Market Wrap: 28/12/2016 (17:30)
Technically
Nifty Fut (Dec @8034) has to sustain over 8085-8120 area for further rally
towards 8160-8200 for tomorrow.
On the other
side, sustaining below 8040-8000 zone, NF may further fall towards 7940-7890 by
tomorrow (FNO Exp day).
Nifty Fut (Dec) today closed around 8034, almost
flat (+0.03%), but well off the day high of 8100 in a late day probable “basket
selling” by some institutions (almost 13 lakh NF sell around 14:09), most
probably to realign their portfolio ahead of FNO Exp tomorrow and start of new
CY. NF made a session low of around 8024 today in a matter of minutes after
gyrating around the vital resistance zone of 8085-8120 for some time and unable
to break the level of 8120.
Although, apparently there may not be any specific
reason for such sudden late hours “basket selling”, we have to keep in mind
that the yesterday’s bounce back in the market was itself a “short covering
rally” on the basis of some tax reform talks by the Govt, which was already a
known factor for the market also.
Looking ahead, market may look into actual
announcements by the Govt/NAMO regarding further demonetization/remonetization
steps after 31st Dec’16, any announcement of “stimulus” on 2nd
Jan’17 at NAMO’s scheduled public meeting and other “selective leaks” about tax
reforms in the forthcoming budget.
Indian market will also watch monthly auto sales,
Mfg PMI and other high frequency economic data for Dec’16 to gauze the actual
damage suffered by the economy and lower trajectory of Q3FY16 earnings &
GDP as a direct impact of the unprecedented “reform” of demonetization.
Indian Govt today appointed Viral Acharya, a NY
based professor in economics as one of the Dy RBI Gov, who has expertise in NPA
management and has also some flamboyancy and thoughts similar to Rajan. As par
some analysts, Viral “knows the moral hazard of Govt guarantee in banks/PSBS
and he may push for running PSBS in an efficient way”.
May be, market is concerned about another “deep
surgery” like Rajan for the hidden stressed assets and thrust for actual
resolution for the banks/PSBS rather than consistent “window dressing” of debt
restructuring in different forms. Banks, specially PSBS was in good pressure
today in the late day trading.
After sudden demonetization, SMES may be the worst
affected much more than the big corporates, because the later are already
digital. As a result of consistent cash crunch & cash flow mismatch, loan
portfolio of the SMES may be in great stress; even personal loan delinquencies
may rise after demonetization led economic disruptions.
Thus banks may be the biggest loser in this epic
experiment of demonetization as they are unable to earn any significant on the
huge demonetization deposits and more over, they have to pay the minimum 4% pa
for such savings deposit and there is no fresh incremental demands of loans
also.
Moreover, operating costs of the banks may have increased significantly
for the demonetization led cash & compliance management. Thus, NIM &
earnings of the banks may be in “deep water” for Q3 as well as Q4FY16.
Only “windfall
gain” for the banks may be sudden spurt in loan/NPA repayments after
demonetization in old notes for around Rs.66000 cr. But, this may also be treated
as “black/unaccounted money” by the IT/ED later, where repayment was more than
Rs.2.5 lakhs in old notes (cash) and there may also be some types of
litigation.
Today Govt also notified an ordinance to give
legality for the demonetization and limitations to further hold the old
currency notes. This may be the last effort by the Govt, desperate for an “windfall
gain” out of demonetization for a “special dividend” from the RBI to give “immediate
stimulus” to the “Aam Admi” (JDY accounts having zero/nominal balance) by way
of “farm loan waivers” or even by “direct deposits” (desi version of helicopter
money).
Although, Gov (Patel) has clearly denied such
possibility in the last RBI meet of an “windfall gain” out of “cosmetic
treatment” of its balance sheet without any actual P/L effect, it’s interesting
to see, what RBI can do this time to protect the independence & credibility
of the institution by saying “no” on the face of the Govt. As former RBI Gov,
Rajan emphasized in his farewell note, that RBI as an institution must have the
ability to say “no” for any illogical demands, even from the Govt, investors
may be now missing the “vocal” Rajan and feeling the actual pain of “Rexit”. A healthy central bank is essential for for a country's banking system and any attempt by the Govt to directly recapitalize the ailing PSBS from the coffers of the RBI may not be taken well by the investors (FPIS); bond market & INR may react adversely and EQ market may also follow that.
NF
No comments:
Post a Comment