Thread by @mosesharding

What’s this week (17-21 August) in global & Indian financial markets?

Theme: Trump & FED dynamics continue to support “last mile” risk-on mode, while India fortunes stay mixed & nervous boxed between risk-neutral & light.

It’s good to avoid overweight on high-risk assets...1/N

NASDAQ mark-time at 10650-11350/11500 (close above 11K) is good beyond high 11126 for 11500-11850 (stop 10650)

S&P500 held steam above 3300 preparing for new high above 3393 towards peak 3500 (stop 3300)

DJIA in catch-up act lifting support at 27350-27500 for 28150-29568...2/N

Highlight on US equities (Q2/2020 to Q3) is from DJIA lifting base from 20500-20850 to 27150-27500, S&P500 from 2950-3000 to 3250-3300 and NASDAQ solid above 10K leaving pre-Covid high 9838 out of focus.

India equities stood to benefit from FPIs mood-shift from exit to buy...3/N

Risk-on mode on US equities halted US 10Y Treasury rally at 0.50% for push back into 0.65-0.725% with play within big picture 0.50-0.85% aligned to FED Fund rate stability outlook around 0%.

Retain focus around midpoint 0.675% at 0.60-0.75% in absence of breakout momentum...4/N

USD Index into sideways mode at 92.50-94 (of focus range 91.50-95) aligning with FED end of rate cut cycle and see no need to review focus beyond here.

EUR/USD retain sideways mode at 1.1650/1.1725-1.1925/1.2000 and so is USD/JPY at 105/106-107.50/108.50 (of 103.50-110)...5/N

Gold into roller coaster ride from peak $2075 in 2-down (2073-1865) & 1-up (1865-1966) mode b4 close at $1944. It’s high probability that short term cap is done, and into sideways mode at $1830/1865-1965/2000.

Nothing unusual in Brent Crude gaining comfort at $42.5-47.5...6/N

Why India financial markets in struggle despite external tailwind support?

It’s trouble on all fronts, unsure of where’s the down-hill headed on top-line GDP & bottom-line fiscal deficit and concerns from high headline inflation & declining CAD from output contraction...7/N

India equities continue to remain in search of turnaround point, #Nifty at 11350-11500 (got 11366-11111-11178) and look set for shift of play from 11100-11350 to 10850-11100 for completion of back & forth at focus range 10850/10885-11350/11385 (lower stop 11350 from 11500...8/N

While #Nifty failed repeatedly over 11350 (while below 11500), #banknifty kept slipping from over 22325 (below cap 22650) for near 1000 points collapse (22439-21459-21679); #WhatNext is worse here with pull bias into 19500-21500, lower half of big picture 19500-23500...9/N

10Y benchmark yield at 5.95-6% was on cards but not expected this way like knock-out punch from 5.75-5.80% when near term bias stood neutral between 5.65-5.75% and 5.90-6%, and the trigger is from emergence of outlook of near 100% probability of end of rate cut cycle...10/N

Can @RBI prevent weakness beyond 6% after falling short of bids on follow-on issue of new bond 5.77% 2030 and pushed for cut-off at 5.96%? Bottom-line, focus range lifted up from 5.75-6% to 5.90-6.15% (on 5.77% 2030 & 5.79% 2030) retaining upward bias on overnight rate...11/N

So, when outlook is not positive on India debt & equity capital markets, what to look for in ₹ exchange rate when USD/INR kept resilient at 74.50-74.85 when the going was good for ₹ from falling $, and now risk emerge from possible upside break of USD Index at 92.50-94...12/N

Retain outlook for USD/INR shift from 74.50-74.85 to 75.15-75.50 and expect @RBI to hold stability at 74.50-76.50 if ₹ into trouble from FPI exit & importers urge for hedge.

EUR/INR focus at 86.50/87.25-89.25/90 stand valid with pull bias into 90-91.50 (base at 85-86.50)...13/N

All taken, need clarity from C-19 moratorium impact on banks NPA/PAT/CAR, turnaround signs on headline inflation for push back into lower half of tolerance zone 2-6% and fiscal measures from @FinMinIndia for comfort on growth. Till then, valuation correction is inevitable...14/14