Market
Wrap: 03/03/2017 (19:00)
What’s
for the next week ahead of crucial results of the state elections?
Market
may be already discounted by a large extent of a likely BJP win including UP
(except Punjab) and may rally further by 3-5% more on the actual outcome; but
in case of any unexpected bad result of BJP, market may also correct by around
5-10% in the coming days.
Time & Price action suggests that,
Nifty Fut (March @8931) has to sustain over 8995 area for further rally towards
9035-9075* & 9125-9195 and 9260-9350 in the short term (under bullish case
scenario).
On the other side, sustaining below 8975
zone, NF may fall towards 8935-8870* & 8830-8775 and 8715-8645 area in the
near term (under bear case scenario).
Similarly, BNF (LTP: 20604) has to
sustain over 20950 area for further rally towards 21050-21150* &
21350-21500 area in the near term (under bullish case scenario).
On the other side, sustaining below
20900 area, BNF may fall towards 20750-20500 & 20400*-20250 zone in the
near term (under bear case scenario).
Nifty
Fut (March) today closed around 8931 (+14 points), almost flat after making a
day low of 8873 and last minutes high of 8933. Indian market today opened in a
negative note following overnight fall in the US market and morning tepid Asian
cues as market realized that the euphoria over Trump’s speech may be overdone
and the valuations are also quite expensive. For any actual shape of the
Trumponomics, the market may have to wait till 2018 as Trump has to cope with
the reality of US budget constraint
& politics, despite having a good intention to make “America great again
like a wonderland”.
In
the meanwhile, market may concentrate on Fed/Yellen today to see if there is
any real possibility of an impending March rate hike this time. Although, FFR
now indicating around 80-90% of a March rate hike probability, quite
dramatically improved from just 20-30% last week after consistent hawkish
scripts from various Fed speakers including some of the known Fed doves; EM as
well as Indian market may not be discounted yet for a 0.25% Fed rate hike on 15th
March and in that sense, if Yellen looks awfully hawkish today, then expect
some knee jerk reaction early next week. On the other side, if Yellen sounds
like a dovish, it will be a surprise and market may also go for some relief
rally, despite the fact that Fed credibility will be at stake.
After
opening in negative tone, Indian market today got some support from the Service
PMI, which came as 50.3 for Feb, against 48.7 & 46.7 registered in Jan
& Dec. Also the composite PMI for Feb flashed as 50.7 from 49.4 in Jan,
indicating some expansion/recovery from the boom/bust line of 50 as ReMo
process by the Govt is almost complete (at around 60-70% of DeMo currencies).
Overall, PMI data for Feb may also indicate some inflationary pressures as
service providers raised charges; subdued business outlook and tepid employment
trend.
Domestic
market today was also supported significantly by:
·
RIL: consolidation/rejig by the promoter for
its holdings in the co and better outlook of R-Jio (projection of better
revenue & EBITDA as its ip based protocol telecom technology-LTE is cheaper
& more effective in comparison with its per’s legacy network and poor
optical fiber infrastructure)
·
Infratel: upgraded by UBS after recent steep
correction on the back of concerns for lower tower rentals as a fall out of
merger between Idea & Vodafone & that might be overdone.
·
Hindalco: news of QIP fund raising
After
some smart rally of over 14% since DeMo led Dec’16 low, Indian market booked
some profit this week ahead of Yellen’s speech, outcome of state elections next
week & GST meeting tomorrow. There was also some concern in the Indian bond
market (G-SEC), where bond yields are falling abruptly for the last few days.
Although
the market rallied quite relentlessly as DeMo concerns subsidized coupled with
a good budget, a prudent RBI step to hold rate, which has helped G-SEC &
INR, better than expected Q3 GDP & PMI and some of the recent M&A
activity, buy back coupled with RIL’s outperformance; but, there are still lots
of concerns like no let up in NPA (actual resolution), tepid private
investments, poor IIP data, and higher trajectory of core inflation.
Also,
a hawkish Fed, rising USD/US bond yields, attraction of Trumponomics and Trump’s
“America First” policy, various EU political risks & real Brexit, China
debt may be some of the major headwinds for the Indian market in the days
ahead. Above all, valuations are not cheap and some of the mid-caps are also
trading at crazy multiples. Although, FPIS lent buying support to the market in
Feb, they are also still very cautious and may want to see the actual macro
data & earnings trajectory for Q4FY17 after DeMo led economic disruptions.
Most
of the analysts are also expecting steep downward revision in the Q3FY17 GDP
figure, which is flashed as 7% by the CSO as more informal economic data may be
reflected in the coming months. But, despite all the narratives, Indian market
is still resilient, because unlike previous occasions, DII(s) are now able to
provide significant support against FII(S) selling and that is the primary cause
of market rally/stability (liquidity driven rally, despite valuation may be
expensive).
If
Fed really goes for three rate hikes in 2017 despite Trump’s policy for a
weaker USD, then EM as well as Indian outflow may be also a big challenge for
the DII(s) in the coming days, despite consistent MF SIP inflow from the
retails.
SGX-NF
BNF
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