*Market Wrap: 02/11/2016 (16:30)*
Nifty Fut (Nov) today closed around 8549 (-1.18%) after making a day low
of 8531 and session high of 8579.on the back of negative global cues
amid uncertainty of US election outcome.
*Looking at the chart, for tomorrow (03/11/2016), NF has to sustain over
8540 area; otherwise it may further fall towards 8500-8465*-8400 and
8350-8260-8205* zone in the immediate to short term.*
*On the other side, for any strength, NF need to stay over 8600 zone for
further bounce towards 8640-8685*-8705/8750 and 8800-8840*/8875-8905
area in the immediate to short term.*
Indian market today opened gap down by around 87 points amidst tepid
global cues because of uncertainty about US election outcome as Trump &
Clinton is now almost running neck to neck in a pre-poll survey done by
ABC/WP yesterday. As a result USD is being hammered and investors are
running for the cover of safe heavens in Yen & Swiss Franc and even Gold
and the other “risk trade” (EQ) is being doomed.
Politically, all eyes will be on the next series of poll survey to be
published later in the day and on FBI also, if they can throw any lights
before US Election Day for their investigations on the latest series of
Clinton e-mails. Also, ongoing Wiki revelations of “Podesta/Clinton
mails” may also be keenly watched as Wiki have already promised about
something very “damaging” for Clinton camp just before US Election date.
Against this “political” backdrop, today’s Fed meet may be a non-event
as there is virtually no expectation of any rate hike. But, Fed’s
statement may be keenly watched for the high probability Dec’16 rate
hike & guidance and any reference to the ongoing geo-political events,
especially any “nasty surprise” for the US Election outcome (Trumpism).
If Trump wins this time, market will sink significantly and Fed has to
be on hold till at least Dec’17 (forget rate hike in Dec’16). But, the
problem is, Trump being viewed as “uncertain/unpredictable”, there may
be significant policy changes and even Yellen may be forced to quit
early in case of "Trumpism".
Theoretically, Trump’s policy of lower taxes and more spending along
with some other structural & fiscal measures may prompt Fed to hike
rates more rapidly and USD will gain strength. Thus, if Trump’s prospect
looks better in the days ahead, market may also give some attention to
his economic policy.
In the event of Clinton win, market may have some temporary relief
rally, but the ongoing FBI probe on Clinton may also make matters worse.
In the event of Clinton win, Fed should have no immediate caveat to stay
on the side line and has to hike in Dec’16 with a guidance of 1/2 hike
in 2017. Also, Clinton is considered as a “war mongering” and in that
scenario, geo-political tension with Russia may also increase
significantly for the Syria issue.
Thus, both (Clinton and Trump) may be negative for “risk trade” and it
may also be a “double whammy” for the global as well as Indian Market.
Oil was also under immense pressure after yesterday’s surprise inventory
built up and ongoing squabbling from OPEC.
Among all these global jitters associated with US politics, Indian Rupee
may come under immense pressure if dollar indexwill stay above 99-101
area and in that scenario, USDINR may rally towards 70-71 level, which
may be not good for the overall Indian economy/macro and specially for
the FPI(s).
This Rupee devaluation concern may be another reason for the consistent
selling by FII(s) in the last few weeks and on an average, benchmark
Nifty may fall around 100 points for every 1000 cr selling by the
FII(s). As par some market buzz from FII desks, in the event of the
above geo-political events, Nifty may correct by around 20% and midcap
index may also correct by around 40% from the recent high.
Indian market sentiment is also being hurt for the continuous firing &
shelling by both sides (India & Pak) at the border/LOC and it’s like an
“unofficial Mini War” going on there, which may turn quite serious in
the days ahead.
Also, ongoing “war of words” between Mistry & Tata is spoiling the
overall market sentiment apart from adverse impact on the Tata group of
shares also. It may also damage the overall image of Indian corporate
governance & the “dignity” of Tata in the eyes of the institutional
investors. As corporate politics & board room battles are getting centre
stage instead of core business & earnings, investors may be quite
worried about the future of various Tata group companies.
Today, as the market was sinking for global jitters, Govt tried to talk
up the Indian market by some selective “leaks”. As par some market buzz,
RBI & Govt is working proactively on faster resolution of NPA/stressed
assets. RBI is planning to change some norms for provisioning for the
banks and the Govt may be formulating a special OTS (one time
settlement) for repayment of the NPA/NPL with a special package for the
construction sector.
Today S&P affirms India’s rating (‘BBB-/A-3“with stable outlook) dashing
the hope for an immediate “upgrade” by the Indian Govt.
S&P also virtually ruled out any rating upgrade for India by next two
years citing weak public finances & low per capita income despite
India’s sound external position (macros) and inclusive policy making
decision. S&P also warned about any failure of RBI/MPC’s target to
achieve 5% CPI by March’17 and adherence to standard net Govt debt to
GDP ratio.
Clearly, S&P is also concerned over India’s pain of “twin balance
sheets” (high corporate leverage & huge banking NPA) and actual
implementation of the recent economic reforms, such as GST etc.
Today, Indian Govt also came heavily on S&P for not upgrading its rating
despite recent measure of various reforms. But as par S&P, mere
policy/reform formulation is not sufficient for an upgrade, it also
requires implementation on the ground. It seems that Indian Govt is
increasingly getting frustrated for this rating upgrade issue, which is
just above junk on the global standard and may hamper future incoming
flow of foreign capitals in the country. Also, recent issue of “ease of
doing business” in India does not look great and all these may be
hampering investor sentiment also, despite 24/7 PR activities.
As state election days are coming fast, there may be also some political
risk on the Indian market also. Despite the “surgical strike” and the
ongoing “warmongering” stance with Pak, poll prospect of BJP/NDA looking
slim both in UP & Punjab.
In UP, there may be an alliance to be formed between SP & INC and
moreover, BSP has better prospect because of internal feud in Yadav
family (SP) amid caste/religion based politics there. Yesterday’s
incident of SIMI terrorists encounter killing may have also dented the
sentiment of Muslim community on the BJP Govt and all these political
events may make it more difficult for final GST passage on consensus.
As Q2FY17 earnings & guidance has no great surprise and moreover the
recent results of banks reveal incremental jumps in NPA (both yearly &
sequentially), market may not be quite impressed and preferring to sell
at every highs (long unwinding or short selling) for lack of any fresh
domestic drivers.
Technically, consecutive closing below 8540-8465 level in NF, may pave
the way for deeper correction towards 8000 zone in the short term;
otherwise expect some bounce up to 8750-8840 area.
<https://3.bp.blogspot.com/-8nrthRz9gSw/WBnqA01JnEI/AAAAAAAAJVE/xFa7IKt9PwcenxmWhSexxJrtiMr0_CZRACLcB/s1600/SGX-NF-PATTERN-02-11-2016.png>
SGX-NF
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Thanks & Regards,
Asis Ghosh
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