Global Markets 2016 outlook : Nothing to fear with no major cues for cheer! Read on.....

US financial markets retain bullish advantage from growth comfort and interest rate dynamics against dollar strength

The external impact on India Financial markets is neutral and mixed. The confidence is from sustainable US economic recovery extending support to India capacity expansion through higher domestic consumption and improved exports. The demand-supply dynamics in commodity assets stand in favour to retain price advantage to hold Current Account Deficit and inflation expectation steady for further baby-steps monetary easing by the RBI. The concern however is from the shift of FII appetite to US markets (from EMs) chasing low risk - high reward risk-on asset classes. The fear mitigant for India is the shift of inflows from hot money short term FIIs to sustainable and accelarated longterm FDI/ECB investors. Given the positive outlook on the way forward, FED has already shifted to rate hike cycle in Q4/2015 notwithstanding resistive outcry from the IMF and other developed & emerging economies with 25 bp hike, not to be seen as baby-step at this stage. The expectation in 2016 is for quick shift of policy rate from 0.25-0.50% to 1.0-1.25% corridor by not later than mid 2016.

The fear of unknown is from the Euro zone and China that are in economic struggle despite ultra-dovish monetary support. While the ammunition at disposal is very limited, the extent and duration of retaining the supportive dynamics is not clear. Having said this, it is very low probability of seeing monetary reversal stance in 2016. The impact from here on India markets will be on Rupee price stability keeping short term foreign investors away for now.

India markets in nervous undertone with expectation shift from optimism to hope

India Financial markets fortunes are mixed without clarity eitherway. The strong external tailwind support is now behind with consolation that it may not turn on the head now, at least in H1/2016. The direction bias will be set from developments in the domestic sector. The expected big bang policy reforms didn't materialise and not seen to be forthcoming soon. The shift from optimism to hope has already resulted in sharp unwind of bullish set up since March 2015. The bottom-line for India in FY16 is the downward shift of sentiment from euphoria to optimism to hope. Can the Government restore optimism in 2016 or allow further slippage from hope to disappointment? At this stage, It is good to set the bias for shift from hope to optimism given the positive cues from the external sector on the CAD, Inflation and Rupee exchange rate.

Can India restore GDP growth optimism from 7-7.5% to 7.5-8% in FY17? Can India see soft landing of CPI inflation around 5% in 2016? Can India restrict fiscal deficit at lower half of 3.5-4.0% in FY17? Will India continue to get external support to hold CAD at 1.5-2.0% in 2016? Will Rupee be stable at 66-70 with not more than 3-5% depreciation in 2016? Will RBI get the desired bandwidth to lower the operating policy rate from current 6.75% in 2016? The directional bias on India risk-on financial markets for 2016 will be dependent on outcome from these critical fundamental cues. The worry is that in the absence of strong FII support, upside gains will be shallow while downside risks can run deep! Despite dilution in external tailwind support for India Financial markets, MARKET PULSE continue to retain hope on long term India economic prosperity. The Government has already opened the doors wide for external investors, and working on policy, regulatory and administrative initiatives to make India as "easy to do business" destination. The public investment into core sectors are being beefed up to provide comfort to domestic investors to pad up to build significant size for capacity expansion. It is true that the pace is slow, but need to give benefit of doubt to the intent and sustained efforts to knock out the resistive political hurdles!

What is the take-away? It is not wise to look beyond 3 months, hence there is no strategic long term play for time horizon beyond 2016! It is prudent to stay short sighted and be fleet-footed to either take monies off the table and stop running the losses taking comfort as long term positions. It has been rewarding 2015 for fleet-footed investors (and traders) across asset classes and it shall be so in 2016 as well, looking for long term trend clarity eitherway!

India equity market in sideways mode given the lack of clarity against limited investor support

NIFTY 2015 high of 9119 looks distant away while low of 7539 is at risk in 2016. MARKET PULSE set end of 2015 Nifty focus at 7500/7650-8000/8150, seen as intermediate zone between 2016 big-picture focus range of 7000/7150-8500/8650. Bank NIFTY is also supported now at intermediate zone of 16150/16500-17350/17700. What Next? MARKET PULSE retain outlook (set on 5th December 2015 update) for 2-step strategic buy entry in Nifty at 7680-7715 and 7515-7550 (Bank Nifty at 16500-16650 and 16000-16150) and 2-step short-build zone of 7965-8000 and 8100-8135 (and 17150-17200 and 17450-17500). Given this outlook on India equity, DJIA index is firm with 2015 low of 15370 looks distant away against high probability of 2016 high above 2015 high of 18351. The end of 2015 consolidation outlook at 17000/17350-18000/18350 has held well building steam for shift higher beyond 18350.

The risk on India equity is from FII play when Nifty under pressure below 2015 low and DJIA looking firm for move beyond 2015 high. The flow dynamics will be between sell-on-recovery stance of FIIs and buy-dips support from DIIs, which provide comfort for Nifty stability at 7500/7650-8000/8150 (Bank Nifty at 16000/16350-17150/17500) in Q1/2016. At this stage, MARKET PULSE stay neutral on FY17 shift of NIFTY focus into 7000-7500 or 8150-8650 (Bank Nifty into 15000-16500 or 17500-19000). Government and RBI have to be on over-drive to arrest downside risks on India equity markets on shift into new financial year in the absence of FII appetite in 2016. All taken, it is prudent to stay risk-neutral in Q1/2016 (ahead of Q1/FY17) awaiting better clarity ahead.

India Bond market in consolidation mode from FII appetite shift from risk-on equity to risk-off Gilts

MARKET PULSE squeezed end of 2015 focus on India 10Y yield at 7.70-7.80% (post end of 2015 chase from over 8% to below 7.50%). While retaining bearish undertone, set RBI support at 7.78-7.80% ahead of 2-step 2016 strategic buy zone in 7.72% 2025 bond at 7.83-7.85% and 7.93-7.95% against duration-cut zone of 7.68-7.70%. This outlook was set in traction with US 10Y yield stability at 2.20-2.35% against yield spread of 5.35-5.60%. It was also set as high-risk short-build on India 10Y bond when India-US 10Y yield spread stay elevated at 5.55-5.60% and India 10Y-Repo rate spread at 1.0-1.10%. What Next?

India 10Y bond is under pressure from domestic low demand - high supply flow dynamics and gradual lift-off in US Treasury yield in 2016. There is limited scope for squeeze in India-US 10Y yield-spread below 5.35% despite US 10Y spike into 2.50-2.65% by mid 2016 against stubborn CPI inflation print at upper-half of 5-6% and Rupee downside risk into 67-70. All combined, see good FII appetite in India 10Y bond at 7.80-7.95% (against Rupee value at 67.35-68.85). This FII strategy in 2016 is not bad against 3-5% Rupee depreciation and 12M Libor weighted average not beyond 1.25%. The big-picture DII play (including Banks) will be between duration-cut zone of 7.65-7.70% and duration-build zone of 7.90-7.95%. The strategic traders appetite will be to build shorts at 7.68-7.73% with caution on shorts at 7.78-7.83% and to build long at 7.88-7.93%. It would need supportive RBI (with 25-50 bps rate cut) and neutral FED (with extended pause post 2nd round of 25 bps hike) to get the India 10Y bond focus into 2015 high of 7.45-7.50%. Most will agree that it will be manna from the heaven if it comes true!

Rupee set for repeat of 2015 with downside risk not beyond 5%

Post the USD/INR intra-2015 bull chase from 63-63.35 to 66.85-67.10, MARKET PULSE set end of 2015 focus at 66.20-67.20 in alignment with RBI admin range of 65.85/66.10-67.10/67.35 for end of 2015 close at 66.35-66.85. During this time, 12M $ rallied from set strategic base of 68-68.25 to resist zone of 71.25-71.50 despite time-value decline from 7.5% to 6.25% in traction with 1.25% rate cut from RBI. Rupee value-decay of 5.25-5.50% in 2015 is not bad against average time-premium of around 7%. What Next?

Not withstanding the beneficial impact on Rupee from lower Brent Crude at $35-50, Gold at 1035-1135 and FDI/ECB inflows, the headwind force is severe. The downside risks are from cues around USD strength against major currencies pushing DXY beyond set 2015 strategic resist zone of 100-100.50, squeeze in 12M time-value to 5-5.5% against steady Repo rate at 6.50-6.75% and hardening 12M Libor into 1.25-1.75% in 2016. The PBoC impact on EM currencies will also add to pressure on the Rupee. The flow dynamics has also turned against with FII $ bids in the cash market and risk-off importer demand in the forward market. One can't ignore huge RBI $ appetite when $ supply turns excessive from lumpy inflows. All combined, MARKET PULSE retain set 2016 zoom-in focus at 65.85/66.10-67.10/67.35 and await orderly or one-shot adjustment into 67.10/67.35-68.85/69.10 at start of FY17. Also retain 12M USD/INR strategic focus at 70/70.25-72.50/72.75.

Post the EUR/INR intra-2015 down-hill chase to set strategic base at 69.90-70.15, correction from here held at short-initiation zone of 72.85-73.35 before consolidation at 70.65/71-73/73.35. The outlook for Q1/2016 is for consolidation here tracking EUR/USD play at 1.05/1.0650-1.10/1.1150 against USD/INR at 66/66.20-67/67.20 and stay neutral on breakout eitherway. It may not be sustainable below 69.90-70.15 against possible intra-2016 shift of EUR/USD play into 1.0/1.0150-1.05/1.0650 against USD/INR shift to 67.10/67.35-68.85/69.10.

