Market Wrap: 30/03/2017
(19:00)
NSE-NF (April): 9185 (+9
points; +0.10%)
NSE-BNF (April): 21530
(+99 points; +0.46%)
For 31/03/2017:
Key support for NF: 9175-9115
Key resistance for NF: 9195-9235
Key support for BNF: 21500-21350
Key resistance for BNF: 21675-21850
Time & Price action suggests that,
Nifty Fut (Apr) has to sustain over 9235 area for further rally towards 9275-9350
& 9425-9505 by tomorrow / in the short term (under bullish case scenario).
On the other side, sustaining below 9215-9195
area, NF may fall towards 9115-9035 & 8980-8865 area by tomorrow / in the
short term (under bear case scenario).
Similarly, BNF has to sustain over 21675
area for further rally towards 21750-21850 & 21950-22150 area by tomorrow /
in the near term (under bullish case scenario).
On the other side, sustaining below
21625 area, BNF may fall towards 21350-21150 & 20950-20700 zone by tomorrow
/ in the near term (under bear case scenario).
Nifty
Fut (Apr) today closed around 9185, almost flat contrary to the Nifty spot
rally of around 0.35% on the Exp day; maybe there are some roll over issues. NF
made a high of around 9199 & low of 9170 in an extreme range bound day of
trading, very unusual on an Exp day.
Indian
market today opened in a flat note following tepid global cues after overnight
mixed US market. USD is getting some strength across the board after better
than expected US economic data and hawkish stance of various Fed speakers,
advocating for 2-3 more rate hikes in 2017. After recent strength in EUR and
tepid inflation data in EU, it seems that ECB may be changing its March tone
for a more dovish stance and all these are supporting the USD/US bond yields,
despite some US political risks and some apprehension about Trumponomics. Some
members of Fed are also concerned about elevated asset prices (US stock
market).
China
market was also under some pressure today after recent money market tightening
stance by PBOC and concern on an overheating real estate market.
Among
all these ongoing global concerns, Indian market sentiment was boosted today by
brighter probability of a July’17 GST implementation and Govt’s promise for a
big-bang reform in banking NPA resolution mechanism. Market is expecting for a
super ARC or “bad bank” primarily funded by the private capex with some Govt
participation (PPP mode).
Incidentally,
Kotak Bank may be also readying itself for such super ARC as they have already
such ARC subsidiary (Phoenix) and Kotak is seeing significant opportunities in
stressed assets business. As par Kotak, gross stressed assets in the Indian
banking system may be now around Rs.14 tln and out of that bank has to
sacrifice around Rs.4 tln in hair cut and loan loss (complete write off). This
is a significant amount for the ailing PSBS and also for the Govt and as such,
private capital & management may be required for the rest of Rs.10 tln as “bad
bank”. PSBS may require at least Rs.6.5 tln capital as par BASEL-III
compliance.
But,
whatever be the composition of such “bad bank”, if it actually happens, the
real issue may be resolution of such stressed assets & their
business/project viability; otherwise even foreign investors may be turned
cautious despite their currency advantage (leverage).
It
now seems that the Govt is now determined for a July’17 GST roll out despite
some apprehensions about its proper implementation; Govt may focus more on the
transition aspect now with GST rates almost at present levels of total indirect
taxes incidence (product & service wise). Such apprehension by various
stakeholders may be usual, whenever Govt try to implement it, be it July or Sep’17
and Govt may also be thinking that, by its July roll out, if there will be any
short term disruption like DeMo, then it may be for max 3-6 months and in that
way, it may not affect next state elections prospect of the BJP. Thus July’17
GST roll out timing may be perfect for the Govt.
Apart
from various ongoing global issues like a strong USD, strong oil, PBOC
tightening/China Jitters, actual negotiations of Brexit (soft or hard?), EU
& US political risks, Indian market may also focus on the Q4FY17 earnings
& macro data trajectory, GST implementation from July’17 (another
disruption?) and actual plan of action by the Govt for the highly promised banking
NPA resolution mechanism.
As
almost all the “good news” has known to the market & may have been already
discounted, lack of any fresh drivers may also cause some time & price
correction in the coming days, which may be quite healthy for a “run-a-way bull
market”; earnings has to be supportive for the market as the valuations are now
quite stretched (at 9200 and an TTM EPS of around 385, Nifty PE is around
23.90, which may be quite high considering its historical mean average of 18
and average EPS growth of around 7% for the last few years). Average EPS growth
(CAGR) has to be around 15-20% for a PE expansion of 18-22.
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 (FY-17 TTM & FY-18 FWD).
Consensus Nifty EPS for FY-17 & FY-18 may be around 415
& 455 and in that scenario, fair median value of Nifty may be around 8300
(FY-17 TTM) & 9100 (FY-18 FWD). Market may keenly watch actual Q4FY17
(FY-17) EPS & guidance for next quarters, before a decisive move.
|
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
|
|
|
|
|
|
|
|
|
|
SGX-NF
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