*Updated: 08:20*
*
*
SGX-NF: 10620 (+12; +0.11%)
Expected BNF opening: 25960 (+0.15%)
SPX-500: 2730 (+17; +0.63%)
*Note:*Flat/positive opening on upbeat global cues amid a temporary
truce in US-China trade war and domestic issues of Karnataka election
outcome (floor test on Saturday), in which BJP succumbed.
Globally, risk-on trade got a boost after US Treasury secretary Mnuchin
said: “The US is putting the trade war on hold' with China and
administration will delay tariffs”. Mnuchin said that the US and China
are stepping back from a possible trade war after two days of intense
trade negotiations that produced “meaningful progress.”
Despite not getting China to agree to trim its overall trade surplus
with America by a specific amount, Mnuchin said the US team did get a
number of “commitments” on a “framework” for reducing the deficit over
time, including big increases in purchases of farm products and a
doubling of purchases of US energy products.The planned tariffs on
Chinese steel and aluminum, as well as $150 billion worth of other
Chinese goods — are off the table while the talks proceed, Mnuchin said:
“We’re putting the trade war on hold,” Mnuchin said on Sunday.
As a recapitulation on Saturday, after day of “tensed” trade talks, US
and China announced that “after two days of constructive talks between
American and Chinese officials in Washington had led to an agreement for
China to buy more goods and services, including meaningful increases in
the United States agriculture and energy exports” as the two countries
work to defuse a potential trade war. China to buy 'significantly' more
US goods and services in a bid to ease trade tensions, a statement by
both countries indicates.
The announcement comes after Kudlow said Friday that China had agreed to
purchase at least $200 billion in more goods and services, which could
help reduce the $375 billion trade deficit with China that has drawn
Trump's ire. But China had not confirmed that number and Saturday’s
statement did not reference a specific additional trade amount.
But Indian market may be on edge after the fall out in Saturday’s
Karnataka Assembly floor test, in which the BJP CM, who was selected by
the Governor barely two days ago, has resigned abruptly just before the
floor test as he has not the required numbers, because of SC directive
to hold the floor test immediately rather than 15-days later. It appears
that BJP was not able to buy sufficient “horses” (opponent MLAs) in such
short time and under the watch of the SC.
Now, JDS+INC will form the Karnataka government. This may be a huge
embarrassment for the BJP/NAMO at the national level and also tarnished
their overall image as the party is now relying on money & muscle power
(“horse trading”) for state elections, where they have not the
sufficient strength of their own to form the government.
But the market will be more concerned about the rise of smaller but
stronger regional parties and INC’s change of strategy to support them
to form the regional/state governments rather than of their own, where
they have not the sufficient number of their own. Those smaller regional
parties may ultimately support INC (RAGA) at the national level in the
2019 general election and thus there may be an intense fight unlike in
2014 when “Modi wave” (anti-establishment wave) swept the whole country.
The political uncertainty of smaller regional parties in the absence of
a strong BJP/NAMO wave coupled with some resurgence of INC/RAGA at the
national level may be a significant headwind for the Indian market in
the coming days; it will be BJP vs “Federal Front” (all the other
regional parties including INC) in the 2019 general election. Despite
NAMO’s mantra of 4-D (demand, demography, democracy, deregulation), the
market may be worried about the political fallout of DeMo, GST, jobless
growth, higher inflation and higher oil.
*Fut-I (Key Technical Levels)*
Support for NF:
10605/10560*-10530/10485-10425/10395-10335/10260
Resistance to NF:
10675/10695-10720*/10760-10800/10875-10935/10975
Support for BNF:
26000*/25800-25600/25300-25100/24950-24700/24600
Resistance to BNF:
26150/26350*-26500/26700-26825/27000-27150/27300
Support for SPX-500:
2715/2695*-2675/2655-2625/2610
Resistance to SPX-500:
2740/2750*-2775/2805-2820/2855
*Technical View (Nifty, Bank Nifty, SPX-500):*
Technically, Nifty Fut-I (NF) has to sustain over 10720 for a further
rally towards 10760/10800-10875/10935-10975/11055 in the short term
(under bullish case scenario).
On the flip side, sustaining below 10695-10675 NF may fall towards
10625/10605-10560/10530-10485/10425 in the short term (under bear case
scenario).
Technically, Bank Nifty-Fut (BNF) has to sustain over 26200-26350 for a
further rally towards26500/26700-26825/27000-27150/27300in the near term
(under bullish case scenario).
On the flip side, sustaining below 26150-26000 BNF may fall towards
25800/25600-25300/25100-24950/24700 in the near term (under bear case
scenario).
Technically, SPX-500 now has to sustain over 2750 for a further rally
towards2775/2805-2820/2855 and further 2880-2895in the near term (under
bullish case scenario).
On the flip side, sustaining below 2740, SPX-500 may fall towards
2725/2715 and2695/2675-2655/2625 and further 2610-2590in the near term
(under bear case scenario).
*Valuation metrics:*
*
*
Nifty-50: 10596; Q3FY18 EPS: 403; Q3FY18 PE: 26.29; Avg FWD PE: 20; Proj
FY-18 EPS: 418; Proj Fair Value: 8360
Bank Nifty: 25876; Q3FY18 EPS: 807; Q3FY18 PE: 32.06; Avg FWD PE: 20;
Proj FY-18 EPS: 961; Proj Fair Value: 19220
SPX-500: 2713; TTM Q4-2017 EPS: 111; TTM PE: 24.44
*GLOBAL MARKET ANALYSIS: <https://www.iforex.in/news>*
FOLLOW ME: TWITTER.COM/ASISIIFL
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SGX-NF
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BNF
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SPX-500
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USDJPY
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