Commodities retain bearish undertone from demand-supply dynamics driven by weak global economic recovery

Brent Crude extend weakness below set long term strategic base of $37 on intra-2015 push-back from $70. Is it good (and prudent) to chase weakness into (or below) $35-37? While the demand pick up in 2016 will stay muted, the attention will be on the extent of supply squeeze to retain fair value play at $35-50. Having said this, long term hedge demand will emerge on extended weakness below $35-37 to stay risk-off (or neutral with 50% hedge) to mitigate risk from possible relief rally into $48-50. At this stage, big-picture focus is retained at 35/37-48/50 and it would be high risk chase on extension eitherway.

Gold held at strategic base at 1000-1035 post sharp intra-2015 unwind from over 1300 before stability at end of 2015 consolidation range of 1035/1050-1085/1100. What Next? The worst case scenario for 2016 is not seen beyond $950, while best case is seen restricted at $1135-1185. Gold has clearly lost its safe-haven status but seen fairly priced at 950-1000 for 2016 stability at 950/1000-1135/1185.

What is 2016 strategy?

2015 has been extremely good for fleet footed play both for investors and traders. Shift of risk play between on and off and staying neutral at intermediate zone has given good double-digit returns to investors in the OTC markets and triple-digit returns (on the margin) to traders on the ETF platforms, across asset classes. The strategy remains valid for 2016 with review at Q1/FY17. It is caution for passive investors who rode the 2012-2014 bull trend; it is possible that 2015-2017 may turn as consolidation phase before exerting pressure on the 2015 high prints. So, it is loss of time-value against search of sustainable strategic "base" during 2016-2017. All combined, cues are mixed to have "long term" trend clarity eitherway; markets will be volatile, so are the views and trading strategies. It will be game of "wind surfing" for strategic investors/traders to stay in patience for the right wave for entry and plan quick exit before getting knocked out by contra waves. It will be greed to look for 90-100% of end-to-end moves and it would be prudent to stay content with 60-75% of set big-picture focus range. As always, stop loss has to be affordable and to what one can chew! It is good not to be a "boxer" in this market; one unexpected blow can knock out even the best (and the favourite) by an underdog!

Wish you all a very happy and profitable 2016.

Moses Harding
harding.moses@gmail.com
9674734145

Leave of absence : Shifting base from Kolkata to Mumbai

Dear all,

It has been a roller-coaster ride in 2015, and I hope you had a good and profitable ride "wind-surfing" the frequent swings in the markets. It is important to be patient for entry on the right wave and exit on time before a bigger wave topples you down! It is also important to cut the losses quickly and ride the profits with trail stop to catch 50-75% of the end to end move. In this process, even if the strike rate is 50%, you end up with decent profit on cash investment and great returns on leveraged margin.

I am in the process of relocation from Kolkata to Mumbai, and will be out of market for some time till end of 2015. I will be happy to take individual queries on the markets regarding hedge, trading and investment strategies. If you may need any guidance or validation comfort on your views, please feel free to post your queries with details on my mail id harding.moses@gmail.com or SMS/WhatsApp on 9674734145.

Will be back by 1st week of January 2016; till then, take care and wish you all the best of luck ahead when markets will turn erratic and volatile in illiquid holiday season!

Wish you all a merry Christmas and great New year (2016) ahead!

Moses Harding
harding.moses@gmail.com
9674734145

India Financial markets : boxed between hope and gloom.....Read on...

Tough battle for India against combined might of FED, ECB and PBoC when RBI ammunition goes off target

RBI was generous with ultra-accomodative 50 bps rate cut on 29th September policy review, but it turned ineffective on India risk-on assets post knee-jerk reaction which couldn't sustain beyond couple of weeks. RBI big supportive act (and measures) is seen as inadequate when FED prepares for shift from accomodative to vigilant stance with start of rate hike cycle in mid December and if data turns supportive in 2016, shift from vigilant to hawkish is not ruled out. ECB is also showing signs of possible end of accommodation in 2016 for shift to neutral stance by end 2016. The other worry is from PBoC importing inflationary pressures building downside risks on the Rupee and upside pressure on commodity prices. All these combined have made India as "high risk" destination on quick reversal of sentiment from being seen as the best-in-Emerging markets, not long ago! The sentiment reversal has gained momentum since mid October when RBI is left with few ammunition, which it can't afford to let go till mid 2016. When FIIs in exit mode, DIIs support can only delay the inevitable and also serve as providing better exit value for FIIs! When external tailwind support has turned on the head at Tsunami force, stakeholders look internal for support from domestic cues and dynamics. Post ECB not being very generous and FED rate hike risk ahead, global markets are nervous with DJIA index in sideways mode 17100/17250-17850/18000 with multiple failure below 18000 against firm hold above 17150. USD Index lost bullish momentum at set pre FOMC cap of 100-100.35, got pushed back from new 2015 high of 100.51 to below 98.50 into 97.50. EUR/USD got 400 point intra-day relief from below 1.0550 to over 1.0950. US 10Y yield couldn't sustain overshoot beyond set tolerance range of 2.20-2.35%.

The impact on India risk-on assets are severe in the absence of RBI monetary bandwidth and lack of clarity on the critical policy guidelines around GST, Land reforms and other measures around "ease of doing business in India" and providing investment opportunities seen as low short term risk against high long term reward. India equity market is already in struggle to avoid new 2015 low, 10Y bond yield back at pre 50 bps rate cut levels and Rupee punching new 2015 low at 67.01 pulling all time low of 68.85 into striking distance. All combined, what it needs in India is "walk the talk/noise" actions from the Government when RBI supportive role is limited in the medium term. RBI has already front-loaded supportive rate actions as combination of steroid (ahead of start of recovery) and as catalyst  (to step up momentum for shift from lower to higher gears). Will it work against other major Central Banks?

Can India domestic cues ring-fence external impact? No great confidence as yet

It is high time the Government shifts to higher gears on its economic growth and development agenda. The initiatives and measures undertaken towards this agenda are many. While some are still in the ideation to policy preparation level, most have not shown desired results. With Land reforms expectation gone behind, GST roll-out target of April 2016 will also go behind if not cleared in the current winter session of the Parliament. The India macroeconomic fundamentals are definitely better than what it was a year ago, but sustainment at current levels and building improvement on them against external headwinds is not an easy task, hence the loss of confidence on the Indian economy and financial markets. The catalyst to growth has to be from accomodative monetary policy (both on rates and liquidity) and risk-on credit appetite of financial intermediaries. While RBI has limited bandwidth on monetary policy, large Banks are credit averse nursing plenty of problems around Capital, NPAs and Profitability. The investor (both domestic and foreign) appetite is good but continue to stay suspect on many factors that do not balance short term risk against long term reward.

All combined, it is not clear on India's ability to ring-fence the pipeline external impact, hence the foreign investors shift appetite to either wait-and-watch mode or exit till clarity on sight of better prospects. Till then, any relief on markets will only be used for exit shifting to risk-off asset classes. The appetite of foreign investors may shift from equity to high yield fixed income at Rupee fair value zone of 67.20-68.85. The domestic investors appetite will stay balanced between equity and fixed income for building strategic portfolio for 2016 while Nifty at 7500-7650 and 10Y bond at 7.78-7.93%. The picture ahead is not gloom and doom as yet; hope for slow-pace sustainable recovery is alive, hence good to buy on 3-5% correction from here on the equity and debt markets. No cheers as yet, but not prudent to dump India Financial assets.

India equity market : No comfort on reversal of bear phase, but short term base is not far away

The lower high's trend since March 2015 high of 9119 is only gaining momentum. It is possible that December high of 7979 (on 2/12) may stay safe through the month, while November high of 8116 and October high of 8336 have moved out of the radar. The risk is now on September low of 7539 and 29th September pre rate cut low of 7691. It would need miracles (accomodative FED, more generous ECB and quiet PBoC) to shift Nifty focus back at 7965-8115, which was set by MARKET PULSE as long-unwind and short-build zone. NIFTY weekly close below 7800 (at 7781) is very negative to set up pull-bias into 7680-7715 ahead of 7515-7550, seen as safe value-buy zone with stop below 7500 for 7000-7150. For now, watch immediate resistance at 7850-7885 ahead of 7965-8000 to hold for continuation of bear phase into 7680-7715 enroute to 7515-7550. It would be lucky not to see a new 2015 low print below September low of 7539. Continue to retain 7500-7550 as make-or-break zone between 7000-7150 and 8000-8150. It is near zero probability for Nifty 2015 close move above 2014 close of 8282 for negative return of 3.5-13.5% against big-picture rest of 2015 trading range within 7150-8000. The rest of 2015 big-picture strategy is to play back-and-forth with buy appetite at 7680-7715 and 7515-7550 (stop at 7480) and short-build at 7850-7885 and 7965-8000 (stop at 8035).

Bank Nifty is sharply down by 9.8% from 2015 close of 18736 and by 19.2% from March 2015 high of 20907. Since then, November high at 17450-17500 is very firm and October high of 18029 has gone out of focus. It is less said the better on the fortunes of Banking stocks except few Banks who are largely insulated from the woes of Capital, NPAs and Profitability. But when the systematic important large Banks are under pressure, the small Banks can do little to come for rescue to arrest the slide. The unwind of benefits from 50 bps rate cut on the Investment portfolio is another major hit on the banking system. The pull bias is into November low of 16587 and 29th September rate cut low of 16648 ahead of 7th September and 2015 low of 15762. The index has been volatile in back-and-forth mode at set pre & post rate cut focus range of 16500/16650-17350/17500. MARKET PULSE set 17350-17500 as too hot to hold zone for 16500-16650, not ruling out revisit to set 2015 strategic base of 15750-16000. For now, watch immediate resistance at 17150-17200 ahead of major 17450-17500 to retain the current bear phase for 16500-16650 enroute to 15850-16000. It would be lucky not to see new 2015 low below September low of 15762. The outlook for 2015 close is between 15750 to 17500 for negative return for 2015 at 6.5-16%. The big-picture strategy is to sell at 17450-17500 (stop/reverse at 17550 for 17900-18050) and to buy at 16500-16650 and 16000-16150 (stop at 15900).

