Nifty Fut (Aug) closed today
around 8692 after making an intraday high of 8705 and low of
8668; opening high of 8708-8745 showing in the system may be an
aberration (fat finger).
Technically, NF has to
sustain above 8725-8765* for an immediate target of
8825-8875-8895* and 8950-9050*-9200 in the near term.
(if GST
will pass by 12-th Aug, then expect 8895-9050 range in a
whipsaw type movement, if sustained above 8765)
On the flip side, sustaining
below 8665 area, NF will target 8615*-8565-8515 and 8480-8440*-8290
& 8220*-8110-8000 zone in the days ahead.
(if GST will not
pass this time, expect 8000-7800 level in the near term)
Even if GST is passed this
time, expect profit booking/long unwinding after a brief rally
up to around 9000 level as the same is almost discounted by the
market.
At Nifty 8700-9000 level,
TTM PE will be around 23.85-24.65 and historically this is a
high bubble zone (23-25) on actual valuation perspective. We
have seen good correction in the past whenever, Nifty goes in
this zone and so smart money can book profit in their longs
without indulging in too much GST euphoria.
Even if GST is passed this
time, it may be implemented only after 2019 election and thus,
the expected effect on the macro economy & bottom lines of
the corporates may be visible only after FY-2020-2022.
Today, BOJ came with a
"water pistol" instead of much expected "bazooka" and delivered
nothing.
After several days of selected leaks and intense
speculation about the size of the latest BOJ QQE, Kuroda
delivered an annual increase of only 2.70 tln Yen booster for
ETF buying !!
Neither BOJ cuts any rate from its existing
(-)0.10% nor it added any fresh buying in its QQE or any future
plans to purchase ling term JGB(s).
But USDJPY did not slide too
much even after BOJ, perhaps on the hope that Abe will unleash
the much expected 28 tln Yen fiscal stimulus package on 2-nd
Aug.
Today's BOJ action may also highlight a central
banker's limitation for unlimited or ever growing QQE and thus
political will for some structural reform/stimulus is required
along with the ongoing & never ending QQE by the central banks
to fight the deflation.
Market will also watch the US GDP today for an idea about true state of the world's largest economy and probable Fed action in the coming months (Sep-Dec'16).
Market will also watch the US GDP today for an idea about true state of the world's largest economy and probable Fed action in the coming months (Sep-Dec'16).
Update:
US Q2 GDP came at 1.2% (QOQ/Annualized) vs 2.6% expected (prior 0.8%). Q1 GDP also revised downwards. The massive miss in the Q2 GDP may be attributed to the inventory adjustment, but the a number is a number and subsequently USD was doomed to some extent. Fortunately, a tepid GDP may also bar the Fed to hike in the near future and thus the S&P-500 & Oil rallied to some extent. Jackson Hole speech of Yellen in the late Aug will be interesting as despite decades of QQE, US & also others DM GDP growth are nowhere. As par some reports, despite massive liquidity, US corporates are not investing enough as there is no pricing power. Liquidity is being used to buy back own shares and to jack up the share.
In the domestic front, there are no dearth of news flows regarding the much awaited GST passage this time. As par latest report, Govt may meet Cong leadership on Monday and then depending upon the outcome of that meeting, it may either table the bill on 2-nd Aug or by 12-th Aug, the last date of the current Parliament session for an 5 hour long debate and then passage. Clearly, now GST may be a game of "ping pong" between Cong & BJP, which is going on for nearly a decade.
As par the latest Cong version, they are not comfortable with the rate of GST rate and the Govt may be not ready for defining/capping a final rate of 18-20% in the bill now. Govt/BJP want the final GST rate to be decided later after further discussions with various stake holders/GST committee; i.e. it will be open ended.
As on date GST may not be a "done deal" yet and our market is not prepared for "no GST" this time, but almost (80%) discounted the passage of he same, going by the recent price action and its a crowded trade.
On the earnings front, L&T may be a big disappointment today, but ICICI Bank delivered above/inline estimates, but net NPA/NPL level may give some concern. Both the result came after market hours today.
On the macro front, India's Q1FY17 Fiscal deficit came around Rs.3.26 lac cr which is at 61.1% of FY-17 BE against 51.6% FY-16 (YOY). Hopefully, better tax collections in Q2 will improve the figure.
