With today’s close, Nifty finished the
week almost 1% higher cheering better prospect of monsoon as predicted by the
IMD; what’s next?
Market Wrap: 12/05/2017
(17:00)
NSE-NF (May): 9420 (-19
points; -0.21%)
NSE-BNF (May): 22684
(-158 points; -0.69%)
For 13/05/2017:
Key support for NF: 9380-9340
Key resistance for NF: 9485-9515
Key support for BNF: 22600-22500
Key resistance for BNF:
22775-22875
Time & Price action suggests that,
Nifty Fut (May) has to sustain over 9485 area for further rally towards 9515-9550
& 9600-9680 in the short term (under bullish case scenario).
On flip side, sustaining below 9465-9425
area, NF may fall towards 9380-9340 & 9295-9245 area in the short term
(under bear case scenario).
Similarly, BNF has to sustain over
22775 area for further rally towards 22875-23000* & 23075-23200 area in the
near term (under bullish case scenario).
On the flip side, sustaining below 22725-22600
area, BNF may fall towards 22500-22300 & 22050-21950 area in the near term
(under bear case scenario).
Nifty
Fut (May) today closed around 9420, down by 0.21% after making a day high of
9443 and low of 9389. Indian market today opened almost flat following tepid
global cues. Overnight
US market also closed almost flat (-0.11%), although off deep lows after better
than expected PPI data. But overall sentiment was very gloomy amid terrible Q1
numbers of some of the leading retail giants, which may have also undermined
the underlying US economic recovery as it is indicating poor retail sales and
subdued consumer spending & sentiment.
In that sense, today’s CPI & retail sales data for US may be
very crucial for Fed to take some clues about the June rate hike and
communicate with the market accordingly as FFR is now indicating almost 90-100%
of a June rate hike with barely a month in hand for Yellen to telegram
properly. Any late dovish stance by Fed may be proved as a disorderly
volatility for USD & “risk on” sentiment later. Despite blockbuster
headline US NFP, wage growth may be still tepid in US, which in turn may also
be affecting disposable income, discretionary spending and overall retail sales
(consumer spending) & GDP for the economy. Another point may be that US
consumers are already under heavy debt repayment pressure and as such tepid
wage growth may be another headwind for discretionary spending & overall
consumer sentiment.
Back to home, among all these ongoing global concerns, Indian
market today also opened in flat note following contradictory forecast of this
year’s monsoon by IMD & Skymet. But soon after 1st hour of trading,
market sentiment was severely affected as reports of NPA divergence for FY-16
hit the Dalal Street from the Mint Street for Yes bank. Similar reports of
significance divergence between some other private banks like ICICI & AXIS
also hit the bourse today.
Although, these divergence may be due to the the earlier RBI AQR
period and may have already disclosed and reconciled in the FY-17 annual report,
the amount of divergence is significance and in the weekend, market is expecting
that both the banks (Yes/ICICI/Axis) & the regulator (RBI) will come
forward for an explanation & more lights on it.
Today most of the private banks except Kotak & HDFC bank has
suffered a lot and also dragged the overall market sentiment for the Satyam
style balance sheet cooking. If these reported anomalies are true in their
essence, then investor’s confidence may be also shaken on the overall Indian
market.
Towards the end of the market, Govt announced some hints (unofficially)
for the proposed GST rates & also some steps for reviving telecom sector
(telecom & GST reform) and the market rebounded from its day low to end
almost flat (“dips converted quickly into a drop”).
Regarding monsoon, as par Skymet, Indian
market may be celebrating early for the better than expected monsoon by the IMD
(as SKYMET has warned against “irrational exuberance”); Skymet is cautiously
optimistic on monsoon (at 96% LTA), whereas IMD has predicted more than normal
monsoon this year (>100% LTA). Although, 4% variations in absolute amount of
rainfall may not matter so much for the overall rural Indian economy, actual
distribution & timing of the same may be more vital (in 2016, rainfall was
97% of LTA).