The unwind of bearish momentum for shift to consolidation phase would be from DJIA index upside break of set hot-to-hold zone of 17850-18000/18350 for punch of new 2015 high over 18351 shifting trading range from 17000/17150-17850/18000 to 17850/18000-18850/19000. DJIA has remained steady in 2015 trading around 2014 close of 17823 now post swings between set 2015 strategic focus range of 14850/15350-17850/18350 with back-and-forth moves at 18351 to 15370 to 17977 between June and now. It is positive that global investor appetite on DM equity assets will cushion downside risk on India.

India Gilt Market : 1.25% rate cut in 2015 leaves no impact on the 10Y yield

India 10Y benchmark yield 2014 close was around 8% and the new 10Y benchmark 7.72% 2025 (issued in May) is now at 7.75% unwinding most of the impact of 1.25% cut in 2015. The intra-2015 low held solid multi times between June - August at 98.70 (around 7.93%). RBI overdose 50 bps rate cut triggered sharp rally to 2015 high at 101.64 (around 7.45% on 5/10). MARKET PULSE target for end FY16 was 7.50% with 2015 best case not beyond 7.65-7.70% against outlook of Repo rate at 7% in Q4/2015 and 6.75% in Q1/2016. The ahead of time hit of target 7.50% helped an early unwind of strategic investments and duration-cut of core SLR book to sub 2 years. The reversal from 7.45-7.50% has met 1st target 7.75-7.80%. The way forward is not good with limited investor appetite who are in shock to see huge erosion in the mark-to-market value, most turned from positive to negative. The upside momentum in US 10Y yield into 2.35-2.50% also exerts pressure for short term consolidation in India 10Y at 7.70-7.85% at India-US yield spread at lower end of 5.35-5.60% tolerance zone. With 7.70-7.85% as best case scenario, the worst case at 5.50% spread will shift focus into 7.85-8.0% with big-picture focus at 7.70-8.0%. All combined, 10Y bond appreciation in 2015 will be close to par against 2014 close of around 8% against 2015 close outlook at 7.78-7.93%. The sharp decline in 1Y yield from 8.50% to 7.25% in 2015 is the blessing in disguise for borrowers, while retail investors have nothing to regret to get similar yield in the longer end despite 1.25% rate cut. The poor thing are the Banks whose opportunity (and real) loss on investment book is more than the one-off NII benefit from interest differential between outgoing and incoming deposits, which will be knocked out on revised Base Rate application method proposed by the RBI. For now, 10Y bond finds immediate support at 7.78-7.80 from RBI and 7.83-7.85% from strategic investors. Beyond here will be panic for revisit to 7.93% (old 10Y bond at 8%). The immediate resist zone is at 7.65/7.68-7.70% initiating huge appetite for long unwind (of strategic investments portfolio) and duration-cut (core SLR book).

India Currency market : Rupee shift status from one of the best to weak in the absence of FII appetite

Rupee is now down by 5.8% against 2014 close of 63.03. It is not seen to be over as yet with subsequent post of new 2015 low punch at 66.90 (27/11) and 67.01 (4/12) post quick and shallow correction from 66.90 to 66.43 (1/12). MARKET PULSE set end December 2015 forward USD/INR focus at 66.50/66.65-67/67.15 for hedge strategy, post end of spot chase from 64.70-64.85 to 66.70-66.85 and 12M USD/INR from 68.75/69-71/71.25. Rupee performance in 2015 is not considered bad against over 11% rally in USD Index from 2014 close of 90.27 to 2015 high at 100.51. The woes on the Rupee is also from PBoC currency administration which exerts downside pressure on EM currencies and Rupee can't stay as odd man out. The way forward is not good in the absence of FII flows which has triggered importer dominance in the forward market while exporters enter only on signs of RBI support to Rupee to hedge not beyond near term receivables. The immediate support for USD/INR is at 66.35-66.50 ahead of 66-66.15 (bull trend reversal only below 65.85) with RBI Rupee support zone at 67-67.15. With firm short term base at 65.85-66.35, bias is clearly in favour of Rupee weakness beyond 67.20 into August 2013 low of 68.60-68.85. For now, retain near term focus at 66.35/66.50-67/67.15 (end December 2015 forward USD at 66.50/66.65-67.15/67.30 and 12M USD/INR at 70.50-72.50, breakout eitherway is tough to hold. The hedge strategy is to stay in traction with spot Rupee outlook at 66/66.35-68.50/68.85 (stop at 65.85 and 69). RBI also has the need to build $ reserves at 66.15-66.50 for Rupee support at 66.85-67.20. All taken, Rupee exchange rate outlook revolve around extent of RBI #USD/INR purchases and Rupee protection $ supplies for net adjustment with OMO bond purchases. RBI may turn as net $ supplier in the near term to retain USD/INR play at 66.20-67.20.

EUR/INR 3-step down-hill chase from September at 75.50, 74.50 and 72.50 was script perfect for end of chase at 69.90-70.15. It was seen as high-risk to hold short at lower end of set big-picture focus at 70-76.50. It is not surprise to see sharp post ECB overnight reversal to over 72.50 against 400 pip correction in EUR/USD from below 1.0550 to over 1.0950. What Next? With EUR/USD resistance at 1.0950-1.1050 against 1.0450-1.0550 support, EUR/INR play is now seen restricted at 70.65/71-73/73.35. The upside risk is from Rupee not building traction with Euro recovery against the USD. All taken, retain 69.90-70.15 as strategic short term base and loss of steam at 73.10-73.35 for end-to-end focus for now.

Global currency outlook : USD retains bull trend into 2016

DXY loss of steam over 100-100.35 (at 100.51) is not surprise. This target was set as end of intra-2015 bull chase from 90-92.50 ahead of mid December FOMC. The reversal from over 100.35 was at faster pace for consolidation at 97.50-98.50, below the set zoom-in focus at 98.50/98.85-100/100.35. DXY bullish momentum in 2015 is strong from combination of advantage from both economic performance and interest rate differential between USD and other major economies. With this major advantage, 2015 close at/over 97.50-100.50 against 2014 close of 90.27 set up positive close at/over 8-11%. USD is expected to retain this advantage in 2016 at diluted pace. For now, short term big-picture strategic focus set at 96.50/97.50-100.50/102.50 not ruling out new 2015 high above 100.51.

EUR/USD complete back-and-forth of set 2015 big-picture focus at 1.05/1.0650-1.15/1.1650 with 1st failure on both side overshoot and for hold at outer corridor on 2nd attempt. The post ECB relief rally from 1.0450-1.0550 short-squeeze zone (low at 1.0538) was at break-neck into 1.0950-1.1050 (high at 1.0980) before consolidation at 1.08-1.0950. For now, retain focus at 1.0450/1.0550-1.0950/1.1050 in consolidation mode, breakout eitherway is not expected to sustain. The hedge strategy for 2016 is held in traction with intra-2016 consolidation at 1-1.10 building momentum for 2017 recovery into 1.15-1.25.

USD/JPY boxed at set zoom-in focus at 122/122.35-123.50/123.85 in multiple back-and-forth mode since November. The underlying bullish undertone is valid with immediate support base at 121.65/122 for upside break of 123.50-123.85 enroute for knock at 2015 high at 125.85. The hedge strategy for 2016 is tuned at 120-130.

Moses Harding

Note : This is the last update for 2015. Hope you found MARKET PULSE analysis supportive to your hedge/trade/investment strategies. Wish you all a merry Christmas and Happy New year! Ciao in 2016. Till then, take care; Cheers!

Moses

Masala bonds : Will offshore lenders welcome? Read on...

Welcome agenda for India macroeconomic stability

The measures to liberalise ECB norms and activation of Rupee denominated "masala bonds" are giant steps in the right direction to remove structural woes on the macroeconomic fundamentals when India is setting up pace for sustainable growth momentum over 7.5% in FY17-FY19 and into double-digit beyond 2019. The relaxation in end use restrictions, broad-base of lenders basket and adjusting the spread to practical market reality are welcome moves.

The benefits to India are milti-fold:

(a) shift of borrowers credit/cash demand from onshore to offshore will not add to domestic liquidity pressure when RBI is vigilant on liquidity retaining Repo rate as operating policy rate. Such a liquidity pressure will turn resistive to its accomodative interest rate policy, having already delivered 1.25% cut in 2015 against limited space for 2016 and beyond.
(b) Attracting long term ECB and masala bonds (for tenor 3-10 years) is relief for Rupee exchange rate and to ring-fence FPI induced volatility and to cut frequent presence of RBI in the FX market. It is much needed when Rupee is more vulnerable to downside risks from ECB and FED walking in opposite direction in their monetary policy stance. The combination of weak EUR/USD and spike in USD interest rate will come very heavy on Rupee value against the USD. The risk from PBoC is also in the radar which continue to stay as unforeseen bolt from the blue.
(c) Shift of currency risk from domestic foreign currency borrowers to offshore Rupee lenders is long overdue measure for steady move towards full convertibility on Capital account. When Rupee is expected to face challenges from sudden bout of weakness and stretch beyond interest rate differential on annualised basis, it is systemic risk for domestic borrowers (and on domestic banks) on unhedged "carry" trade foreign currency liability exposures, and RBI has the need to mitigate this risk by offloading the same on foreign lenders.
(d) Rupee exchange rate volatility is driven by FDI mood-swings from sudden shift from India risk-on to risk-off and vice versa; seldom they remain risk-neutral for long period. This leads to stakeholders pain (real loss and/or opportunity loss) and RBI is forced to stand in guard eitherway to arrest excessive one-way price move to balance competitive interest between exporters and inflation. It is high time India cut this FPI induced short term volatility by attracting stable long term debt.

