Brace Yourself For The 12,000 Milestone If Nifty Closes Above 11,600 Mark
The affaire de coeur of the bulls, which started on the Dalal Street since February 19 low, took a pause on March 22. During this period, Nifty registered a gain of just over 9 per cent, but the heartthrob has been the banking index Bank Nifty, which has skyrocketed just over 13.5 per cent and marked fresh all-time high. The velocity and magnitude of the upmove was the talk of the town, but the bullish script turned bloodcurdling by the weekend as global growth distress resurfaced grabbing media headlines. The culprit was the US's reliable predictor the ‘inverted yield curve’ indicator, which historically has been a reputed indicator and a precursor of the past US recessions and this has struck a chill in the hearts of investors across the global markets. Meanwhile, the silver lining seems to be news from the weather office as the IMD has predicted robust monsoon in 2019 provided there is no unexpected El Nino phenomenon.
On the global front, the US markets have been on a roller-coaster ride since the FOMC, the policy making arm of the US Federal Reserve, kept the interest rates unchanged and projected no rate hikes in 2019. Also, the Fed announced that it will slow the roll-off of its balance sheet in May and then conclude its reduction at the end of September. The Fed has reduced its projection for GDP growth for 2019 from 2.3 to 2.1 per cent. On Wednesday, the 10-year yield sank to 14-month low, deepening its inversion against the 3-month T-bill, which continued to keep fears of recession alive. On the economic front, the US trade balance showed that the deficit shrank more than expected in January and this restricted the fall in the US markets. In the Asian region, profits of China’s industrial firms posted biggest fall in the post-global financial crisis era in the first two months of this year.
In the coming days, there are a flurry of events to keep a tab on. However, the mega event to look out for would be the RBI monetary policy committee meet. The consensus is that the RBI is likely to go for a follow-up repo rate cut by 25 bps in the April policy and the price action over the last couple of weeks in the Bank Nifty is indicating clearly this could come true. There are a host of factors supporting the rate cut argument, ranging from the recent 180-degree turn by both the US Fed and the ECB and, more importantly, at a time when there are warnings of slowing global growth. Apart from this, investors will eye for important sets of data which will demonstrate the condition of India’s economy, namely, the fiscal deficit data and infrastructure output data. Other than that, the country’s fourth-quarter data for external debt and current account as well as auto sales figures and Nikkei Manufacturing PMI for the month of March will grab attention. On the global front, the United States and China, after being in a tight corner for many months, have opened the latest round of their trade talks on Thursday in Beijing and any positive development between these two economic superpowers will potentially be a cherry on the cake for the markets. In addition, any development on Brexit would garner some attention.
The Nifty has almost provided a return of about 13 per cent in the financial year 2018-19, and there is still a day to go before the fiscal ends. Nifty is now within a striking distance from the record high level, and if it closes confidently above the 11,600 level, brace yourself for the ride to the 12,000 milestone.