Apart from monsoon, GST implementation from July’17 (?), ongoing
NPA reform/resolution process, market may also focus more on the Q4 report card
of Indian corporate, which is so far termed as mixed; Nifty is trading around
TTM PE of 24, may be assuming a 24% CAGR of EPS for FY-18, which may be quite
tough to achieve, considering both short & long term trend and various
macro economic factors.
Today global rating agency Fitch also came forward in response
to yesterday’s acquisitions by the Indian CEA for double standards in rating
parameters. As par Fitch, Indian Govt’s incremental debt (combined debt/GDP
ratio), combined high fiscal deficit and earlier high current account deficit
(CAD), ease of doing business, structural high inflation, high banking NPA
& recapitalization issues of the fragile PSBS, twin balance sheet problem, tepid
private investments are obstructions for India’s rating upgrade despite high
GDP growth (although on lower base), a strong INR and Govt’s effort of
incremental reforms. Going forward, if the above parameters are improved and
Govt’s ongoing NPA resolution effort yield any meaningful result, then Fitch
may consider India for a rating upgrade. Thus, rating agencies may not be in a
hurry to upgrade India despite so much effort (pressure) from the Govt/policy
makers and this may have also affected the domestic market sentiment today.
Meanwhile, Indian CPI, WPI both just flashed below expected; but
IIP data disappointed at a glance. Although this may be due to favourable base
effect of new series (2011-12), market may also speculate about probability of
a RBI rate cut in the coming days, which in turn may also give some sentimental
support for the market on Monday (?); but RBI, being in neutral mode may not
oblige so easily, considering various other factors.
Today, after market hours, some of India’s macro data flashed as:
WPI (Apr): 3.85% (estimate: 4.79%; prior: 5.29%-R) (New series:
2011-12)
CPI (Apr): 2.99% (estimate: 3.49%; prior: 3.89%-R)
Core CPI (April):
4.5% (prior: 4.9%)
IIP (March): 2.7% (estimate: 1.5%; prior: 1.9%-R) (New Series: 2011-12)
Sticky core CPI around 4.5-5% can made the RBI somehow hawkish
in the days ahead and together with GDP growing around 7-7.5%, the Indian
economy may be too hot and thus does not require further repo rate cuts by the
central bank (pure growth vs inflation equation).
Due to new inflation series and subsequent volatility, RBI may
not consider the high real rate of interest (RRI) or neutral rate of above 3%
from its original projection of around 1.5% (Repo rate-CPI) and thus continue
to be in neutral mode waiting for more evidence of actual inflation moderation
in India. RBI may take cautious stance considering any adverse effect of GST,
monsoon & 7-CPC arrear on the CPI and thus may also keep its “wait &
watch” stance in the coming months.
RBI, today also cautioned India’s high combined fiscal deficit due
to ongoing incremental high Govt capex and hopes that Govt will take necessary
steps to reduce the high fiscal deficit in the coming days. RBI also raised its
concern over farm loan waivers & any revenue risks for GST implementation.
Meanwhile, US flashed its core CPI & retail sales data quite
subdued as:
Core CPI (Apr): 0.1% (MOM); estimate: 0.2%; prior: -0.1%
Core CPI (Apr): 1.9% (YOY); estimate: 2%; prior: 2%
Core Retail sales (Apr): 0.3% (MOM); estimate: 0.5%; prior: 0.3%
Retail sales (Apr): 0.4% (MOM); estimate: 0.6%; prior: 0.1%
As a result,
USDJPY, which was already facing significant resistance of the 114.50-115.50
zone; is now coming down for 113.15-111.15 & 108 zone in the coming days; Fed’s June hike
plan may be off and “risk on” trade may also face serious questions amid Trump’s
political squabbling & alleged Russian links controversy.
SGX-NF
BNF
USDJPY
Article Courtesy: frontiza.com
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