Will domestic borrowers lose the "carry trade" play or foreign lenders keen to take currency risk?

Most foreign currency denominated ECBs are not fully hedged. At the moment, most borrowers tend to keep 6M Libor cost open taking comfort from sustainability of low short term interest rates without the need to pay 6M to 3-10Y Libor hedge cost. Most borrowers also do not see the need to pay the elevated 5.5-6.0% swap cost for long term USD/INR currency hedge. If both the LIBOR and USD/INR hedge is done, it may not be cost effective to cover CDS risk premium and intermediation margin spread. Even if some space is left for good risk borrowers, the operation risks from marking to market & related periodic exchange of cash flows with Banks is not seen to be worth it. It is better to borrow in Rupees at fixed rate. Most AAA/AA borrowers have already moved away from ECB carry-trade play to interest rate arbitrage play in the domestic market. Taking comfort from declining short term money market rates, borrowers have increased appetite in 3-12M CP market (riding the down-hill from 8.75-9.5% to 7.5-8.25%) for decent cost arbitrage against stable 3-10 years long term fixed rate at 10-11%. This approach is now seen as low risk - medium reward against high risk - low reward nature on ECB exposures. All taken, while the demand for foreign currency ECB (from domestic borrowers) will be on decline, there will be less appetite for Rupee denominated masala bonds (from foreign investors). It will work only if foreign lenders could provide decent cost benefit over 10-11%. Can foreign lenders price masala bonds at fixed rate coupon of 8.5-9.5% for 3-10 years tenor?

Against demand for issuance of Rupee denominated Masala Bonds by Indian borrowers, need to review supply side appetite from foreign lenders at fixed coupon rate of 8.5-9.5% for 3-10 years for AAA/AA credit risk. The first look of it doesn't evince interest against CDS credit risk premium of 1.5-2.5% and current hedge cost of 5.5-6.0% (all-in at 7-8.5%), which leaves little for foreign lenders at 1.5-2.5% USD return for 3-10 years). The only option for the foreign lender is to keep the USD/INR exchange rate open to buy masala bonds. Will (or can) they? Long term Rupee exchange rate stability with an annualised depreciation of 3-4% is seen to be behind. The proof of the pudding is from the rate of Rupee depreciation in the last 2-3 years since 2012. The external dynamics will keep Rupee under pressure for annualised depreciation of 5-6% for next couple of years. All combined, foreign lenders preference will be on foreign currency lending with minimal appetite for Rupee exposure. The demand for taking on masala bonds into the Balance sheet will only be to test the water rather than as strategic preference.

Shift of appetite from offshore to onshore credit is there to stay through 2016

The demand-supply dynamics is complex; while domestic borrowers will prefer fixed rate short term Rupee credit (retaining interest rate arbitrage play from CP and short term demand loan credit products against fixed rate long term loans), foreign lenders appetite will be on long term foreign currency debt for encashment of elevated tenor premium. Given the huge credit appetite of domestic banks (with bandwidth for cut-throat pricing by shifting excess SLR cash to low risk - low reward credit), foreign lenders will find it tough to compete with India based lenders when short term US yields are set to inch higher. The only hope is from new entrants (into eligible investor category) who may not be adverse to pay entry premium for acquiring India risk assets/debt.

All taken, it is great initiative but need to be prepared for baby-steps start with hope for turn into giant steps beyond 2016-2017.

Moses Harding

RBI Monetary Policy : Balancing act between cheer and gloom....Read on....

Retain caution on inflation expectation

Post the front-loaded 50 bps rate cut on 29th September review, status-quo was expected on policy rates and liquidity ratios. Thankfully, the delivery was to unanimous expectation.

The expectation was from RBI outlook and expectation on the GDP and inflation. While RBI is seen to be in comfort on FY16 GDP target at 7.5%, RR remain suspect on CPI retaining FY16 target at 5.5-5.8% with marginal improvement to 5% by end FY17. RBI has taken into account possible reversal of trend in commodities in 2016, weak Rupee against strong USD against global currencies and supply side bottlenecks to absorb higher consumption demand leading to elevated prices on essential items. This outlook on inflation sets aside next round of rate cut in the near future, in any case not before June 2016. While remaining suspect on inflation, it is not fair to expect RBI to cut CRR or SLR or shift operating policy rate from Repo to Reverse Repo rate during this period. All taken, RBI monetary policy stance stay accommodative on policy rates (with limited room for more cuts) and vigilant on liquidity (retaining operating policy rate at higher end of LAF corridor).

Resolutions to Banks Balance Sheet woes not clear

While RBI provides top priority to resolutions to NPA woes of the Bank to make them fit and strong to feed into higher credit demand from growth momentum, more focus is on the revised Base rate application by Banks. The lending rate fixation is factor of risk - reward and demand versus supply against the incremental cost differential between outgoing deposits and incoming funds. RBI also took comfort from relaxation in off-shore access to domestic borrowers. The shift of demand from domestic to offshore may not be to the liking of domestic lenders leading to cost advantage only to good risk borrowers, while high risk wholesale borrowers in core sectors continue to struggle for funds willing to pay higher credit premium. Who will share the burden of Banks NPA restructuring strategy? There was no clarity on this, as Banks do not have the Capital or P&L bandwidth to do it on their own.

Way forward is bumpy against FED rate hike

The short/medium term outlook is nervous when India operating policy rate stay steady at 6.75% while US FED Fund rate may inch up to 1% by mid 2016. Against this policy rate outlook, sub 1% inflation in the US against 5-5.5% in India is not positive for India Financial markets. While nothing to expect from RBI in the next 2 policy review in February - April 2016, all attention will be on the FED on quantum of rate hike and on ECB for timing of end of QE, expected to be ahead of schedule. All taken, foreign appetite on India risk-on assets will stay low. Will domestic appetite bridge the gap to aspire for 12-15% rally from here back to 2015 high by end of 2016? Dunno, fingers crossed!

Having done the devil's advocate, BJP is seen to get the opposition together on policy reforms. If the pipeline initiatives are put into execution mode at faster pace, India may get the attention and appetite of foreign investors. I could only wish for the best to get the euphoria on NaMo back on track which drove the markets crazy between May 2014 to March 2015.

Over all, there is nothing much to cheer from the policy review. The take-away is the recognition of the downside gloom from domestic and external dynamics without clarity on ring-fence to retain the economy in sustainable growth track and dilute the pent-up nervous undertone on India risk-on financial assets.

Good to end with caution to stay vigilant on the financial markets for better balance of risk-reward, awaiting better clarity from the mid-December FOMC review.

Moses Harding

India Financial markets : End of 2015 review

Equity market : A great start, but only to lose steam before mid-way

It was a glorious run in 2014 with Nifty up by over 30% and Bank Nifty by over 60%, but got fizzled out in Q1/2015 post Nifty stretch by another 10% and Bank Nifty by 11.5%. The 15 month rally in Nifty from end 2014 close of 6300 (Bank Nifty from 11400) lost steam at set hot-to-hold zone of 9000-9150 (NIFTY) and 20650-21000 (Bank Nifty) in the absence of execution triggers on India reform process. The reversal in Nifty (from March high at 9119) was steady and gradual into set cheap-to-acquire zone of 7500-7650 (September low at 7539) with intra-2015 correction by over 17%. Ditto was in Bank Nifty with sharper correction by over 24% into strategic support base at 15650-16000 (September low at 15762). Will Nifty regain steam now for 2015 close above 8282 for positive close in 2015? Bank Nifty 2014 close of 18736 is clearly out of focus for negative close in 2015.

On the short way ahead for rest of 2015, Nifty post 29th September 50 bps rate hike triggered high of 8336 (high on 30/10) is clearly out of sight. The hope at best is to conquer November high of 8116 for stability at 7750-8100 for move into 2016 with confidence for an improved performance. The cues ahead are not very encouraging. The external tailwind support is on the unwind and FPIs have no great appetite for risk-on India assets when other markets have turned relatively better than India. The domestic cues are nervous losing the built up optimism and euphoria, but retaining the hope for resolutions from reform-hungry Government. The domestic cues need to be strong to counter the FED monetary policy driven headwinds. The hope cues are from GST roll-out, resolutions around Banks NPA, making FDI entry smooth, increasing domestic investment & consumption through growth supportive monetary policy and geographical spread of economic activity for higher employment generation and wealth creation. It looks great on paper, but as always execution delay is the major irritant and bottleneck on the way ahead. For now given the lack of clarity either way, it is tough to set up direction bias for December when the participation is low making markets volatile in the absence of two-way liquidity. It is good to retain NIFTY focus at 7500/7650-8000/8150 with most trades expected to be around intermediate risk-neutral zone of 7750-7900.

