Market
Wrap: 22/02/2017 (19:00)
Looking at the chart, Nifty Fut (Feb @8920)
or Nifty Spot has to sustain over 8975-8995 area for further rally towards 9035-9075
& 9125-9185 zone in the short term (under bullish case scenario).
On the other side, sustaining below 8955
zone, NF/NS may fall towards 8850-8805 & 8725-8665 area in the near term
(under bear case scenario).
Similarly, BNF/BNS (LTP: 20855) has to
sustain over 20950 area for further rally towards 21050-21200 & 21350-21450
area in the near term (under bullish case scenario).
On the other side, sustaining below
20900 zone, BNF/BNS may fall towards 20750-20650 & 20500-20400 area in the
near term (under bear case scenario).
Nifty
Fut (Feb) today closed around 8920 (+0.11%), almost flat after a moderate day
of volatility; but closed well off the day high amid broad based selling in
most of the other pivotals and mid caps after the recent rally. Domestic market
today opened almost flat on the back of mixed global cues and some drops on USD
& made a session high of 8957.60 and day low of 8901.55.
Nifty
was supported today almost +45 points by RIL, which made a single day highest rally
of around 11% since May’2009 and closed at eight years high amid optimism that
its telecom venture (R-JIO) will be EBITDA positive from FY-18/19 itself contrary
to earlier expectations of FY-20 or beyond that. As par reports, if RI-JIO will
be able to retain & convert its 50% “Free Customers” to “Paid” mode, then
it may be operationally viable aiming at Rs.1 bln gross revenue for FY-18.
R-JIO’s offering of 333/- PM for 30 GB monthly data (1GB FUP/day; speed??) with
free calling may be very attractive for mobile internet, considering other prominent
player’s (Airtel/Vodafone) data charge of 250-300/- for only 1-1.75 GB PM.
Thus,
mobile internet subscribers, who are now paying 250-300/- for only 1-1.75 GB of
monthly data will certainly switch to this new R-JIO’s cheaper plan. Now, the
challenge for the R-JIO may be to switch big users of broad band (retail/SME
& corporate) from key players like Airtel, where the data cost is almost
the same (10/- per GB). Attraction of complete wireless mode for R-JIO may be
an added advantage with respect to the old clogged wire set up by its rivals;
but traditionally, office users do also prefer the wire connection for myth of
better & consistent network speed.
Technically, RIL (LTP: 1207) has to
sustain over 1235-1275 area for 1300-1340 & 1410 zone in the near term;
otherwise it may see some correction and sustaining below 1185-1145 area, it
may further fall towards 1095-1055 & 1015 again.
Apart
from RIL, today market was also supported by Axis Bank (merger rumour), Idea
(some progress & positive news regarding its merger with Vodafone, which
may be officially announced by this week), Asian Paints and Coal India
(deleveraging news). Nifty was dragged by HDFC twins (HDFC Bank FII trade is
still under SEBI consideration for limit breach), IT Pivotals (Infy/TCS after cancellation
of some contracts from one of its US client-JC Penny), NTPC and cement counters
(Ambuja, ACC).
After
TCS buyback offer, all the other cash rich big IT companies are in immense
pressure from investors to reward them similarly; but despite some news of
buyback from HCL Tech, the management denied it today. The stock also corrected
by some extent.
Despite
ongoing effort by the Indian Govt and NASCOM to block the US H1B Visa bill,
there are still considerable uncertainties and together with that, lack of
timely adaption of AI & digital tech may have made the Indian IT
outsourcing vulnerable. Also, growing automation may be another threat for the
Indian IT jobs as most of the employees/engineers are not well skilled for it.
Overall,
despite all the narratives & demonetization blues, Indian market has
rallied considerably primarily on the back of consistent positive DII inflows
(MF SIP) and also by retail/HNI investors, who are now quite smart than
previously and adapted the simple art of “buying low & selling high”
without any over panic induced by any “black swan” event. Indian market is now
no longer being controlled by FII exclusively unlike previously; DII &
retails are now a formidable strength challenging the FII dominance. Still,
FII(s) own a substantial majority of Indian equities & bonds equivalent to
the country’s FX reserve and thus can’t be overlooked also; without their
active participation, it may be very tough for the market to reach a new life
time high. FPIS may be waiting for Q4FY17 macro data & earnings trajectory,
which may be a true reflection of any extended demonetization blues for the
Indian economy.
Despite
the recent rally mainly, which is primarily caused by various M&A activity
& RIL, market may be also concerned about huge stressed assets in the
Indian banking system. Although, RBI & other policymakers are actively
supporting the idea of a “bad bank” (Govt run ARC), Govt may not be very enthusiastic
about this idea as it does not want to bail out bank loan defaulters with tax
payer’s money.
Also,
with a “bad bank”, the actual resolution process & revival of a stressed
asset can’t be possible, unless there is a structural reform for our high cost
economy, which is a legacy issue. Unless, private investments return and
consumer demand revives, both rating agencies and FPIS may continue to be
cautious for the Indian economy, where growth is basically being driven by huge
incremental Govt capex. Thus, combined fiscal deficit or Govt debt to GDP ratio
is hovering around uncomfortable level of the rating agencies and together with
that, India’s comparatively low per capita income and pain of twin balance
sheets may be the biggest issues for the rating agencies to upgrade India in
the near future, despite some signs of green shoots & incremental reform
initiatives by the Govt.
As
par various reports, India’s FY-17 GDP growth may slowed down to 6.5-6.1% after
demonetization and market may be also waiting for actual data to be published
in March/May’17. Actual FY-17 fiscal deficit figure may also depend upon the
absolute amount of FY-17 GDP.
Globally,
all the eyes will be on the FOMC minutes today to have some glimpse about US
rate hikes idea from various Fed members. Although, Fed is now unusually
hawkish in its script, market may not be convinced yet for a March’17 rate hike
as simply, its US politics, which is now controlling Fed & US rate
trajectory, rather than economics. Trump & Co may have now realized that a
stronger USD is not good for US economy contrary to their earlier rhetoric and
thus one may expect only one rate hike from Fed in Dec’17 rather than two/three
in 2017. As actual “Trumponomics” is yet to take any shape, Fed may be in the
side line in June’17 too!!
USDJPY
lost some strength today as BOJ Kuroda sounds somewhat hawkish in his
Parliament testimony with comments that, BOJ is not actively considering any
more incremental QQE or more NRIP as Japanese economy is recovering gradually.
But USD is quite strong against EUR despite some upbeat EU economic data &
talks of a ECB tapering purely for increasing EU political risks.
Besides,
hopes of “Trumponomics”, US stock market is being supported by better than
expected Q4FY16 earnings and mixed/upbeat economic data despite a hawkish Fed.
Technically, SPX-Fut (LTP: 2357) need
to sustain over 2375-2395 area for further rally from here; otherwise may come
down again.
No comments:
Post a Comment