Banks Rebound On Hopes Of RBI Cut In
Aug, After Govt Cuts Small Savings Interest Rate By 0.10%
Nifty Finished Almost 1% Lower In June,
The First Monthly Drop In 2017 Amid Concern Of GST, NPA & QT
Market
Wrap: 30/06/2017 (17:00)
NSE-NF
(July): 9515 (-4; -0.04%) (TTM PE: 24.10; Near 2 SD of 25; TTM EPS: 395; NS:
9521)
NSE-BNF
(July): 23210 (-21; -0.09%) (TTM PE: 29.20; Near 3 SD of 30; TTM EPS: 795; BNS:
23211)
For
03/07/2017:
Key support for NF: 9495/9440-9395/9335
Key resistance for NF:
9540/9600-9670/9725
Key support for BNF:
23000-22800
Key resistance for
BNF: 23350-23550
Time & Price action suggests that,
NF has to sustain over 9615 area for further rally towards 9670-9725 &
9775-9865 in the short term (under bullish case scenario).
On the flip side, sustaining below 9600-9560
area, NF may fall towards 9495/9440-9395/9335 area in the short term (under
bear case scenario).
Similarly, BNF has to sustain over
23350 area for further rally towards 23550-23750 & 23850-24000 area in the
near term (under bullish case scenario).
On the flip side, sustaining below
23300 area, BNF may fall towards 23100/23000-22800 & 22450-22300 area in
the near term (under bear case scenario).
Nifty
Fut (July) today closed around 9515, almost flat after making an opening
session low of 9451 and late day high of 9529 led by late recovery tracking
some rebound in European markets and possibly by quarter end portfolio/fund
rebalancing in a cautious tone ahead of GST roll out tomorrow.
Indian
market today opened around 9493, almost 27 points down following
negative global cues. Overnight US market (DJ-30) also closed in deep red
(-0.78%) on concern of central bankers tightening (QT) and subsequent surge in global
bond yields; tech shares/start ups were also in huge pressure as era of easy
money may end soon. Although, Q1 US GDP headline came upbeat on 3rd
revision, fine prints of the same may not be so much rosy.
Financials has supported the US market yesterday following Fed’s
approval of higher dividends & buy backs after successful stress tests.
Indian
market also opened lower following negative global cues & ongoing GST
jitters and market continues under stress on
earnings concern for Q1-Q2FY18 due to GST disruptions and NPA blues despite
great thrust on deleveraging for stressed corporate India.
Almost all the major sectors in India from steel, power and
cement to telecom are in stress; but telecom sector may got some boost as Govt
help/bail out them by lowering interest rate & extending debt tenure.
Overall, market participants are concerned that due to hurried
implementation of GST from tomorrow in so much complex form may cause economic
activity contraction, at least in the short term. The present form of GST is
not a “one tax, one nation” as originally thought; but it’s a multi tax dual system
with a huge challenge of full compliances, especially for the small traders
(SMES).
Going forward, Nifty-Fut (July), which is closed around 9515
area today, need to sustain above 9440-9395 area; otherwise expect more
corrections for 9335-9285 area in the coming days amid concern of GST, NPA
& QT by global central bankers.
Today banks supported the market to some extent after Govt cut
interest rate on most of the small savings instruments by around 0.10%. RBI has
some reservation about higher small savings interest rate in India, being not
aligned with the 10Y GSEC bond yield and may be one of the major obstructions
for the banks in their transmissions of the full benefit of the lower RBI repo
rate cuts. Thus, cut in small savings rate by even 0.10%, may encourage banks
to transmit more as they may have also cut their FD/deposit rates and RBI may
follow suit in Aug’17.
Govt/FM also assured the industry/market today that if the GST
compliance is good, then Govt may reconsider aligning some GST rates, such as
12 & 19% into a single 15% for a simple GST structure of 3-4 rates against
present system of 6-7 rates. This may have also calmed the nerves of the market
today.
Today Nifty was supported by BOB (Nomura upgraded it after
recent steep fall), ITC (favourable GST rate optimism), Pharma, Metals (Tata
Steel for buzz of Essar steel M&A), IT (TCE/INFY), Private Banks
(Yes/Indusind/Kotak/Axis).
Nifty was dragged by Tata Motors, TECHM, ICICI Bank, HDFC, RIL
& LT; out 51 components, 31 were in red today.
Asian Market Update:
Elsewhere,
Australia (ASX-200) was closed in deep red (-1.50%) amid concern of a hawkish
RBA next week in the changing global central banks bandwagon of hawkish tunes
despite some rebound in iron ore prices after upbeat China PMI data today.