Bank Nifty is supported only from growth optimism and resultant pick up in credit growth. Barring this, there are many hurdles on the way. Foremost is the NPA woes around most Banks; while some have the P&L and Capital bandwidth for resolutions, most suffer from the absence of these two critical muscles to get out of the NPA woes. It is less said the better on the revenue squeeze on Banks, except few new generation private sector banks. Banks have incurred significant opportunity loss from inefficient price transmission on long tenor Gilt yields from the 1.25% rate cut in 2015. All combined, it will be great if Bank Nifty can close above October 2015 high of 18029, which is 3.75% below 2014 close of 18736. For now, immediate resistance at 17450-17500 looks fragile for extension not beyond 17850-18000 with minor support base at 16550-16700. Beyond here, do not rule out downside risks into set strategic base at 15650-16000, which should hold. It is good to focus rest of 2015 at 15850/16000-17850/18000 with most trades at intermediate risk-neutral zone of 16600-17250.

Money Market : win-win for short term borrowers and long term investors with short term pain for Banks on the investment portfolio

The play in 2015 is on the tenor spread between the operating Repo rate and 10Y bond yield. While the Repo rate is down from 8% to 6.75%, 10Y bond yield slipped from over 8% to 7.45% before up to 7.78%, thus pushing the tenor spread from near zero to over 1%. In this process, significant drop in short term money market rates (upto 1 year) is cheer to borrowers without causing significant hurt to long term retail investors. Despite 1.25% rate cut in 2015, RBI should not be in discomfort with current price transmission which is in satisfaction to "vocal borrowers" and "silent savers". What Next? The sentiment is not in favour of long term bonds when RBI is in extended rate pause mode while FED prepares for start of rate hike cycle. Till CPI inflation trend shifts to lower end of 4-6% long term tolerance zone, India-US 10Y yield-spread at/sub 5.35% will only build downside risk both on India Bonds and Rupee exchange rate. It is good to allow short term stability at 5.35-5.60%. Given the US 10Y short term yield stability at 2.15-2.50%, India 10Y bond yield is set to be in sideways mode at 7.75-7.85%. The strategy therefore is straight forward - to stay overweight and build duration at 7.85-7.93% and avoid chasing recovery into 7.65-7.72% seen as duration-cut zone, retaining tolerance zone of 90-110 bps between 10Y bond yield and operating Repo rate. The comfort is that 2014 close of 10Y bond around 8% is safe with expected close at higher end of 7.70-7.85/7.93%. While 15-20 bps year-on-year appreciation is ok for domestic investors, foreign investors take pain against 6-7% Rupee depreciation.

Currency Market : It is distant away for Rupee stability and for shift into consolidation mode

Rupee is already distant away from 2014 close of 63.03 and seen weak to punch a new 2015 low beyond recent 66.90, down by over 6%. However, there are many comfort cues. Rupee depreciation is lower than 1 year time value interest differential of average 7%. Rupee depreciation is lower than USD appreciation against major currencies; DXY already up by over 16% at over 100 against 2014 close of 90.27. Rupee is up against Euro by over 7% against 2014 close of 76.24. All combined, Rupee exchange rate volatility has not caused pain and agony to most stakeholders on end-to-end basis. What Next? Rupee has lost the aggressive FPI support for now. This has pulled in importers fear and exporters greed driving the forward market in $ demand driven mode. Despite RBI having comfortable reserve position, the need for fair-value adjustment of Rupee along with peers will only lead RBI to speed-break the adjustment rather than play against the trend. All taken, Rupee is at risk of shift of play to 66.20/66.50-68.50/68.80 in traction with DXY bullish momentum at 99.35/99.85-101.85/102.35. It will be pain for "carry trade" FC borrowers on 12M $ shift to 70.50-72.50 trading range, up from previous 69-71. It is important for RBI to protect July-August 2013 low of 68.60-68.85 to avoid set up of panic, which then would need yet another set of administrative strictures and NRI scheme. The positive take-away is the set up of appetite for "Masala Bonds" from foreign investors and lenders.

EUR/INR is solid at 69.90/70.15-70.90/71.15 while EUR/USD stay in sideways mode at 1.0450/1.05-1.0650/1.07 and USD/INR at 66.65-67.15. It will be very slippery turf below 70 against breakout bias into 72.50 on sharp relief correction on the EUR/USD and marginal relief for Rupee.

Moses Harding

Note : I am shifting base from Kolkata to Mumbai, hence may not be available for rest of December. Will try my best to show my presence here off and on. Best wishes, Good luck and take care!

RBI Monetary Policy review : No action, but outlook and guidance tone matter!....Read on...

Ineffective rate cut transmission - blessing in disguise!

RBI is in disappointment mode post the 29th September 50 bps rate cut. The expectation then was either rate pause or 25 bps rate cut. RBI was expected to stay in caution ahead of mid October FOMC for better clarity on FED stance on timing of start of rate hike cycle and the quantum. RBI took comfort from the then expectation by majority that FED may shift rate hike actions to 2016. The comfort was also from successive sub 5% CPI (and WPI) print in July & August, and robust FII flows fueling Rupee strength and downside pressure on Bond yields across tenors. 10Y bond yield did cover maximum 25 bps rate cut with gradual decline from 7.90-7.93% to 7.70-7.73% preparing for stability around par value. The pleasant surprise of overdose 50 bps cut brought cheer with post action 10Y bond rally into 7.45-7.50% squeezing India-US 10Y yield-spread to 5.35%. The unfortunate "twist" was here; FOMC guidance tone on mid October review was hawkish giving signal for mid December rate hike driving the US 10Y yield from 1.90-1.95% to 2.30-2.35%, which undid the FII appetite to drive 10Y bond to 7.75-7.78% and Rupee from 64.70-64.85 to 66.65-66.90. The disguise is from the fact that 1.25% rate cut transmission has turned inefficient with rate-cut ammunition have turned ineffective. The blessings is from both interest and exchange rate. The spread between India 10Y yield and Repo rate is sharply up from sub zero to 1% in 2015. The sharp decline in short term money market rates by over 1% and status-quo yields on the medium to long term tenors is win-win for "vocal borrowers" and "silent savers". The post 29th September rate cut Rupee rally from 66.40 to 64.70 is to the discomfort of RBI when USD was extending gains over major and emerging markets currencies. Rupee value at 66.65-66.90 is seen good to retain export competitiveness and attractive to FDI and Masala Bonds. A weak Rupee will also lead to FPI turning overweight on India Bonds when equity appetite is low.

What will be RBI response to the post 50 bps rate cut adverse impact on Bond yields and Rupee exchange rate? With October CPI back at over 5% against risk of unwind of tailwind support from price advantage of Brent Crude & Rupee exchange rate and worry from spiraling food prices, what is RBI outlook on inflation on the way forward?

Sustainable comfort on inflation is seen to be distant away

RBI is expected to stay in discomfort on CPI outlook. The pressure is likely to be from the risk of price stability of Brent Crude at elevated levels of $45-60 taking away the expected comfort at $35-50, Rupee under pressure at 66-69 and supply side pressure on food prices. The pipeline efforts to get India growth momentum beyond 7.5% is inflationary against low short term money market rates and higher consumption led demand over limited supplies. While stop-gap measures on supply side can provide temporary relief, RBI concerns will be on long term sustainability given the very limited bandwidth on rate post 1.25% rate cut in 2015. RBI has no space to provide comfort to stakeholders from favourable inflation expectation till end of FY16. While set long term CPI tolerance zone of 4-6% is safe, sustainability at 4-5% is in doubt for RBI to ease system liquidity from deficit to surplus. RBI will stay in caution retaining end FY16 outlook around 5.5% with slippage bias into higher end of 5-6% rather than lower end. The probability of 25 bps rate cut in Q2/2016 on sub 5% CPI print as at end of FY16 is very low at this stage. The resultant elevated 10Y bond yield at 7.65-7.90% is good to retain FPI appetite and ease pressure on Rupee exchange rate.

Need to revive investors and lenders confidence to restore India optimism

Banks and financial intermediaries are not seen to be active participants to India capacity expansion against pressure from Capital and NPAs. When the revenues is under squeeze, the comfort from buffer income from investment book is now behind. It is less said the better on the psyche of the investor community, both domestic and foreign. RBI has the critical task to improve the fire-power of Banks and non-Bank financial intermediaries, leading to better risk-reward environment for investors. Government is already working on resolutions to structural woes around Financial system, but RBI's role to make them work is critical. The track record on successful execution of reforms and measures is not good, hence the expectations from RBI to provide the necessary comfort to investors and higher risk-on bandwidth for lenders.

Measures to ring-fence India from rising US yields and speed-break its impact on financial markets

FED is seen to start the rate-hike cycle in mid-December FOMC meeting. The majority expectation is for 2-step 25 bps hike before end of FY16. RBI will be left to defend 10Y bond at 7.93% and Rupee at 68.85. The impact on India equity markets will also be adverse, not ruling out new NIFTY 2015 low below 7500. Investors will look for cues from RBI guidance to turn overweight for the short/medium term or turn light in the short term retaining appetite till better clarity.

It is non-event (before the event) on policy rates, but lots to hear on RBI's outlook on the way forward

This is one of the few occasions when an RBI policy review event has gone out of focus before the policy day. There is no case for review of 6.75% operating Repo rate or the need to tinker with CRR or SLR. RBI can't cut HTM limit when 10Y bond yield is up from 7.45% to over 7.75%. The expectation will be on either hope & confidence or caution & discomfort from RBI outlook and guidance on the way forward. Fingers crossed!

