US debt ceiling disaster: Should Nifty bulls be anxious?

May 27, 2023 | blog

USA on the verge of a Debt Crisis…A Global Economic Catastrophe awaits us…Global Markets to Crash these are few of the headlines which have grow to be the speak of the city. These occasions give me a powerful sense of déjà vu. It seems like a film I’ve seen earlier than and due to this fact know the way it ends. The subject of the American debt ceiling is again and so is the concern mongering by the USA politicians and Western media.

So, what is that this USA Debt Ceiling and what influence will it have on Global Financial markets? The USA authorities spends extra money than it earns and due to this fact it must borrow cash to pay its payments. In an try to manage the extent of debt, it could possibly solely borrow as much as a sure restrict and that sure restrict is named the Debt Ceiling.

The USA debt at present stands at round US$ 31 trillion and is on the verge of surpassing its debt ceiling of US$ 31.4 trillion. Once it reaches the debt ceiling it could not be capable to borrow extra money. Therefore, with a view to not default on its current curiosity funds, it must minimize its spending and improve tax charges. This would have a cascading impact on the USA credit standing, rates of interest, monetary markets and all issues dangerous.

But this isn’t the primary time the USA is on this scenario. Since 1960 it has been in such the same scenario 78 instances and has come out superb on a regular basis. How? Just by growing its Debt Ceiling. The Debt Ceiling was final raised on August 1, 2021 to USD 31.4 trillion from USD 28.4 trillion. If the choice is to be made between two choices – A Debt disaster and growing the debt Ceiling – the latter could be chosen on a regular basis. Thus, debt ceiling is nothing however a should move piece of laws to save lots of the nation from the disaster. The USA has by no means defaulted on its debt obligation. The authorities has at all times been capable of attain a cope with the congress to lift the debt ceiling.

Investors are due to this fact suggested to not panic and make irrational choices primarily based upon the exaggerated media headlines. The debt ceiling is nothing like its title suggests. It is just like the sky which retains on going farther away as we construct excessive rise buildings.

Technical Outlook:

Nifty rose by 295.95 factors, gaining 1.63% on this week. It has fashioned a powerful candle on the weekly chart, closing above the earlier week excessive of 18458.90. Nifty was consolidating between the 18050-18400 zones since final three weeks. It lastly managed to interrupt the 18400 resistance on Friday and closed at 18499.35.
On the each day chart, the 13 Day Exponential Moving Average (DEMA) continued to behave as a powerful help for Nifty. The help of 18200 gave the impression to be in hassle on Thursday this week earlier than a pointy restoration within the final hour, pushed Nifty larger.
The Index has taken help from the 23.6% retracement degree of 18,076 on nineteenth May, drawn from twentieth March low of 16,828 to fifteenth May excessive of 18458, signaling that the correction from 18458 to 18060 from sixteenth to nineteenth May was on account of revenue reserving and never a change of development.

However, the Relative Strength Index (RSI), a number one momentum indicator, is but to interrupt its earlier excessive and merchants are suggested to be cautious as we step into the June collection expiry.

The India VIX, also referred to as the concern index, fell by 3.27% in the course of the week, from 12.30 to 11.90, gave main aid to the bulls.

Nifty is now simply 2.10% away from its all-time excessive of 18887.60 made on 1st December, 2022. A observe up shopping for from right here can take Nifty to 18700-18800 zones whereas the decrease finish help now shifts to 18300 from 18200 zones.


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