Market Trajectory: 13/03/2017
(14:00)
SGX-NF: 9175 (+221
Points; +2.5%)
Time & Price action suggests that,
Nifty Fut (March) has to sustain over 9195-9225 area for further rally towards 9275-9350
& 9550-9685 and further 9865-10100 in the short term (under bullish case
scenario).
On the other side, sustaining below 9125-9075
zone, NF may fall towards 9035-8995/8960 & 8865-8795 and further to
8695-8585 area in the short term (under bear case scenario).
Similarly, BNF (LTP: 20796), which is
expected to open around 21350 level tomorrow after gap up opening, has to sustain over 21500-21675 area for
further rally towards 21855-22150 & 22350-22715 and 23000-23200/23650 area
in the near term (under bullish case scenario).
On the other side, sustaining below
21350 area, BNF may fall towards 21150-20900 & 20700-20500 and 20300-20000
zone in the near term (under bear case scenario).
After an emphatic win
for BJP in UP, India may be termed as “Politically very Stable” till at least
2024 as 2019 NAMO win is now virtually a done deal as there is no compatible
political leader in the national level to challenge him as of now/till 2019;
but even after huge win in UP and some other states, BJP/NDA may not get the RS
majority before 2019 as most of the RS seats pertaining to BJP’s winning states
will be vacant only after 2018-19.
Considering their huge
defeat, INC and other regional opposition political parties may not also oppose
any reform initiative by the Govt in RS in the days ahead and onus will be now
on the Govt/BJP to carry on or implement major reforms in a meaningful way,
which may ultimately push the country’s GDP & help in earnings improvement of
the corporates/SMES and also among general public (maximum employment &
growth with reasonable inflation like US/Fed’s economic goal).
Technically,
consecutive closing above 9195 area, Nifty Fut-I may rally towards 9550-9685
& 10375-11050 and 11350-11550 zone in the short to mid & long term
(FY-17) under bullish case scenario, provided earnings (EPS) supports the rally;
9125-9075 or 9035-8995 area may be the immediate positional support for NF-I in
the days ahead.
After
a much better than expected winning margin in UP by BJP/NAMO, Nifty is expected
to open around 9175-9195 area tomorrow as par early SGX indication today, while
Indian market is closed due to holi. While the market will certainly celebrate
another holi tomorrow amid NAMO’s big win, after the initial euphoria settles,
market may also see some profit booking around 9275-9550 level, as eventually
earnings (EPS) has to support the Nifty rally.
At
expected 9275- 9550 level of Nifty & Q3FY17 TTM EPS of around 385, current
PE of the market may be around 24.10-24.80; certainly a PE of above 24 may be
termed as “bubble zone” at least historically and eventually, market always
corrected itself, even after considerable consolidation at this bubble zone,
whatever be the narratives.
Even,
if we consider FY-17 projected EPS around 410, FWD PE may be around
22.62-23.29, which may be also well above average FWD PE of around 18-20. At
9275-9550 level, Nifty EPS should be around 465-480 in FY-17 or even by FY-18;
the key question may be, will Nifty deliver an actual EPS (weighted average) of
around 480 in FY-18, which translates around 25% CAGR from present level of
385?
Nifty
EPS actually fall by 0.97% in FY-16 from FY-15 and at the present average run
rate, projected FY-17 & FY-18 EPS may be around 394 & 418 and in that
scenario, with an average PE of 20, fair median value of Nifty may be around
7880 & 8360.
|
NIFTY
|
Mar '16
|
Mar '15
|
Mar '14
|
Mar '13
|
Mar '12
|
FY-12-16
|
FY-15-16
|
AVG
|
AVGR
|
SGR
|
PROJ(%)
|
FY-17
|
FY1-8
|
|
NIFTY
|
7738.4
|
8491
|
6704.2
|
5682.55
|
5295.55
|
46.13
|
-8.86
|
6543.33
|
18.26
|
10.64
|
7.89
|
8349.30
|
9008.42
|
|
PE
|
20.89
|
22.7
|
18.86
|
17.89
|
18.74
|
11.47
|
-7.97
|
19.55
|
6.87
|
3.26
|
1.26
|
21.15
|
21.42
|
|
EPS
|
370.44
|
374.05
|
355.47
|
317.64
|
282.58
|
31.09
|
-0.97
|
332.44
|
11.43
|
6.80
|
6.26
|
393.62
|
418.26
|
|
AVG PE
|
20
|
20
|
|
|
|
|
|
|
|
|
|
20
|
20
|
|
FAIR VALUATION
|
7409
|
7481
|
|
|
|
|
|
|
|
|
|
7872
|
8365
|
|
ACTUAL EPS CAGR(%)
|
-0.97
|
5.23
|
11.91
|
12.41
|
|
|
|
|
|
|
|
|
|
It’s
may be also a fact that out of Nifty constituents, some of the specific
companies (around 40%) has excellent/decent EPS growth, while the others has
virtually very tepid EPS growth; thus rather than index, market is now more
focused with individual stocks, having good earnings growth/visibility/business
model, strong balance sheet (good debt profile) and impeccable management credibility.
At
projected 10100-11550 level by FY: 17-18 supportive NIFTY EPS should be around
505-578, which implies an EPS CAGR of around 31-50% from present level of 385 and
that may be quite difficult, considering the present scenario of tepid consumer
demand, lower capacity utilization & credit demand, stressed twin balance
sheets, hawkish RBI and probability of no further rate cut in FY: 17-18, unless
Govt slashed small savings rate in India drastically and above all lack of
adequate resolution of huge stressed assets with the Indian banking system.
Also,
Govt’s stance of “war on black money” might hamper the great consumption story
of India by at least 20-30% in the coming quarters, if it continues further.
DeMo is certainly a transient disruption and with ReMo, Indian economy is now
again gone back to the old informal way of full cash transactions as if nothing
has happened.
But,
destruction of “wealth” and subsequent rebuilding & redistribution of the
same will take time as a result of Govt’s surgical strike on “black money” and
all will depend upon the Govt’s next stance or continuation of the same to
finish it logically. Success of DeMo may be only reflected on any significant improvement
of income tax/GDP ratio; otherwise, whatever may be the narrative, Indian
economy will not gain much out of DeMo.
Analytical Charts:
SGX-NF
BNF
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