Moses Harding

Financial and Tax reforms key to build India economic and social prosperity! Rough weather ahead....Read on...

Most irritants continue to stay as hurdles

India continue to be bothered by issues related to policy initiatives and execution bottlenecks. UPA lead by the Congress Party was booted out in May 2014 on issues around policy paralysis, regulatory irritants, administrative & execution bottlenecks, and all leading to corrupt practices, under-capacity productivity and poor efficiency. This triggered combination of anti-Congress and pro-NaMo wave to give BJP a single party majority in the Lok Sabha in May 2014. The hope and optimism did turn into euphoria taking comfort from the able leadership of NaMo, who was expected to sell India Story abroad and to build strong and efficient teams in the Government to step up pace from ideation to execution phase for on-ground impact of economic, monetary and social benefits.

The issues impacting external stakeholders are around policies related to legal, taxation and inordinate delay & complexities involved from investment entry stage to repatriation of returns. NaMo has done a good job in taking the India story abroad to deep-pocket nations, who can bring debt & equity into India and also support the Make-in-India initiative to balance expansion of domestic productivity and emerge as supplier of goods to feed external demand and consumption. The agenda is great on paper and in the right direction. The external stakeholders - investors, lenders and manufacturers are now in wait-and-watch mode with keen attention on various pipeline policy initiatives and better clarity on execution capabilities. Rolling out "red carpet" through liberalisation (and expansion) of ownership limits across sectors is good to attract attention but not good to pull hard cash. India has to emerge as one of the best destination for ease of doing business with no complex issues around entry and exit barriers.

Financial reforms key to build domestic capacity and attract foreign liquidity

The domestic financial system looks great from outside, but saddled with lot of inefficiencies around capital and NPAs in systemic important public and private sector banks, and fringe participation from Development Financial Institutions. The PSU banking system is in struggle for Capital, both for growth and strategic restructuring of its non-performing asset/loan book leading to revenue squeeze, low productivity and poor efficiency. The allocation of huge capital from exchequer to PSU banks is low in the absence of deep-pocket purse while dilution of public stake to private is not a sensible option at below par valuation. It is kind of between the devil and the deep sea. The solution is obvious to improve the efficiency of PSU banks and to build valuation before significant dilution from majority public stake to majority private for accumulation of huge premium to Capital funds, the way private sector banks have enlarged the capital base since 2004 through dilution of marginal stake for significant capital funds without dilution on the return on capital funds.

The actions now should revolve around NPA management. The huge NPA portfolio need to be shifted out from debt to cash or equity. The recent restructuring measures are only to shift the inevitable default risk from now to later date with the hope that Banks will build capabilities to absorb provisions. The role of the Government to participate in restructuring of the NPAs in core sectors around infrastructure and commodities is very critical to gain investor confidence on large Public Sector Banks. The stress loan book without adequate asset coverage have to be moved out from the Banks balance sheet to Government owned (or sponsored) finance (or investment) vehicles. The next agenda is the Bankruptcy Act which should remove the irritants for Banks and comfort of the borrowers. While the Banks are under pressure for accelerated provision on the NPAs, recovery process from the borrowers take decades. Against this huge time lag between provisions and actual recovery, Banks are expected to provide 50-75% of gross NPAs from the profit when most Banks are under revenue pressures from either the competition or the inefficiencies. The two measures of creation of National Infrastructure Fund and revised Bankruptcy Code are in the right direction. As always, execution risk remain valid if adequate cash is not allocated for the fund and stringent (and punitive) legal actions are not initiated on willful defaulters and/or impropriety use of borrowed funds. It is not proper to plough into tax payers money for the protection of large borrowers. The efficiency in which money is recovered from small borrowers should also be deployed for large borrowers.

Tax reforms critical for fiscal prudence and cost optimisation

India Taxation mechanism is inefficient both on the cost and revenue side. The inefficiencies on the revenue side is from tax evasion of many and understatement by most, while genuine payers not getting desired value for the contribution. The cost of collection of revenue is also inefficient. The multi-tier tax policy is also making things complex and leading to evasion. The Government has taken steps to plug revenue leakages and cost management which are seen as steps in the right direction to remove structural bottlenecks for long term sustainable benefits. The GST roll-out has been on "paper" for long which will remove the complexity in tax payment and collection. Will it be through (and done) now in the winter session of Parliament? Earlier the better to restore confidence on the Indian economy and financial markets.

Public resources critical to accelerate private investments and to attract offshore long term liquidity

Public investment for expansion of economic productivity is low. The exchequer is finding it difficult to meet both ends meet with most money spent on administration, subsidy consumption and social obligations around defence, security, legal, health care and education. Most developed economies revenues are from combination of taxes and profits from public sector enterprises. The capital/cash burn for running most PSU entities need to be stopped and turned into contributors to exchequer. This will lead to lower taxation leaving more monies for consumption. Genuine tax payers end up paying more than 50% by way of direct and indirect taxes which is inefficient. The only way is to bring in effectiveness in revenue collection, thrift in cost management, efficiency in PSU enterprises and to reduce spending on unproductive consumption items.

India can not aspire to become super power unless it emerges as best-fit building strengths on the economy, finance, defence, security and social standards. In all these parameters, India is below par/median amongst peers, and laggard with large gap with the leaders. The agenda has to be 3 phase - doing it right to be above par, doing it well to be best-in-class and diversify & build scale to be amongst the leaders. The Government now has the agenda to do things right removing the inefficiencies and bottlenecks switching from lower gears to high/top gear cruise mode; low-gear cruise (for extended time period) will lead to engine failure sooner than later! This is the caution and risk factor ahead on the political system. Can India political parties be kind enough to upgrade maturity for the good of the country and its people? As always, retain hope shifting the sentiments between optimism and pessimism. It is good that people have the patience to retain hope, waiting for the sight of light at the end of the tunnel! Will we see the light in 2016?

Moses Harding

Global Markets this week : With no trend clarity, fleet-footed is the way2go!...Read on...

Two-way swing with no unanimity on FED rate action expectation

Global markets in (2-way) volatile mode adjusting value between expectation of 25 bps rate hike followed by unwind not ruling out rate pause and back again to build rate hike risk. It has been trader's markets ahead of FED rate decision (and guidance) for trades in back-and-forth mode at set ranges adjusted to extremes of 25 bps hike and pause. What is not covered the hawkish policy guidance tone for accelerated pace.

Pre FOMC DJIA index focus was set 17000/17150-17850/18000. The intra-November moves have been at 17977 to 17210 to 17914 with close at 17823. The bias on move closer to FOMC is neutral either for stretch into 18000-18350 or extended push-back to 16650-17000, but all within upper-half of set 2015 strategic focus range of 14850/15350-17850/18350. It would need a very hawkish stance to get the pressure into lower-half which is low probability. Given the US & Euro zone priority attention (along with Russia) to restore order in Syria, it's prudent to retain stability in Financial markets by avoiding "bolt from the blue" monetary triggers. Therefore, the probability of pleasant surprise (from the FOMC) is higher than the getting an unpleasant shocker! Based on this outlook, US 10Y yield is in back-and-forth mode at set focus range of 2.20/2.25-2.35/2.40% with intra-November moves between 2.23 to 2.38% with close at 2.26%. The post FOMC breakout bias is neutral between 2.10-2.20% and 2.40-2.50% with stretch beyond here tough to sustain.

Gold 3-month recovery from 1077 to 1185-1200 target (high at 1190.63) got unwound in 1 month into 1065-1070 (low at 1064.95) before consolidation at 1065/1070-1085/1090. The undertone continues to remain weak for stretch into 1020/1035-1050 against firm near term resistance at 1085-1100. In the big-picture (into 2016), the range focus is biased at 950/985-1100/1135.

Brent failed to retain steam at 52.50-55 shifting focus back to lower end support zone of 40-42.50 (from September high of 54.32 and October high of 54.05 to November low of 43.15 before close at 44.66). Brent Crude unable to derive support from military tensions around the Oil production zone is surprise, which is unusual behaviour. Is the demand compression so huge to ignore worries from supply and spike in risk premium? What Now? The moves since 2009-2012 is very wide between 36.20 to 128.40, and now at lower end. There has to be hedge demand at value 40-45, sustainability at 40-50 is dream, hence tough to be true for long. It is God's gift for oil importers to make hay while the sun shines at 40-45. For now, stay tuned at 40/42.50-48.50/50 retaining breakout bias into 53.50-55 against unsustainable stretch into 35-36.50.

USD bullish momentum (DXY from 92.62) met target 99.85-100.35 (high at 99.85 before correction into 98.50-98.85 for bullish close at 99.60). The intra-2015 moves in DXY is more or less to the script with outlook for back-and-forth volatility at 92/93.50-98.50/100. Now, the pressure is on April high of 99.99 and March high of 100.39. Inability to break into 100-100.35 and deeper push-back into 96-98.50 is signal for revert into neutral consolidation at upper-half of 92.50-100.50 at 96.50-100.50 awaiting FED.

EUR/USD complete its back-and-forth play at 1.05/1.0650-1.15/1.1650 with correction from 1.06-1.0650 losing steam at 1.0750-1.08. What Next? Need to watch USD bullish momentum while DXY at 99.85-100.35 and EUR/USD at 1.05-1.0650. Can DXY shift bullish gear beyond 100.50 driving EUR/USD below 1.0450? No clear answer to this now ahead of FOMC. Till then it is prudent to stay with neutral bias at 1.0450/1.06-1.0850/1.10.

