Market Wrap: 22/05/2017
(17:00)
NSE-NF (May): 9445 (-0.75;
-0.01%) (TTM PE: 23.95; Near 2 SD of 25; TTM EPS: 394; NS-9438)
NSE-BNF (May): 22685
(-114; -0.50%) (TTM PE: 31.12; Above 3 SD of 30; TTM EPS: 728; BNS-22653)
For 23/05/2017:
Key support for NF: 9420-9395/9375
Key resistance for NF:
9500-9535/9600
Key support for BNF: 22590-22450
Key resistance for
BNF: 22800-22900/23000
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 9515-9470
area, NF may fall towards 9420-9395/9375 & 9320-9280/9240 area in the short
term (under bear case scenario).
Similarly, BNF has to sustain over 22900
area for further rally towards 23000/23075-23200 & 23325-23450 area in the near
term (under bullish case scenario).
On the flip side, sustaining below
22850-22750 area, BNF may fall towards 22650-22590 & 22450-22300 area in
the near term (under bear case scenario).
Nifty
Fut(May) today closed around 9445, almost flat after making an opening minutes
high of 9492 & session low of 9427 in another day of consolidation.
Although Nifty was flat in an overall day of range bound trading, broader
market (Midcaps) were under visible stress today along with Bank Nifty due to
concerns of stretched valuations, mixed Q4 report cards (so far) and renewed apprehensions
about stressed assets in the Indian banking system (PSBS & some private
banks).
Q4FY17
report card of SBI shows that, although on standalone basis, NPL has moderated
for the country’s largest lender, on consolidated basis, the NPL situation is
quite grim due to very high level of stressed assets in the recently merged
other banking entities of SBI. On the other side, divergence of NPA issues with
the RBI continues to drag on some of the selected private banks (Yes, Axis,
ICICI etc) and overall, a sense of mistrust may be there as far issues of NPL
and market may be concerned for more “hidden” stressed assets in the system,
which may got exposed as a result of ongoing NPA ordinance/policy by the RBI
(mini AQR).
Also,
report card of BOI, which has shown quite elevated level of NPA/NPL, may have
affected the overall sentiment in the PSBS space, which has run quite a lot in
the recent time on the hopes of an effective NPA resolution policy by the
Govt/RBI and improvement in the stressed assets. As par reports, RBI may come
out with more NPA resolution policy (hair cut) by next two weeks and market may
be concerned over various rules & regulations (various oversight
committees) and forced hair cuts by the banks; the process may take another 1-2
year to yield some result/actual resolution.
Today
Nifty was supported well today by ITC (+6.08%), HUL (+1.05%); i.e. FMCG
counters due to favourable GST rates; although the same may be in the expected
line. Along with GST boost, prospect of a good monsoon this year may be also
helping the FMCG stocks in the recent times.
Nifty
was also supported by IT stocks (HCL Tech, TCS, Infy) to some extent today. For
the last few days, since Trump’s political crisis and high probability of an impeachment,
IT stocks are rallying to some extent, may be Trump’s absence in WH (if
impeached) is good for IT companies (H1B Visa issues by Trump). Also, Indian
Govt officials & NASCOM are closely co-coordinating (lobbying) with the
concerned high US authorities to look after the interests of the Indian
outsource companies (IT) and thus, market may be expecting some “relief” from
these H1B Visa concerns.
Liquor
stocks were in demand today after analysts found that it may not be under GST
sin tax as of now. But airline stocks were affected for some concerns over high
GST rate in business class travel and also for the surge in crude oil prices.
Indian market today opened around 9480; gap up by 24 points
following mixed global cues and GST & earnings optimism. Overnight, US
market closed in positive (+0.69%) primarily on the strength in oil (energy
related shares) & defence sectors (big deal with Saudi Arabia during
Trump’s visit). Oil is trading higher around $51 after OPEC indication of not
only production cut extension date till March’18, but also for some deeper
production cut (quantity). But, supply glut and talk of 6 months cut against
present buzz of 9 months may also limit any blockbuster rally from here. For
India, higher oil above $55-60 may pose serious concerns for overall economy
(macro headwinds).
US political concern may take more serious turn in the days
ahead after Comey confirmed about his testimony with the US congress and there
was some reports that some more WH officials (close aide of Trump) may be
involved with the alleged Russian election interference. All these may invite
an impeachment motion against Trump and as par some reports, US constitutional
experts are exploring various probabilities & working hard for such
unprecedented action in the recent US history. As Trump is now on a 9 day tour
in the ME & EU, market is calm now; but US political drama may take ugly
turn after his return next week.
Overall, USD was higher today after tepid trade data from Japan
& some UK comments about probability of a “hard Brexit” for hefty fine
proposal from EU (UK has to pay around $100 bln for Brexit)!! Thus, renewed
concern for Brexit related EU political crisis today may have affected the EU
market. Also, some dovish talks from German officials about ECB QE mechanism
may have helped the USD in the early morning Asian session today; but another
comment from Merkel & Co that “EURO is too weak” and ECB is responsible for
the weak EURO may be again putting pressure on the USD.
Technically, EURUSD
(1.1243) has to sustain over 1.12930-1.30 area for 1.16-1.20 zone; otherwise,
the pair may fall and sustaining below 1.11450-1.10 area may further fall
towards 1.07-1.05 zone in the short term.
Apart from UK & US political risks, market may be also
concerned for Brazilian political crisis. Any serious Brazilian crisis may
invite sovereign default (?) from the nation, which was one of the highly focused
EM group among the investors and any such sovereign default may also trigger a
chain of defaults among the US banks there, which may turn into another global
crisis.
Looking ahead, apart from ongoing Q4 results, Indian market may also give more focus on the GST as 1st
July roll out day is now a reality as par the Govt/various stake holders. But,
the Govt should come clear as there are twin issues of IT system and
awareness/lack of preparedness among tax payers/GST stake holders with barely
five weeks left for the implementation.
But, with so many tax slabs,
especially in the service sector and with so much rules & regulations, the
present GST structure may be far from the original concept of “one tax one
nation” and may be much more complex, than being a simple GST regime. Market
may take more time to digest this GST; Q2FY18 earnings may be affected for GST
related disruptions and market may be also concerned for GST compliance costs
and its adverse effect on the SMES & overall unorganized sector of the
Indian economy, which may find it quite difficult & unviable to continue
their business by paying full compliance costs of the GST & DeMo. Thus, the
projected thrust on GDP (around 1.5%) & corporate earnings because of
implementation of GST may also be under cloud.
Apart from GST disruption,
Indian market may be also concerned for any escalated conflicts between India
& Pak due to increasing domestic compulsions from both the nations; weekend
reports from the HM & the Air Force Chief calling for preparedness ( to be ready
for war & appropriate response) at short notice may be also affecting the
sentiment.
SGX-NF
BNF
EURUSD
Article Courtesy: frontiza.com
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