Overall, 2-nd Aug will be very interesting as we have both Abe with the expected "Helicopter Money" and clarity about GST after BJP-Cong meet on 1-st Aug.
US Q2 GDP came at 1.2% (QOQ/Annualized) vs 2.6% expected (prior 0.8%). Q1 GDP also revised downwards. The massive miss in the Q2 GDP may be attributed to the inventory adjustment, but the a number is a number and subsequently USD was doomed to some extent. Fortunately, a tepid GDP may also bar the Fed to hike in the near future and thus the S&P-500 & Oil rallied to some extent. Jackson Hole speech of Yellen in the late Aug will be interesting as despite decades of QQE, US & also others DM GDP growth are nowhere. As par some reports, despite massive liquidity, US corporates are not investing enough as there is no pricing power. Liquidity is being used to buy back own shares and to jack up the share.
In the domestic front, there are no dearth of news flows regarding the much awaited GST passage this time. As par latest report, Govt may meet Cong leadership on Monday and then depending upon the outcome of that meeting, it may either table the bill on 2-nd Aug or by 12-th Aug, the last date of the current Parliament session for an 5 hour long debate and then passage. Clearly, now GST may be a game of "ping pong" between Cong & BJP, which is going on for nearly a decade.
As par the latest Cong version, they are not comfortable with the rate of GST rate and the Govt may be not ready for defining/capping a final rate of 18-20% in the bill now. Govt/BJP want the final GST rate to be decided later after further discussions with various stake holders/GST committee; i.e. it will be open ended.
As on date GST may not be a "done deal" yet and our market is not prepared for "no GST" this time, but almost (80%) discounted the passage of he same, going by the recent price action and its a crowded trade.
On the earnings front, L&T may be a big disappointment today, but ICICI Bank delivered above/inline estimates, but net NPA/NPL level may give some concern. Both the result came after market hours today.
On the macro front, India's Q1FY17 Fiscal deficit came around Rs.3.26 lac cr which is at 61.1% of FY-17 BE against 51.6% FY-16 (YOY). Hopefully, better tax collections in Q2 will improve the figure.
Overall, 2-nd Aug will be very interesting as we have both Abe with the expected "Helicopter Money" and clarity about GST after BJP-Cong meet on 1-st Aug.
Update:
As par some latest media reports Govt may pass only the GST Amendment portion of the bill this time, which was approved by the cabinet after consultation with the Cong.
As par some latest media reports Govt may pass only the GST Amendment portion of the bill this time, which was approved by the cabinet after consultation with the Cong.
In that scenario, Govt will consult with the various stake holders (states/GST Comm/Cong & other regional political parties) to decide the final GST rate (18-22% or 25-27%), any capping of rate in the bill, GST redressal & dual control mechanism. If a broad consensus arrived by next few months, then the actual GST bill may be passed in the Winter session.
Govt/BJP will try to keep a brave face and may assure the market that if needed, they will call a special Parliament session in the midway to pass the GST bill.
If the above story comes true and the actual GST bill will pass in the Winter session, then it may be virtually impossible to implement the same wef the scheduled Apr'17 and ultimately may be implemented in 2020 (after 2019 election).
In 2017-18, there will be several state elections and GST bill need to be approved by the 29 state assemblies separately and thus one can expect at least one year (till 2018) for completion of the entire required legislations to be passed by various states and the centre/President. Meanwhile, 2019 election will come near and ultimately the new Govt may implement it in 2020.
If GST is passed in the next Winter session and subsequently implemented in 2020 (after 2019 election), then there will be no fear of any runaway inflation on the overall economy and common people (vote bank).
There may be significant upwards pressure on the service industry because of comparatively higher GST rate despite credit adjustments. Overall, manufacturing sector will be beneficial, if GST rate kept around 20% (18-22%).
Thus, both Govt/BJP & Cong and also the other regional parties (oppositions) can say in the 2019 election campaign that they are all "co-operated" in bringing the GST bill passed in the Parliament and are not hindering the country's economic/development interest for the sake of pretty politics & take credit for the GST passage. Cong & other regional political parties will make it sure that BJP can't take the credit of GST passage in 2019 election and they will all share the credits for it.
So, GST will continue to be a victim of pretty vote bank politics in India and that will be the moral of the whole story.
But, Indian market & investors may not be amused, if actual GST bill passage in RS is delayed this time.
Article Courtesy: Frontiza.com
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