The FED options are amongst  (a) deliver to expectation with 25 bps hike with neutral to cautious data dependent guidance  (b) rate pause awaiting more clarity with near 100% probability post festive season and (c) 25 bps hike with hawkish guidance for regular baby steps beyond 50 bps. I tend to stay 51:49 for option (a) against (b) ruling out option (c).

India assets in relief recovery mode with fear of the unknown on the way ahead

The impact on India risk-on assets from external cues have already turned against, from combination of FED monetary policy shift and FPI appetite shift. Domestic cues are also not in favour despite some decisions (and measures) post Bihar results. The only consolation in the near/short term is the relatively cheaper valuation compared to 2015 peak pulling support from short-squeeze, DII bids and from others who missed post NaMo rally. Taking all these, near term focus is fixed in Nifty at 7700/7750-8000/8050 for short term stretch not beyond 7500/7650-8200/8350. Bank NIFTY near term focus retained at 16700/16800-17400/17500 with short term stretch restricted at 16000/16150-17850/18000. Good to stay focused end2end for now.

India 10Y bond yield base is seen firm at 7.63-7.66% with risk of overshoot beyond 7.72-7.75%. In addition to FED rate hike and low FPI appetite, fresh concerns have emerged on fiscal deficit, inflation and higher supply against reduced demand. All combined could lead to RBI rate pause in 2016 and downside risk on the value. While strategic appetite from domestic investors will emerge at 7.72-7.75%, the underlying trend (into 2016) will stay bearish for 7.90-7.93%. Against this big-picture outlook, set 10Y bond focus at 7.65-7.75% for now in traction with US 10Y at 2.20-2.30% with spread around 5.45%. It is unfortunate that the 2-step intra-2015 rally from 7.93%/7.75% to 7.45-7.50% is half unwound (with 7.45% to 7.75% fall) for risk build up for more into 7.75-7.93%.

Rupee recovery from 66.50 held at 65.85-65.90 against import hedge support zones of end December at 66.35-66.50 and 12M $ 70-70.25. The major risk on the Rupee is now from the extent of stretch in DXY beyond 99.85-100.35 and the level of FPI exit from India risk-on assets. All taken, the short term big-picture is already set at 65.70/65.85-66.85/67 (stop at 65.50 or 67.20 for new range shift) against near term play at lower half with most trades at 65.85-66.35 followed by time-decay adjusted shift to 66.05-66.55. The hedge strategy is unchanged watching end December at 66.35-66.85 and 12M at 70/70.25-71/71.25.

EUR/INR complete the push-back from 72.50 to 70 (low at 70.10 from high 72.49) for short-squeeze driven correction into intermediate resist zone at 70.90-71.15. The near term momentum continue to remain bearish for 68.65-69.15 for pre FOMC consolidation at 69-71.50 (reviewed from previous 70-72.50).

Have a great week ahead; Good luck!

Moses Harding

Will India ever bridge the gap with China? Doubt it!....Read on...

Ferrari drive versus shift from an Ambassador to Maruti-Suzuki

China began the economic liberalisation journey two decades ahead of India and since then to now, the journey has moved on to a kind of express-way road in high powered Ferrari engine. India began late in early 1990's and since then have upgraded from an ambassador car to Maruti-Suzuki on to single way uneven road.

All to do with political maturity and execution efficiency

We talk about evolving domestic (and external) tailwind support and headwind resistance without getting much attention to the major domestic hurdles from absence of political maturity and poor execution efficiency. The comparison of India with China on these two aspects will lend credence to my doubts on India's capabilities to bridge the widening gap during my life time, and I am not old by the way!

Political maturity is not really relevant in China given the one-man, one-party environment. Anything is possible, good bad or ugly! In the developed World, politics exist only during the election period. Post verdict, all are together for a common cause for stepping up economic well-being of the country and ensuring social upgrade of its people. Unfortunately, neither of that exist in India. We may not aspire for Chinese kind of political authority, which may end up very good or go disastrous with ultimate powers with one party and few strong individuals in control. The best option is to get the political system together for India economic well-being for social upliftment of its people, who are said to be the masters in the democratic political set up.

We import capital, liquidity, goods & services, technology, Intellectual property and more from the developed countries, why not political maturity? The only agenda of the Indian opposition parties is to wish (and ensure) that the ruling party doesn't deliver to promises! The intent is to get back to power on the back of failure of the other, without realising the hard fact that the losers are indeed the country and its people! Who cares if they could hold on to power and money? This agenda is sustainable only when majority (called the vote bank) is illiterate and stay dependent on the Government's subsidies and freebies. No party is different in this agenda; BJP did that to the UPA then and getting paid back by the Congress Party to NDA now! This vicious circle has to be broken if India has to stay where it is now and to cut the risk of getting labeled as insignificant. The delay in getting critical policy reforms around GST, Land reforms etc are testimonials to the case in point.

Direct executive action versus lot of noises with delayed action

We don't get to hear noises around strategies and tactics from China, what we hear loud and clear is the execution actions to realise the end result at break-neck speed. It applies even to Monetary policies - without noises and discussions around what needs to be done; rate actions or liquidity management is done instantly before it is demanded by the system.

It is different in India! We hear lot of noises around what is necessary; some get done with delay, while most gets into time-out mode making 5 years tenure too short to take initiatives (and measures) from ideation to execution phase. NDA is already through 18 months of power, just short of half-way mark but nothing much done. The intent is good and related strategies are clear, but the significant delay in converting the same into tactics (policy and regulatory measures) to get into execution mode is the serious concern. The UPA was booted out for reasons of policy paralysis, regulatory irritants and administrative (and executive) bottlenecks. NaMo (and BJP) was seen to be the only alternative and got single-party mandate with hope and optimism. The external stakeholders got relieved with hope of removal of issues around policies, regulations and execution. It is 18 months behind since then, but nothing much visible on the ground. The financial markets are nervous with risk-on equity assets having unwound around 15% from 2015 high. The 1.25% rate cut in 2015 has not helped. Loss of FII appetite with risk of shift into exit mode is exerting pressure on the Rupee exchange rate. India can't survive for long from external support from lower commodity prices from demand compression and liquidity flow in the absence of opportunities in the developed and major economies.

It is a wake up call now with political environment shifting from bad to worse; Congress Party is getting into the act of opposition collaboration to counter BJP and the Government. NaMo has tough job ahead to translate his India Vision into reality. Opposition parties should realise the real fact that the India political behaviour will make India an insignificant player over long term when the gap between India and China will keep widening. It is also possible that someone else may replace India as alternate to China in the global system shifting the global attention away from India!

By end 2016, the halfway mark would have been hit to make things better or worse. Hence see 2016 is the make-or-break year for India, it's economy and financial markets. Let's hope for the better! What else to say! The financial markets are already showing signs of 2015 close below 2014 close. It is important to get the 2016 close above 2015. Thinking aloud for "powers that be" to respond!

Moses Harding

Gold Monetisation Scheme: A Critical Analysis - Dalal Street Investment Journal

Global markets in the week ahead : Is the worst really behind? Read on.....

Can liquidity driven rally on equity assets hold on to stretch valuation in the absence of support from fundamentals?

Despite weak macroeconomic fundamentals, G7 risk-on equity assets have built significant valuation since 2009. Central Banks are in ultra-dovish monetary policy stance since then, pumping huge liquidity at near zero interest rates and now with bloated Balance Sheet. The regime of zero (or negative) return on idle funds parked with Banks is with intent to build economic capacity through leveraged consumption. Despite FED ending QE in 2014, others in Euro zone, Japan and China are still in extended supportive mode. Unfortunate part is that all these measures have not led to economic growth, but only led to liquidity flows into risk-on assets for short term "carry trade" play. In the absence of fundamental support, liquidity driven rally has to end at some point, at hot-to-hold valuation. DJIA multi-year rally from below 6500 is already losing steam over 18000. During this period, NIFTY rallied from below 2500 to over 9000 before reversal. The reasons for inability to pick up global growth momentum despite 5-7 years of overdose monetary support is mystery - "something is seriously wrong somewhere".

The Indian scenario is more complex despite optimism since mid 2014. The macroeconomic fundamentals look definitely better, but not with significant economic capacity expansion. The GDP growth got lifted up from below 5% to over 7% on the book through review of base year calculation. The significant improvement on the CAD, inflation and fiscal deficit is largely due to sharp decline in Crude. The external appetite for India is more to do with others being worse, and attracted by elevated interest rates & sharp decline in Rupee exchange rate. The comfort is from opening up of huge opportunities, while the risk is from execution efficiency. While India is still seen as "best among the bad" (along with China), it is not good enough to sustain stretch valuation in the absence of backing by strong fundamentals.

What Next? MARKET PULSE set 2015 focus on DJIA at 14850/15350-17850/18350 covering the above-said dynamics in play against 2014 close of 17823. As per script, overshoot beyond the hot-to-hold resistance point 18350 was short-lived with punch at 18351 (in May) before sharp unwind to low of 15370 (in August) followed by recovery into 17977 (on 3rd November). Now, the pace of correction from below 18000 into set target at 16850-17000 is worry with weekly close below 17250-17350. The cues ahead are complex with conflict between the FOMC  and IMF on FED preparedness for December rate-hike. The economic data from G7/G20 (excluding the US) provide little comfort on growth, consumption and employment. It's not good risk to stay invested in risk-on equity assets taking comfort from liquidity support from G7 (excluding US). All taken, the short term outlook is not in favour, thus setting up risk of extended correction into 16600, seen as make-or-break point which is also mid-point of set 2015 strategic focus range of 14850/15350-17850/18350. For now, it is good stay focused at 16500/16650-18000/18150 with short term cap at 18250-18350. Given the liquidity support and possibility of rate-steady FED in 1st week December FOMC meeting, risk-on buy would emerge at 16500-16650.

