGR in EPS ?
With today’s gap up rally, market may have discounted the state election
factor, a politically stable Govt till 2024 and above all more policy
reforms & implementation in an effective way like tax/GST, land &
labour, full FDI in multi brand retail, resolution of huge banking NPL,
resumption of private capex & consumption (demand) and an effective
resolution of India’s huge under/un-employment problem. The list is long
with high expectations of the market and the Govt has to deliver fast as
it can’t take the excuse of “opposition hurdles” further as the
“opposition” is almost wiped out for now.
It’s true that BJP may not be able to garner the much elusive RS
majority before 2019 despite emphatic victory in UP and some other
states, opposition political parties also may not block any reform bill
including GST in RS for the sake of “only opposition” as they may not
want to be portrayed as a “disrupter” of economic reform and the onus is
now on the Govt to fasten the economic reform process by some big bang
measures. In fact, over the years, INC also supported the Govt
indirectly or directly in passage of various reform bills including
IRDA/Insurance and amendment of GST also.
All eyes will be now on 16^th March for Q4FY17 advance tax numbers & GST
council meet to see the actual progress of GST on the ground and
implementation of the same by Jul-Sep’17. But as usual, just before any
Parliament session for passage of final GST bill, there is always some
political drama or some “surgical strike” employed both by the main
national political parties (BJP & INC) and this time too it may be the
Goa & Manipur state legislative issues of “horse trading” and INC may
not be in a mood to allow the Parliament to function either. Thus, the
onus may be now on the Govt/BJP to create an amicable political
atmosphere in the Parliament to pass the final GST bill and implement
the same from July-Sep’17 without any other excuses, if it really wants
the GST to be implemented before 2019 election.
Contrary to earlier narratives, DeMo has been proved as a “Political
Masterstroke” rather than a “Political Suicide” for NAMO and the gamble
is paid off quite amazingly by its rich electoral dividend. Also, BJP’s
cadre based systematic & professional organization has helped a lot in UP.
But, rather than some big bang reform, BJP Govt may focus on the ongoing
incremental reform (slow) and more on social/political agenda in the
coming days as RSS is itself against any big bang reform. GST may be
also delayed by the Govt as small traders are not prepared for it all as
of now.
After DeMo, Indian market is witnessing more domestic fund flows,
especially in the MF SIP segment, which is driving the market primarily.
It may be due to flows of earlier “black money” kept with the informal
system to the banking/formal system now and that is being channelized
into various financial assets class including EQ. The onus is now with
the Govt, how to treat such “investment” out of DeMo or “black money” in
its logical conclusion of the “war against corruption/unaccounted money”.
Now, all may depend upon the Govt’s war or future stance in continuation
against the “black money”. As Jefferies is pointing out that “what can
be good socially, ethically, morally, may not be good for the market and
the party may be soon over”, DeMo is certainly a transient issue and
people will soon forget that; but the “war against black money” & its
adverse effect on the discretionary consumption, private investments may
be persistent, although the Govt may not bother that and is willing to
sacrifice something for a cleaner system. Capital market taxation &
P-Note reform may be the next big bang step by the Govt in its “war
against black money”.
India today flashed its inflation (YOY) as:
WPI (Fed): 6.55% (estimate: 5.90%; prior: 5.25%)
CPI (Feb): 3.65% (estimate: 3.58%; prior: 3.17%)
The upward trajectory of WPI & CPI and also the core CPI may keep RBI in
an extended period of “neutral mode”; there may not be any rate cut in
FY-18 and considering the recent hike in food prices, RBI may be quite
hawkish in the days ahead.
Globally, all eyes will be now on the Fed tomorrow and the market is
expecting a 0.25% rate hike along with more hawkish dot plots &
statements by Yellen (3-4 hikes by Fed in 2017!!). Fed may be right in
its jawboning about multiple rate hikes in US, considering the
economics; but in reality, politics may overshadow economics this time
as Trump is himself against a stronger USD contrary to his earlier
election rhetoric.
Thus, Fed may not hike rate tomorrow on some excuse of tepid wage
inflation and uncertainty about “Trumponomics”. Yellen may take a
“hawkish hold” stance with strong indication of a June hike, although
eventually Fed may hike only once in Dec’17.
In any way, a “hawkish hike” by Fed tomorrow may be not good for EM
including Indian market and a “hawkish hold” may bring some cheers for
the time being.
Oil is another factor, which may be going for a capitulation like in
late 2015, which may also affect the “risk on” sentiment globally and
also domestically. Apart from supply glut from the US shale oils,
concern of production breach agreement by Saudi Arabia is causing
significant melt down in oil. A comment by Kuwaiti oil minister that the
current OPEC & Non-OPEC agreement may be extended beyond the schedule of
June’17 has helped oil to some extent yesterday; but today his comment
that oil is heading towards $45 is causing more selling.
Elsewhere, UK Parliament has approved the invocation of Article-50 today
and as par reports; UK will formally start the divorce process from EU
by this month (March’17). The real Brexit pain and uncertainty may start
now for UK economy and together with Dutch election, BOJ & Fed meet,
market may be very volatile in the coming days.
<https://4.bp.blogspot.com/-TvH-LjseaqQ/WMgL3r-gPLI/AAAAAAAAK5k/J1A41gpzYlchH-V0Z0YeHk4h3_XTxJ6EQCLcB/s1600/SGX-NF-PATTERN-14-03-2017.png>
SGX-NF
<https://3.bp.blogspot.com/-JajMiLyDPWM/WMgL-WE_gBI/AAAAAAAAK5o/FkwC_sKGth05XgoEQsd0YPBCrE4oFnACgCLcB/s1600/BNF-PATTERN-14-03-2017.png>
BNF
--
Thanks & Regards,
Asis Ghosh
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