China
(SSE) also closed almost flat in slight red (-0.15%) after PBOC further
strengthen the Yuan (CNY) and sucked out more liquidity (CNY 60 bln) today by
reverse repo; there are talks that PBOC may cut RRR for some small lenders
(Banks) targeting the SME sector (real economy) and continue its deleveraging
effort for the big ones.
Although,
today’s official China PMI was upbeat and above market expectations, fine print
reveals that PPP & Mfg PMI may be contracting, which may have some negative
impact on its GDP going ahead.
Japan
(Nikkei-225) closed almost 0.90% lower around 20000 level, following strength
in Yen after mixed economic data today and overall weakness of USD. In Japan,
although headline CPI for May came at 0.4%, core CPI continues to be at 0%
against BOJ’s target of 2% and that may be a big disappointment despite decades
of QQE.
Subdued
core CPI & wage inflation in Japan may be a structural issue which monetary
policy may not solve alone; thus Abenomics need to undertake some changes in
order to address this decade old issue properly. In that perspective, Sunday’s
Tokyo regional election may be an acid test for the Japanese PM (Abe) & his
policy of Abenomics. Technically, for Nikkei-225, the area of 19800-19700 may
be a big support as of now.
Hong
Kong (HSI) also closed lower (-0.60%) tracking negative global cues ahead of
“Hand Over” day tomorrow, when Chinese premier may announce some sops for the
market/economy; looking ahead HSI, which is trading around 25600 now, need to
stay over 25300 area for any rebound; otherwise may correct more.
In
commodities, Crude Oil is now trading around 45.20, stabilizing to some extent
after recent slump on concern of supply glut & OPEC squabbling; surprised
fall in US supply & better drawdown of gasoline may be supporting the Oil
right now, although that may be seasonal in nature.
Another
point may be that stock of Crude Oil may be converting into gasoline stock
piles considering the recent spate of refinery expansion. All eyes may be on
today’s Baker Hughes Oil rigs data to gauze the underlying supply sentiment.
European
market update:
Elsewhere, in Europe stocks recovered slightly after upbeat EU
economic data; specially inflation. Headline CPI for June flashed as 1.3%
against estimate of 1.2% (prior: 1.4%). Similarly core CPI came as 1.1% against
estimate of 1% (prior: 0.9%).
But EURUSD did not react too much even after upbeat EU core CPI
data as bund yields fall; although, core CPI came around 1.1% from earlier 0.9%
and quite encouraging, it may be far below ECB’s target of 2% (unless ECB
officially lower its inflation target).
European market was also under some pressure today following
overnight slump in US market; Banks are supporting, but healthcare &
commodity related stocks are dragging. Bayer is under huge selling pressure
after its guidance warning citing some headwinds from its Brazil business.
In UK, although Q1 GDP came as expected at 2% (YOY) & 0.2%
(QOQ), the underlying details may be less impressive with 1.4% fall in real
disposable income; as a result BOE may not run for an immediate hike despite
its recent hawkish script. Subsequently GBPUSD dropped by some extent.
DAX is now trading around 12390 area, down by 0.17%; looking
ahead, it need to stay over 12300 area; otherwise expect more fall towards
12170-11970 area in the coming days.
FTSE is now trading around 7350,almost flat (+0.03%) amid some
fall in GBP; technically it now need to sustain over 7240 area for any bounce;
otherwise it may fall further towards 7125-7030 zone in the days ahead amid
increasing QT coordination among G-10 Central Banks.
US market update:
SPX-500
(US-500) is now trading around 2420 after making a session high of 2428
following mixed US economic data; core PCE, a favourite indicator of Fed to
gauze underlying inflation pressure on US economy came in line for May as 0.1%
(MOM) & 1.4% (YOY) against prior 1.5%.
Although
US personal income for May came as upbeat at 0.4% against prior 0.3% (MOM-May),
personal spending came disappointed at 0.1% against prior 0.4%.
Chicago
PMI (June) came upbeat at 65.7 against estimate of 58 (prior: 59.4); U-Mich
consumer sentiment for June also flashed well at 95.1 against estimate of 94.5
(prior: 94.5).
Overall
data may be good but may not be block buster enough to move the Fed above the
side line in the coming days and may have also failed to lift the sentiment of
USDJPY & SPX-500; both are down to some extent after the data.
Although,
U-Mich consumer sentiment data has beat the estimate, it’s at 7 month low, which
may be also indicating that consumers are fast losing hopes in “Trumponomics”
after the election amid increasing uncertainty about US economic prospect and
political jitters. Trump’s election rhetoric now need to be transformed fast
into real action; otherwise US consumers may soon lose all the hopes on Trump
to make “America great again”.
DAX-30
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