NIFTY comfort is largely from significant unwind in valuation since March 2015 high of 9119 to 7730 (by over 15%) and not far away from (September) 2015 low of 7539 which is just 2.5% short pulling in short-squeeze bids and value-buy appetite. MARKET PULSE 2015 strategy was not to chase NIFTY into 9000-9150 and to accumulate at 7500-7650. While 2015 high is seen very safe, uncertainty is from the hold at 2015 low at 7539. The unfortunate part is that 50 bps rate cut support rally from 7691 to 8336 (between 29/10 to 26/10) is set to unwind completely by stretch into 7539-7691 in the immediate term. The short term resistance  (for rest of 2015) is away at 8115-8150 and 8315-8350 not ruling out 2015 close below 2014 close of 8282. The  immediate minor support at 7685-7710 with make-or-break support zone of 7500-7535, which is likely to hold. MARKET PULSE has already squeezed the Q4/2015 (post 29th September rate cut) range focus at 7500/7535-8315/8350 and with break below mid-point 7925, the bias was for test/break of 7750-7785 which is done now with low of 7730 before weekly close at 7769. For the week, short-squeeze correction will be shallow at 7850-7885 with firm resistance zone/cap at 7915-7950. The downside pressure at 7685-7710 is likely to give way for stretch into 7500-7550 before consolidation at 7535-7935; break below 7500 will be very bearish. Stop for weekly big-picture focus is at 7500 and 7950.

Bank NIFTY went sharply down to 16587 from 2015 high of 20907 (by over 20%) against 2014 close of 18736. The sharp unwind post 1.25% rate cut in 2015 says it all on the woes from NPA and Capital squeeze on Banks P&L and Balance Sheet. The 2015 focus was set at 15000/15850-20650/21000 and have seen end-to-end with stability around 16850 now. Can the 2015 low punch at 15762 stay safe? There is high probability of staying firm post the recent measures to find structural resolutions relating to Capital (through enhanced FDI limit) and steps to reduce the huge NPA burden largely from infrastructure and price sensitive commodity sectors. The earnings risk is from hardening bond yields (leading to huge opportunity and real losses on the Banks investment book), squeeze in the intermediation margin and increased competition in the lucrative product segments of low cost CASA, high yield small ticket loans and Transaction Banking fees. All taken, Bank Nifty is likely to outperform NIFTY for rest of 2015 in bullish consolidation mode at 15850-18250 with intermediate resistance zone at 17050-17450. For the week, it is good to retain focus at 16500/16650-17350/17500 in sideways mode with 51% bias for unsustainable stretch into 15850-16000.

Limited clarity on the trend in Gilt yields

The huge volatility in US 10Y yield has impacted most markets; Euro zone woes drove US 10Y yield down from over 3% to 1.65% in 2014 before stability at 1.85/2.0-2.35/2.50% in 2015 (low at 1.91% and high at 2.50%), and now in risk-neutral mode at 2.25-2.35%. What Next? FED holds the trigger for breakout of 2.20-2.35% pre FOMC focus range. FED rate-hike would trigger move into 2.35-2.50%, while rate-pause get the focus back into 2.05-2.20%. The most critical will be the policy guidance tone between neutral to hawkish. At this stage (against IMF red flag on rate hike while G7 in extended dovish stance), set 51% probability of mid-December FED rate hike; eitherway, volatility will be extreme in thin Christmas holidays market conditions. For the week, good to retain focus at 2.20-2.35% with marginal bias for spike into higher end of 2.35-2.50%.

India 10Y bond has now completed the expected FY16 rally from 7.90-7.93% to 7.47-7.50% ahead of time at end H1/FY16, and now in end-to-end sideways mode at intermediate zone of 7.65-7.75%. What Next? RBI next round of rate cut is seen distant away, having already unwound impact of 25 bps rate cut, seen as more than necessary of the 50 bps cut delivered on 29th September. The probability of CPI stability at 5-5.5% in rest of FY16 is higher than ease into 4.5-5.0% which puts RBI in extended rate-pause mode. During this time, it is higher probability of FED delivery of 50 bps rate hike before end of FY16. Combination of RBI and FED monetary policy stance, India 10Y bond range focus is now set at 7.60-7.85% with India-US yield spread squeeze to 5.20-5.35% cutting FPI appetite significantly till USD/INR exchange rate correction into upper-half of 65-70. For the week, it is good to retain focus at 7.60/7.62-7.73/7.75%. The strategic play is to unwind "long" (entered at 7.73-7.75%) book at 7.60-7.62%. Banks also will be seen cutting duration here on core SLR book for reinstate at 7.75-7.85%.

USD retain bullish undertone despite swift rally into 2015 high

DXY intra-2015 moves have been volatile within set strategic focus at 90/92.50-98.50/100 against 2014 close of 90.27. The back-and-forth moves are wild at 90.24 to 100.39 to 92.62 and now at 98-99.50. USD continues to retain its strong hold on major (and EM) currencies, both from macroeconomic and interest rate advantage. Will DXY punch a new 2015 high over 100.39? Between Yes and No, the bias is in favour of punch of new high if FED is seen ok for bullish extension beyond 100. For the week, it is good to retain focus at 97.85-100.35 with extended correction not beyond 96.50-96.85 while retaining bullish momentum for break of 100.35 to test FED nerves whether to intervene or be with the flow.

EUR/USD is the worst hit in 2015 down by over 13.5% in Q1/2015 to low of 1.0450 from 2014 close around 1.21. The recovery from here was equally swift to August high of 1.1711 and now under pressure at 1.07-1.0850. What Next? Post the Q1/2015 crash, MARKET PULSE strategic big-picture focus was set at 1.05/1.0650-1.15/1.1650; since then overshoot into 1.0456 and 1.1711 couldn't last beyond intra-day. Now 1.05-1.0650, seen as short-squeeze (and long-build) zone is at striking distance is at risk against the DXY bullish momentum beyond 100.35? It depends on FED guidance more than the token rate hike act; neutral guidance with 25 bps hike will lead to print of new unsustainable high, while a hawkish guidance can shift the range focus to 98.50-103.50 (driving Euro below 1.05 to striking distance of parity).

Rupee resilience to USD strength is at risk

Rupee has been resilient to USD strength down only by 5% against DXY up by 10% from 2014 close, thanks combination of CAD decline from 5-7% to 1-2% of GDP, robust NRI/FDI flows and huge FPI appetite for India debt & equity assets. But for aggressive RBI $ purchases at 63.35-63.50 & 64.70-64.85 and huge offers at 66.35-66.85, Rupee would have been extremely volatile at 60-70. Can all these dynamics sustain to retain Rupee resilience against the USD strength? The risk is from FPI flows; while elevated Bond yields is relief, consolidation of equity market is essential to cut FPI exit mode. While FPIs move away, USD/INR will build traction with DXY strength and stay diluted with DXY push-back. For now, USD/INR near/short term base seen firm at 65.50-65.85 with bias into 66.50-66.85; consolidation outlook here is valid while DXY at 96.85-100.35 and extended gain beyond 100.35 will build downside risk on the Rupee into 66.85-67.20. The hedging strategy is to cover near/short term imports at 65.95-66.10 (end December 2015 $ at 66.50-66.65) and long term imports at 65.50-65.65 (12M $ at 69.85-70) while exporters stay away for 12M $ at 71-71.25 (spot at 66.85-67.10). Beyond 67.20, focus will shift into August 2013 low of 68.85. Rupee complete unwind of post 29th September strength from 66.35-66.50 to 64.70-64.85 may not be to RBI's dislike. All combined, Rupee retains its nervous undertone from global headwinds and domestic complexities.

EUR/INR post the unsustainable swing between 65.65 and 78.15 (tracking EUR/USD between 1.0450 and 1.17) is seen to be settled at 70.35/70.60-72.15/72.40 within near term big-picture at 70-72.50 while USD/INR at 65.50-66.85 and EUR/USD at 1.05-1.10.

Commodities under pressure with most cues against

Commodity assets have lost advantage from combination of demand-supply and growth-inflation dynamics not being in favour with shift of traction to USD price movements. The abundant liquidity at near zero interest rate has not helped.

Brent Crude recovery from 40-42.50 strategic support zone lost steam at 53.50-55, and now building pressure for more downside risks. MARKET PULSE strategy was to stay focused at 40-55 with bias for bullish extension into 55-70. But given the growth pressure and supplies pile up, near term risk remains for closer look at December 2008 low of 36.20, which will bring more fear than cheer to even Crude importers. For now, may need to review strategic focus from 40/42.50-53.50/55 to 35/36.50-48.50/50 with near 100% probability of relief recovery into 53.50-55 from 37-42, seen as good hedge for oil importers.

Gold under pressure again at 1070-1085 having lost over 8% from 2014 close of 1183.50 and by over 17% from intra-2015 high of 1306. Gold has lost its safe-haven status from low inflation and Central Bank sales for cash liquidity. MARKET PULSE was on the down-hill chase through 2015 for 1070-1085 and favoured deep correction from here into 1185-1200 before sharply down. The fall from 1185-1200 (high at 1190.60) since mid October to 1070-1085 is at break-neck speed. Now, the outlook is negative while below 1100-1110 for 950-1000. For now, let us keep close watch at 1070/1080-1100/1110 with bias for downside break into 1000.

Have a great week ahead; Good luck!

Moses Harding