Market Wrap: 04/05/2017
(16:00)
NSE-NF (May): 9381 +41
points; +0.44%)
NSE-BNF (May): 22760
(+412 points; +1.84%)
For 05/05/2017:
Key support for NF: 9320-9280
Key resistance for NF: 9400-9475
Key support for BNF: 22675-22525
Key resistance for BNF:
22800-22950
Time & Price action suggests that,
Nifty Fut (May) has to sustain over 9425 area for further rally towards 9475-9510
& 9550-9600 in the short term (under bullish case scenario).
On flip side, sustaining below 9405-9385
area, NF may fall towards 9320-9280 & 9245-9175 area in the short term
(under bear case scenario).
Similarly, BNF has to sustain over
22850 area for further rally towards 22950-23075 & 23200-23475 area in the
near term (under bullish case scenario).
On the flip side, sustaining below
22800-750 area, BNF may fall towards 22675-22525 & 22400-22200 area in the
near term (under bear case scenario).
Nifty
Fut (May) today closed around 9381, surged by 0.44% after making a session low
of 9333 and closing minutes high of 9384. Indian market today opened almost
flat following mixed global cues. After opening flat, Nifty came under some
selling pressure after subdued Service & Composite PMI (April) which
flashed as 50.2 (prior: 51.5) & 51.3 (prior: 52.3).
But
soon market brushed aside the tepid PMI data as Govt confirmed about the
ordinance waiting for President’s assent for some amendment of banking
regulation act, which in effect will provide more powers to the RBI to deal
with the NPA mess. The basic idea is to create more pressure on the stressed
companies, especially on the topmost 40-50 ones in the infra & textile
sector for an effective & speedy resolution. The NPA reform may also enable
the banks to take hair cut (waive off) by certain amount (50-40%) on a case to
case basis without any fear of future investigation (“witch hunting”) by any
Govt investigation agency (CBI/ED etc). Thus, the banks may settle their NPA
either directly with the borrowers or indirectly through some ARC more quickly
with some sacrifice (hair cut). This development may be primarily responsible
for today’s rally in BNF apart from better than expected PAT/NII from ICICI
Bank published yesterday after market hours.
All
eyes may be now on further details from the Govt about this NPA policy to gauze
its actual effectiveness as “devils may be in the details”. Actual resolution
may be more important than some window dressing for the NPA issues. It’s not
that there were no NPA policy before; such policy in different forma are going
on for decades, but despite that PSBS has significant stressed assets as structural
problem may not be properly addressed. Sustainable debt may be a problem for
most of the stressed companies and along with that, lots of structural issues
may has to be considered (like project viability, demand creation, some policy
paralysis and India’s legacy problem of high real rate of interest). Globally,
all the major countries has much more lower lending rate than India and thus to
compete globally or even to be viable domestically, Govt/RBI need to bring down
the bank lending rate drastically by bringing down the CPI, small savings rate
and GSEC yield. Again, all such steps may be not possible practically in the
next few years at least.
ICICI
Bank today surged by more than 9% and closed around 298, causing almost 41
points of rally in Nifty and 337 points rally in Bank Nifty alone (i.e. around
81%). Apart from ICICI Bank, some other banks like Axis, SBI, BOB has also
contributed significantly for today’s market rally.
ICICI
Bank today rallied quite significantly despite continues asset woes and
elevated credit costs. The rally may be supported by optimism that the NPL
cycle may be at its peak and going ahead, there may be some moderation. Also
Q4FY17 PAT & NII came above market expectation with a healthy growth in
retail loan may have supported today’s rally along with Govt’s initiative for
the NPA policy. But, ICICI Bank is also a victim of corporate NPA and there may
be also higher slippages form its corporate book in the quarters ahead. Looking ahead, technically, the scrip has
to sustain over 300-305 area for more rally towards 320-350 zone; otherwise it
may correct to some extent.
Today,
HDFC bank also reported its Q4FY17 earnings and at a glance although PAT came
in line with expectations, GNPA may have surged. Thus asset quality issue may
also hunt the scrip in the days ahead.
Govt,
yesterday also announced a comprehensive steel policy for overall growth of the
sector aiming increasing steel production & consumption and FDI. Also,
domestic steel producers will be preferred with any Govt sponsored infra
projects under this policy. Govt will also ensure increasing supply of domestic
coking coal to cut dependence on imports by almost 50%. Govt is aiming for a 300 MT finished steel production
by 2030-31 from previous target of 2024-25, because India is still producing
much more steel than its actual domestic demand. But, all these steel policies
are already known to the market and together with that, global/China concern
for demands of metals & strong USD may have kept the metal sectors in
pressure today.
Globally,
EU market was in green today following upbeat PMI data across the region and
favourable opinion poll of the centrist candidate in French election to be held
on Sunday. US stock futures are also trading higher following Fed’s optimism
about underlying economic strength despite soft data in Q1CY17. Market is also
upbeat as the revised US health care bill (Trumpcare) is supposed to be passed
by today/tomorrow.
After
Fed’s somewhat hawkish statement yesterday, all eyes may be now on the NFP job
data (April) tomorrow; estimates are:
Head
line NFP: 185k; prior; 98k
Unemployment
rate: 4.6%; prior 4.5%
Average
hourly earnings: 0.3%; prior 0.2%
Yesterday’s
US ADP Nonfarm employment & ISM Non-Mfg data was upbeat and today’s initial
jobless rate may be also below estimates and thus market (USD bulls) is
expecting a block buster NFP tomorrow along with some hawkish script from
Yellen & Co. In the last two years, credibility of Fed was at stake as
despite so much jawboning, Fed only hiked twice in 2015-16. But after surprised
March’17 hike, market is now taking Fed quite seriously and thus FFR is now
indicating around 90% of a June rate hike probability, although it may be quite
unusual, considering Fed’s overall statement yesterday.
Any
disappointment form NFP & Yellen may also bring down the high FFR tomorrow.
Technically, USDJPY (LTP:113) need to
sustain above 113.50-114.50 area for more strength towards 119-125 zone;
otherwise it may correct for 109-107 area again.
SGX-NF
BNF
USDJPY
Article Courtesy: frontiza.com
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