Market Wrap: 09/05/2017
(16:30)
NSE-NF (May): 9351 (+7
points; +0.07%)
NSE-BNF (May): 22765
(-21 points; -0.09%)
For 09/05/2017:
Key support for NF: 9305-9265
Key resistance for NF: 9400-9475
Key support for BNF: 22625-22500
Key resistance for BNF:
22875-22950
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 9305-9265 & 9215-9170 area in the short term
(under bear case scenario).
Similarly, BNF has to sustain over 22875
area for further rally towards 22950-23075 & 23200-23475 area in the near
term (under bullish case scenario).
On the flip side, sustaining below
22825 area, BNF may fall towards 22625-22500 & 22400-22225 area in the near
term (under bear case scenario).
Nifty
Fut (May) today closed around 9351, almost flat (+0.07%) after making a session
high of 9373 & low of 9332 in an extremely choppy day of trading. Indian
market today also opened almost flat following mixed global cues. Overnight US market also closed almost flat; but in the
morning China & Hong Kong market rebounds from their key technical support
area after some days of intense selling. USD/US bond yields is gaining strength
as smart money may be again entering risk assets after the emphatic win of
Macron in the French election, which reduced the EU political risks to a great
extent; although there are still significant uncertainty about hard or soft
Brexit.
In addition to upbeat NFP job data on last Friday, USD may also
got some support from positive US employment index data yesterday; but tepid
trend of wage inflation/growth and subdued consumer spending may also limit any
significant USD (“risk on”) rally from here; one may watch 113.50-114.50 zone in USDJPY for any decisive movement.
USDJPY, which may be now acting as a proxy for “risk on” trade,
got further boost from hawkish scripts made by some Fed members and some dovish
comments from Kuroda (BOJ) today. Real wages from Japan was reported as -0.8% against
expectation of +0.5%. The decline in real wages is lowest in the last two years
and may also force the BOJ to keep its accommodative policy (QQE) by another 2
years at least till core CPI in Japan reaches 2% level. Thus, the growing divergent
monetary policy between Fed & BOJ is causing more USD strength, which in
effect may be also worrying Trump & Co for their desire for a weaker USD.
Metals are stable today after some intense selling for the last
few days on the back of China concern (regulatory tightening on leveraged
position of iron ore coupled with supply glut). For the time being it seems
that, Crude Oil has also taken the support of $45-43 zone amid increasing OPEC
jawboning about extension of production cut agreement by another 6 months after
June’17 and ongoing supply glut due to increasing US shale oil production. Gold
was under some pressure today due to strength in USD & decrease of EU
political risks.
EU market was also trading in a “risk on” mode and DAX reached
its 12 month high as EU political risks may have decreased to a great extent
now, coupled with some upbeat economic data.
But Indian market today failed to capitalize the positive global
sentiment, may be due to profit booking in the cement & PSBS counters
(SBI/BOB) and Pharma scrips (US FDA concerns). After initial euphoria, it seems
that market is increasingly skeptical about the real effectiveness of the NPA
policy because it does not address the key structural issues for creation of
the stressed assets itself and it may be another long drawn out process. Also,
most of the fragile PSBS are not adequately well capitalized to take large “waive
off” (haircuts). As par some reports, Indian Banks may require waiving off
around Rs.2 tln for settlement & quick resolution of the NPA, which is a
significant amount.
Domestic market may be also under pressure today due to IMF’s
cautious tone about India’s growth potential in FY-18 & FY-19. IMF
projected India’s GDP as 7.2% & 7.9% in FY-18 & 19, slightly below their
earlier forecast due to DeMo related economic disruptions & spillover
effect, tepid private investments and issues of twin balance sheets (huge
banking NPA & stressed corporate balance sheets).
Incidentally, today Fitch also forecasted upbeat trend of global
GDP from 2.5% in 2016 to 2.9% in 2017 & 3.1% in 2018. As par Fitch US
growth may come little sluggish, but China & Japan may contribute better.
There were also some reports of Govt’s proposal to increase PSBS
weightage in its forthcoming CPSE ETF. As par reports, the new CPSE ETF may
include top PSBS like SBI, PNB & BOB, while Govt may dilute its stake of
L&T, ITC & Axis Bank (SUUTI) by including these in the new CPSE ETF.
Inclusion in CPSE ETF may also dilute Govt’s stake in the above three PSBS
(SBI/PNB/BOB). Also, SBI is planning to raise more equity capital and this may
also affect its EPS (EQ dilution). All these may have caused some selling/long
unwinding in these scrips after recent steep rally.
Indian market today was supported by capital goods (L&T),
metals (Hindalco, Tata Steel) and some IT counters on USD strength (Wipro, HCL
Tech, TECH-M, Infy).
Overall, although mixed Q4 report cards, ongoing incremental
reforms by the Govt, political stability and above all, robust domestic inflows
is now supporting the Indian market, there may be some lack of conviction at
such higher levels of the market, considering stretched valuations and continuous
FII selling for the last few weeks (China concern ??). Market may be waiting
for some definitive clues for its next movement after the current phase of
consolidation.
Technically, Nifty need
to sustain over 9425 area for the short term target of 9500-9550 area and mid-term
target of 9865-10100 zone by FY-18; otherwise market may correct to some extent
towards 9000-8470 area in the coming months. Earnings (EPS) need to catch up
with the rapid expansion of the valuation multiple (PE).
SGX-NF
BNF
Article c ourtesy: frontiza.com
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