*Market Wrap: 10/01/2017 (17:30)*
*Looking at the chart, Nifty Fut (Jan @8297) has to sustain over
8350-8375 area for further rally towards 8425-8485 & 8545-8585 zone in
the short term (under bullish case scenario).*
*On the other side, sustaining below 8275-8235 zone, NF may further fall
towards 8155-8040 & 8000-7940 area in the near term (under bear case
scenario).*
Nifty Fut (Jan) today closed around 8297 (+0.57%) after making an
opening session low of 8260 and late day high of 8299 amid mixed global
cues supported by some fall in USD & Oil and upbeat Q3FY17 numbers from
Indusind Bank.
Domestic market today opened in flat note following mixed global/Asian
cues. Overnight US market fall to some extent after some drops in USD/US
bond yields and concerns of renewed supply glut in oil from higher
production out puts from Iraq & Iran and US SRDR release & additions of
more oil rigs/productions.
Although, there are some reports of a first “official” presser by Trump
tomorrow, it may not be an occasion to divulge any concrete plan of
“Trumponomics” as he is yet to take charge of the White House. All eyes
may be on some scheduled speech by Yellen and some economists closer to
Trump (potential Fed chair after Yellen in 2018) to gauze their thinking
about path of US economy and rate hike trajectory. As there are no fresh
triggers after the upbeat NFP last week for the USD, some long
unwinding/fresh shorts may be happening at the higher levels.
*USD is being driven by US bond yields and looking at the 10Y TSY notes,
which is trading around 125, USD/US bond yields may fall more, if the
10YTSY rallied & sustained over 126 area in the days ahead.*
Today’s upbeat China PPI (Dec) data, which came at 5.5% against estimate
of 4.5% (prior: 3.3%), although may not help Chinese economy much and in
fact may force PBOC for more tightening, it’s good for the global
economy (DM), which is thriving for “inflation”.
For the last few years due to production glut, “cheap” Chinese goods may
be spreading some kind of “deflation” across the globe; but now with
some deleveraging in its manufacturing hubs (curtailment of excess
capacity) and more devaluation of CNY (costly raw materials import),
China’s factory prices (PPI) has increased and that’s a great news for
the “inflation savvy” DM. If such incremental PPI sustained, it may be
seen as an important source of inflationary impulse apart from oil for
the developed economy in the coming days.
Indian market sentiment may be boosted today after various “upbeat
comments” in the ongoing “Vibrant Gujrat Global Summit”, which may see
record commitments of investments/FDI in the state. In the recent years,
Indian FDI is surpassing flow from the highly volatile FPI(s), which is
giving some good support for the INR stability, even in times of crisis.
Although, recent auto & real estate sales data is indicating tepid
consumer sentiment after Nov demonetization and the trend may continue
in the coming months (Q4FY17), slightly better than expected Q3 numbers
from Indusind Bank may also helped the overall market sentiment that
Q3FY17 earnings may not be so bad as feared by the street.
Tomorrow, all eyes may be on the EC’s stance after Govt officially
replied to the opposition demand of rescheduling the budget presentation
day, just ahead of the crucial state elections.
Looking ahead, apart from the outcome of the state elections & budget
presentation, all eyes may be on the CPI & IIP data and earnings from
Infy/TCS later this week.
The political outcome from the series of five state elections,
especially from UP may be seen as “mini referendum” for “NAMO” for the
2019 general election. Any adverse outcome may also heighten the
political risk and uncertainty apart from the ongoing demonetization issues.
As almost 97% of the demonetized notes has their way in the banks,
market may be “relieved” that all is “not lost” in the “surgical strike
against black/unaccounted money” and at least 25-50% of the “destroyed
wealth” may be eventually came back in the system even after paying the
required taxes & lock in period, which may again support the Indian
consumption story.
But, as par various reports, at least Rs.3-7 lakhs (25-50%) of
demonetized bank deposits may be out of undeclared income (black money).
As Govt is repeatedly stressing that all “black money” can’t be “white”
overnight by merely depositing it in the bank accounts and required
taxes have to be paid on it (amnesty scheme).
In its fight against black money, all may now depend upon the pace of
remonetization and Govt/IT steps on such “black” demonetized bank
deposits, which are not “anonymous” now. A regular IT demand and its
implementation may take decades to be settled, considering various legal
hurdles & lack of IT manpower/infra and in that scenario, Govt may
impose certain kind of BTT, even for digital transactions above certain
limits in the forthcoming budget or even take the help of “Benami Act”
for such illegal demonetized bank deposits.
In both the above scenarios, vicious cycle of the Indian consumption
story may take at least five years to revive again and in the mean time
one can expect at least 30% fall in demand on an average, even after the
remonetization as redistribution or rebuilding of “lost wealth” &
revival of lost “consumer sentiment” may take considerable time.
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SGX-NF
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Thanks & Regards,
Asis Ghosh
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