Nifty finished the June series also
almost flat (-6 points); What’s next in the GST month with increasing concern of
central banks tightening (QT)?
Market Wrap: 29/06/2017
(17:00)
NSE-NF (July): 9525
(+17; +0.18%) (TTM PE: 24.06; Near 2 SD of 25; TTM EPS: 395; NS: 9504)
NSE-BNF (July): 23231
(-25; -0.11%) (TTM PE: 29.22; Near 3 SD of 30; TTM EPS: 795; BNS: 23227)
For 30/06/2017:
Key support for NF: 9495/9465-9395/9335
Key resistance for NF:
9530/9565-9615/9660
Key support for BNF: 23100/23000-22700/22450
Key resistance for
BNF: 23350-23550
Time & Price action suggests that,
NF has to sustain over 9615 area for further rally towards 9660-9700/9735 in
the short term (under bullish case scenario).
On the flip side, sustaining below 9600-9560
area, NF may fall towards 9495/9465-9395/9335 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 23100/23000-22700 & 22450-22300 area in
the near term (under bear case scenario).
Nifty
Fut (July) today closed around 9525, slightly in positive (+0.18%) after making
an opening session high of 9594 and late day low of 9510 in a fairly volatile
session on the FNO Exp day amid ongoing concerns for GST disruption &
NPA/IBC blues and mixed global cues.
Indian
market (Nifty-July) today also opened around 9525 in an upbeat mood following positive global cues & firm commodity
prices. Overnight US market (DJ-30) also closed in upbeat mood (+0.68%) after
ECB clarified that Draghi’s comments day before yesterday was misinterpreted by
the market as a signal of QT (QE bond tapering).
Also, US market sentiment was boosted by Banks after “good
results” from 2nd stage of Fed stress test and Fed permitted to hike
dividends and buy backs. Various big US banks, such as BOA, City, MS, JPM are
scrambling to announce higher dividends & buy backs soon after the Fed
announcement.
Tech/FAANG shares also supported the US market well in addition
of Oil (energy related shares) after surprised gasoline draw down & reduced
US oil supply report, although that may be seasonal in nature.
Fed’s approval for the hike in Bank’s dividends & buy backs
may be an indication of its confidence on the overall US economy after the 2008
economic crisis led by Lehman Brothers collapse and in line with Yellen’s
observation that such crisis may not come again in the foreseeable future (“in
her life time”).
Thus, it may also mean that Fed will not hesitate for QT and
other major central banks also have to follow Fed to maintain the policy/rate
parity; easy money era of the central banks may soon end and that may not be
good for the risk assets.
Indian market today
also opened in positive tone following supportive global cues and soon after
opening, short covering led rally brought the index to almost around 9600, but
ongoing concern of GST & NPA blues may have dragged the market later on
despite some optimism about Air India disinvestment & 7-CPC arrears (HRA)
sanctioned by the Govt.
Banks were under
severe pressure today. As par some estimates, an amount of Rs.20000 cr may be
required by Banks to cover incremental provisions for IBC NPA cases.
US rating agency Fitch
has also expressed some concern for the ongoing farm loan waivers in different
states across India, which may be a risk for its fiscal consolidation and may
also hurt the public investment (Govt capex). It may be also an impediment for
cutting India’s general Govt debt and upgrade of sovereign credit profile.
India’s combined
fiscal deficits including states & central Govt may be also significantly
high already and a growing culture of pan-India farm loan waivers due to
political populism may be also not good for overall fiscal health of the
country apart from the risk of credit discipline of the system.
For GST, market has
clearly some confusion amid divergent views among the stakeholders,
policymakers & politicians; thus market participants may be restoring to long
unwinding or fresh shorting at record high level of the market with stretched
valuations; earnings for Q1-Q2FY18 may be severely affected for GST
disruptions.
Today Nifty was
supported by Axis Bank (after it confirmed lower incremental provisions for
NPA/IBC cases), Tata Steel (buzz of buying Essar steel NPA), Gail & BPCL,
ICICI Bank (JPA cements deal with Ultratech helps its NPA book), ITC &
other metal counters (Chinese commodities price surge & hopes of
consolidation in the Indian stressed steel sector).
Nifty was dragged by
Kotak Bank, Tata Motors (deal with VG may not happen), SBI, BOB, Yes Bank,
Indusind Bank, TCS, TECHM & RIL (concern of stressed B/S amid incremental
capex).
Asian Market update:
Elsewhere, Australia
(ASX-200) was closed higher around 1% boosted by banks & commodities (metals,
iron ores & coals). China has reportedly puts some restrictions on coal
miners due to its ongoing deleveraging effort & environmental concern.
Hong Kong (HSI) was
also closed higher (+0.80%) led by strength in banking blue chips and Japan
(Nikkei-225) also gained higher (+0.50%); but of the highs following strong
Yen.
China (SSE) was also
positive at 0.30% higher due to upbeat commodity prices; PBOC has strengthen
Yuan today below 6.80 level and effectively drained out another CNY 60 bln from
the Chinese money market citing adequate liquidity amid ongoing Govt capex.
European market update:
After opening positive
tracking supportive global cues, European market came under some pressure due
to higher EUR despite ECB’s yesterday clarification that market has misjudged
Draghi’s comments as indication of QT.
EUR goes higher on
optimism about EZ economic growth prospect and weak USD despite QT
clarification by ECB yesterday; market may be not convinced about unlimited QE
by ECB as eligible German bonds are in scarcity. So at some point, ECB may have
to admit the QT path. EUR is also now regarding as a safe haven currency like
Japanese Yen amid various ongoing geo-political jitters.
Easier financial
conditions across EZ may prompt ECB to switch gear from accommodative to
neutral soon and it may also take the QT path as inflation may soar soon. ECB
is seeing the present subdued inflation as purely transitory mainly driven by
lower oil, but if it not tighten, ECB may find it soon to be behind the
inflation curve.
European market came
under some pressure due to higher bond yields across the spectrum amid an apparent
coordinated hawkish scripts from almost all the major central bankers including
Fed, BOE, BOC and also Draghi (?) despite ECB’s yesterday clarification that
market has misjudged Draghi’s comments as indication of QT; it seems that
market is not convinced about ECB’s clarifications.
US market update:
USDJPY
rallied almost 113 (112.93 HOD so far) after US Q1 GDP (3rd
revision) came better than expected at 1.4% (EST: 1.2%; PRIOR: 1.2%) on QOQ
basis led by surge in private consumption.
On
other data points initial jobless claims came a bit disappointing at 244k
against estimate of 240k; prior: 242k. Overall US Q1 GDP data may be looking very
encouraging; but some more analysis of the fine print may be showing that US
consumers actually spend more on RV (recreational vehicles) and without that,
Q1 US GDP may be reported below 1%.
The
surprised US consumption surge in RV may be also indicating about tepid housing
recovery and weak underlying strength of the US economy. Despite lower gasoline
prices, there was decline of spending in automobile sector on YOY basis and
that may be a big concern for US auto industry also.
USD
may have also got some support today after reports that WH (RNC) is working
overtime to modify the Trumpcare bill in order to pass it by this week.
After initial surge led by optimism
about Banks (higher dividends & buy backs) and upbeat GDP, SPX-500 is now
looking stressed and trading around 2430; technically, looking ahead 2450-2465
may be a big hurdle for it, whatever be the narrative.
SGX-NF
BNF
SPX-500
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