Market Wrap: 19/05/2017
(17:00)
NSE-NF (May): 9456 (+15;
+0.16%) (TTM PE: 23.93; Near 2 SD of 25; TTM EPS: 394; NS-9428)
NSE-BNF (May): 22835
(+127; +0.56%) (TTM PE: 31.28; Above 3 SD of 30; TTM EPS: 728; BNS-22770)
For 22/05/2017:
Key support for NF: 9435-9395/9375
Key resistance for NF:
9535-9560/9600
Key support for BNF: 22725-22590
Key resistance for BNF:
22900-23000
Time & Price action suggests that,
Nifty Fut (May) has to sustain over 9535-9560 area for further rally towards 9600-9640
& 9680-9770 in the short term (under bullish case scenario).
On flip side, sustaining below 9515
area, NF may fall towards 9435-9395/9375 & 9320-9280/9240 area in the short
term (under bear case scenario).
Similarly, BNF has to sustain over 23000
area for further rally towards 23075-23200 & 23325-23450 area in the near
term (under bullish case scenario).
On the flip side, sustaining below
22950-22900 area, BNF may fall towards 22725-22590 & 22450-22300 area in
the near term (under bear case scenario).
Nifty
Fut (May) today closed around 9456, just 15 points up after making an opening
session high of 9512 and day low of 9402 in a moderate day of volatility.
Indian market today opened by around 39 points up following
mixed global cues.
Overnight, US market was closed in slight positive (+0.27%) amid
better than expected economic data (Phi Mfg index & initial jobless
claims). But more than economics, what has helped the USD/risk trade yesterday
late NY afternoon session may be the one fake (?) C-Span video clip, which was
apparently showing ex-FBI director Comey testifying that no US DOJ or AG has
pressurized him to end any investigation; market interpreted it as no WH (Trump)
officials has asked him to stop any Russian link investigation and both USD
& risk trade got a sudden boost. But this video clip may also be completely
out of context.
Yesterday, GBPUSD has suffered a sudden unexplained flash crash,
possibly for the Comey video; technically,
GSPUSD (1.3025) need to sustain above 1.31085 area for further rally towards
1.35217 zone; otherwise the pair may come down towards 1.27-1.24 area again.
Also now, Trump is on a weeklong Middle East & EU tour, any
congressional action (impeachment) may not take place until next week and that
has also helped the overall global market sentiment.
But, overall US political risk & Trump’s impeachment
probability are still there and thus global market sentiment is now cautious as
evident by the subdued US bond yields amid this ongoing “Trump Tremor” (US
political turmoil). Also, Brazilian political crisis & some news about
Venezuela default probability may have affected the sentiment of the global as
well as Indian market.
Amid all these ongoing global jitters, Indian market today got
an initial GST boost after fixation of some favourable tax rates for FMCG, coal
& capital goods products. But, lower taxation rates for FMCG may be also on
the expected line and thus the sector rally was limited except ITC, which
surged by around 3% as overall GST rate for cigarettes is lower than earlier
expectation and the uncertainty element has also gone now.
Nifty was also supported by Yes Bank, Axis Bank (short
covering/value buying after recent plunge for NPA divergence issue) and PSBS
(SBI, BOB). Today’s SBI result was largely in line with expectations with no
great disappointment over asset quality (NPL) and thus the counter rallied to
its two year high of 315, which has basically helped the market to recover in
the closing hours.
Overall, the FMCG sector may be the biggest winner of the GST
rates so far announced, although it is in the expected line. Market is
expecting a significant boost up for the economic activity & GDP (1-1.5%)
for GST implementation and its overall effect of lower tax incidence,
transmission of input tax credits, logistic savings, and incremental
consumption with shifting of informal part of the economy to the formal part.
Thus, GST may be one of the significant structural reforms of Indian economy
despite some near term challenges of implementation (GST disruption).
But, with so much multiple tax rates and rules &
regulations, the current form of GST may not be the ideal simple “one tax, one
nation” original concept and thus its meaningful benefit over the existing
taxation system (VAT+ED/CEN-VAT with input tax credit) may be also doubtful.
Moreover, four rates of service tax announced today may also complicate the
whole system and making it more complex. This, along with the high probability
of a temporary GST disruption may be also making the market nervous. As there
is no clarity and cut off day for the input tax credit issues till date with
barely 44 days is left for its implementation, both traders & manufacturers
may be compelled to reduce their inventories to a minimal level to avoid any
inconvenience & loss; thus Q2FY18 earnings may be also affected in the
process apart from GST compliance costs. It seems that Govt is now committed
for the 1st July deadline for GST implementation without any rethinking.
GST rates announced for some sectors may be also quite high and
can affect the consumer sentiment; such as white goods (TV, Refrigerators, AC
at 28% against existing of around 25%), telecoms & financial services (18%
against existing 15%), Auto (28% against 24%, except small car), Radio Cab
service (12% from 6%) etc.
Thus, basically being revenue neutral, Govt may be trying to
give some relief to the “Aam Admi” by lowering tax rates of FMCG products, but
at the same time is hiking the GST for some other products, being used by the
relatively high earner people to balance the loss of revenue. Also, Govt is
relying very high on the seamless input tax credit transmission mechanism,
which may ultimately benefit both the consumers & the supply chain. But for
this to be successful in reality, everyone in the supply chain should be active
GST dealers and GSTN (IT network) should also work in every steps, which may be
a big challenge for a country like India, where IT infrastructure may be still
at very nascent stage.
SGX-NF
BNF
GBPUSD
Article Courtesy: frontiza.com
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