*Market Wrap: 12/01/2017 (20:00)*
*Looking at the chart, Nifty Fut (Jan @8422) has to sustain over
8435-8485 area for further rally towards 8510-8545 & 8585-8635 zone in
the short term (under bullish case scenario).*
*On the other side, sustaining below 8405-8360 zone, NF may further fall
towards 8300-8225 & 8125-8000 area in the near term (under bear case
scenario).*
Nifty Fut (Jan) today closed around 8422 (+0.41%) after a very choppy
day of trading, which saw a closing session high of 8424 and an opening
session low of 8386.
Domestic market today opened almost flat amid mixed global cues
following lack of any definitive plans about the much touted
“Trumponomics” from Trump’s presser yesterday.
The Q&A session of Trump turned into a virtual “clown show” with and the
main thrust was towards the Russian scandal episode and hacking
allegation with the usual rhetoric about “Obamacare, pharmaceuticals
pricing, trade protection, Mexican wall etc. There were no clues about
his plan for the huge fiscal spending, tax cuts, and deregulation. Thus,
politics was at the forefront rather than economics and “Trump Trade”
bumped with fall in USD/US bond yields, metals (Copper) and stocks. Gold
& oil was zoomed following weakness in USD.
Now, with unpredictable Trump at the top of the helm, his comments &
“Twitter Tantrum” may be now the greatest source of volatility, far
greater than any central banker/Fed and “Trumpism” related tremendous
euphoria just based on his face value (jawboning) may be one of the
headwinds for US as well as global market in 2017 (US political risk)
apart from EU political and banking risk.
Now, depending upon the tomorrow’s US retail sales data, we may see more
long unwinding/shorts for the USD ahead of 20^th Jan, when Trump
formally take over.
EM currency as well as India may be one of the beneficiary of the “Trump
Fade Trade” in the coming days (weak USD), even if that may be short
lived and will depend upon the actual plan of action & implementation of
“Trumponomics”.
Today, Pharma was under pressure initially following Trump’s adverse
comments about high pricing of drugs and competitive bidding. But, later
Pharma was recovered to some extent as pricing by various Indian
companies are already under severe competition there in US and as par
some experts, US has no legal authority to force the generic Pharma
companies for such competitive bidding. But, various regulatory action
or ghosts of US FDA may be a consistent overhang for the Indian Pharma
sector apart from comments from Trump.
IT also gave good support to the market today ahead of TCS & Infy
result, for which tepid numbers for Q3 may be already priced in,
considering steep fall in the last few weeks; their guidance & outlook
and strategy under “Trump Threat”, may matter now.
Another reason behind IT rally today may be that under enhanced H1B visa
salary limit of min $100000/pa from the previous $60000/pa, Indian
bigwigs may be already proving min salary more than $100000 to its
employees in working in US; it’s a minimum criteria to survive a decent
life in US. Thus it may not be a big issue for them.
Also, under the Trump’s plan of “rebuilding America again”, there may be
renewed IT related boom in US in the coming days. Thus, despite lack of
timely adaption for the latest tech (AI/cloud etc), Indian IT companies
may not be lose so much even from their traditional business model of
servicing/outsource/code writing in the coming days, specially on the
back of BFSI & Oil firms related verticals; i.e. IT will trade in a
range for the time being.
TCS Q3 result flashed just after market hours today also came good & in
line/ slightly above expectation with a decent Q4 guidance. All eyes
will be on the Infy numbers & guidance tomorrow.
After upbeat numbers from Indusind Bank & TCS, market may be already
beginning to hike Q3 earnings growth after concerns of demonetization;
but rather than Q3, Q4FY17 and Q1FY18 may matter more for actual trend
as various other high frequency leading data, such as PMI, auto sales,
real estate, stamp duty collections etc are indicating for a significant
slowdown in the Indian economy after Nov-Dec’16.
After market hours today Indian CPI came at 3.41% for Dec against
estimate of 3.57% (prior: 3.63% MOM; 5.61% YOY). Though the headline
number looks good, considering India’s long tradition of high inflation
economy, the sudden fall may be attributable to the lower demand & weak
economic activity as a result of demonetization apart from some seasonal
(food inflation) & base effects. It also indicates tepid consumer
sentiment & lower discretionary spending.
As par some reports, food inflation may surge after Jan’17 because of
lack of harvesting/farming after acute cash crunch in the rural &
semi-urban economy (domestic supply may adversely affected) and rising
oil may be also a concern. There is not so much moderation effect in
core inflation of the economy (core CPI at 4.9%).
IIP for Nov also surprised to the upside and came at 5.7% against
estimate of 1.3% (prior: -1.9% MOM; -3.4% YOY). Experts believe this as
the favourable seasonal & base effect as in Oct end, there were Diwali
holidays last year and various factories were closed. The same may be
also true for the current year (Oct’16).
Also, higher petrol & diesel consumption because of use of demonetized
notes exception may also be one of the reason for unexpected surge in
IIP, apart from surge in capital goods, which grew 15% in Nov’16
against(-) 26.9% in Oct’16 & (-) 24.4% in Oct’15.
Higher capital goods index in IIP may be an indication of corresponding
capacity addition by the manufactures after record sales in Diwali
season this year (Sep-Oct) to replenish the consumed inventories. Going
forward, this may be tepid considering visible slow down in the consumer
spending after demonetization.
Overall, on cumulative basis IIP growth for Apr-Nov’16 came at 0.4%
against 3.8% on YOY basis, even before demonetization in line with tepid
projection of the GDP by CSO few days ago (7.1% from 7.6% till Oct’16).
*Technically, NF need to close consecutively over 8485 area for any
further rally towards 9000-9555 area in the coming months; otherwise it
may again came down towards 8000-7900 zone.*
Tomorrow may be vital after more than 6.5% rally in Nifty in the last
few weeks as EC may announce its decision regarding budget day in the
weekend and in the next week more earnings will come, which may help to
gauze the actual extent of damage done to the economy after demonetization.
<https://3.bp.blogspot.com/-fpSWgrkLi3Q/WHeq5EoosoI/AAAAAAAAKIg/Kju9aqBHGik2VR1KJ7ORNQg99TgGdo8ugCLcB/s1600/SGX-NF-PATTERN-12-01-2017.png>
SGX-NF
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Thanks & Regards,
Asis Ghosh
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