Market
Wrap: 17/02/2017 (19:00)
Nifty
closed the weak almost flat marked by an unusually hawkish Fed and tepid
domestic macro & some disappointing Q3 results; But overall better than
expected Q3FY17 earnings despite demonetization blues coupled with a fiscally
prudent budget, a hawkish RBI (good for INR stability) and last of all HDFC Bank’s
FII play may have restricted any fall this week despite tepid global cues amid
various geo-political issues and ongoing “Trumpomania”.
What’s
next for the coming week?
Looking at the chart, Nifty Fut (Feb @8826)
has to sustain over 8875 area for further rally towards 8925-8995 &
9035-9075 zone in the short term (under bullish case scenario).
On the other side, sustaining below 8855
zone, NF may fall towards 8780-8690 & 8605-8520 area in the near term
(under bear case scenario).
Similarly, BNF (LTP: 20540) has to
sustain over 20650 area for further rally towards 20750-20950 & 21150-21400
area in the near term (under bullish case scenario).
On the other side, sustaining below 20600
zone, BNF may fall towards 20500-20350 & 20150-19950 area in the near term
(under bear case scenario).
Nifty
Fut (Feb) today closed around 8826 (+38 points) after making an opening session
high of 8872.45 and day low of 8800.10 amid huge volatile movement in HDFC Bank
after RBI removed it from FII purchase restriction yesterday as it fall
marginally below the caution level of 72% (71.85%) as a result of ESOPS
conversions (Equity dilution). But, heavy buying by FII (mostly supplied by
DII) again prompted the RBI to put it in the restriction list as the limit of
74% was already reached soon after opening and consequently HDFC bank also fall
from its opening high, dragging down both the Nifty (3% weightage) and Bank
Nifty (10% weightage).
Today
HDFC bank made an opening session high of 1454 (almost +9.5%); but closed at
1377 (+3.7%) after this FII restriction issues. HDFC bank being the only old
generation private bank which has significantly low NPL/NPA comparison to its
peers (Axis & ICICI Bank) due to less exposure on the corporate loans and
has clean balance sheet with a consistent 25% CAGR for the last few years;
although in Q3FY17, EPS growth slowed down to 15% (YOY), which was
disappointing.
HDFC Bank is always a FII/institution favourite for its excellent
performance and an implacable & experienced management; but due to some FDI
definition issues the scrip has this 74% FII restriction almost all the times. FII(s)
generally play this stock in the FNO window. But, today’s unusual momentum for
the stock may be purely temporary and will not last as such high level will
certainly be used by some other domestic investors (HNI/DII/Retail) to book
some profits (long unwinding).
At
around 1450, HDFC bank may be trading around 3.8 PB (FY-18E BVPS) and such high
valuation may not be sustainable. Also, at around 1450 and actual Q3FY17 TTM
EPS of 54.20, PE may be around 27, which is also not sustainable against its
average PE of 22. Analysts’ consensus for FY-17 EPS may be around 56.90-57.50
and that translates a fair value of around 1255 at an average PE of 22 for the
stock as of now (average CAGR now stands around 22%).
Technically, for HDFC Bank
(LTP: 1378), watch 1350-1320 zone and sustaining below that expect 1275-1240
& 1210; consecutive closing (3-5 days) above 1320, mid to long term target of HDFC
Bank may be 1450-1485 zone; 1385-1425 zone being immediate hurdle.
Apart from HDFC Bank, Nifty got some boost from Sun Pharma (US
FDA approval for one of its ANDA), some other private banks, RIL & Tata
Motors. On the other side, it was dragged by TCS, INFY, Infratel, Maruti, SBI,
Hindalco, Tata Steel etc.
All eyes may be now on the GST meeting tomorrow for any further indication
about July’17 implementation. Apart from the ongoing state elections, all eyes
may be also on TN politics as its becoming an increasingly unstable political
state after sad death of “Amma”. TN is traditionally one of the preferred
investment destination states in India. Also, an unstable TN may be another
hurdle for a nationwide GST implementation plan from July’17.
Globally, “risk on” sentiment was off today after Trump’s highly
chaotic press conference yesterday, which has yielded nothing about his tax reform
or fiscal spending plan; market may be quite concerned now that eventually, it
may be tough for Trump to pass his idea of “Trumponomics” in the US
senate/congress. Market may also be quite confused about the ultimate shape of
Trump’s tax reform and its benefit for the US citizens/investors as also for
the global investors.
EU market was also tepid today after increasing geo-political
risks in France, where extreme left wing party may has to face the extreme
right wing party (nationalistic & anti EU) after some probable alliances,
neither of which is good for the market. Also, the latest poll indicates that
Le Pen (extreme right wing & anti EU) is enjoying some leads and that is
also causing some pressure on the global market sentiment. Retail sales data
from UK was also tepid today and thus overall EU market is under some stress as
of now.
Incidentally, Heinz threw an offer to buy Uniliver today, although the
later has rejected the offer citing low valuation, there may be some action in
the HUL counter on Monday.
SGX-NF
BNF
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