Market Wrap: 15/06/2017
(17:00)
NSE-NF (June): 9599
(-39; -0.40%) (TTM PE: 24.25; Near 2 SD of 25; TTM EPS: 395; NS-9578)
NSE-BNF (June): 23394
(-92; -0.39%) (TTM PE: 29.42; Near 3 SD of 30; TTM EPS: 795; BNS-23392)
For 16/06/2017:
Key support for NF: 9580-9530/9505
Key resistance for NF:
9635-9675
Key support for BNF:
23200-23000
Key resistance for
BNF: 23500-23650
Time & Price action suggests that,
NF has to sustain over 9675 area for further rally towards 9715-9770 &
9825-9865 in the short term (under bullish case scenario).
On flip side, sustaining below 9655-9635
area, NF may fall towards 9580-9530/9505 & 9470-9405 area in the short term
(under bear case scenario).
Similarly, BNF has to sustain over
23650 area for further rally towards 23750-23875 & 24000-24100 area in the
near term (under bullish case scenario).
On the flip side, sustaining below
23600-23500 area, BNF may fall towards 23200-23000 & 22900-22700 area in
the near term (under bear case scenario).
Nifty
Fut (June) today closed around 9599, almost 39 points down after making an
opening session high of 9626 and late day low of 9584. Indian market today
opened gap down by around 15 points following tepid global cues after report of probe by US special
Counsel Muller on Trump for the alleged Russian link, soft US economic data
(core CPI/Retail sales) released yesterday, a hawkish hike by Fed indicating
another hike in Dec’17 with gradual tapering of its B/S (QE bonds).
Although, overall
statement of Fed was dovish as expected, it’s also maintained the previous
guidance of another hike in 2017 (Dec); in addition to this, Yellen sounded
somewhat hawkish in the Q&A session and termed the tepid US CPI as transitory.
In brief, Fed may be optimistic about US growth, job market but quite
pessimistic about inflation & also on the fiscal stimulus (Trumponomics). But,
Yellen is not ready to acknowledge the subdued inflation and this Fed fantasy
may be keeping the market in balance; as par Fed, consecutive rate hike is a
sign of confidence on the US economy.
Having said that,
although Fed looks very optimistic on US economy, market may not believe Fed
fully, considering its past record of poor credibility and that’s why we may
see range bound movement of USD, despite Yellen sounded surprisingly hawkish in
its presser yesterday; divergence of US soft & hard data may also keep the
market quite cautious about prospect of US economy.
Overall, for the US
economy, real wage growth may be very tepid and this lack of wage inflation may
be also affecting the US consumer spending or rather discretionary spending; a
central bank monetary policy alone may not be sufficient to rectify it; some
structural resolution is necessary (like job skill, proper education,
automation issues etc).
But, more than Fed
hike; taper tantrum may hurt the risk trade & specially EM assets. All eyes
may be now on the PBOC/China for its monetary policy adjustments after Fed hike
as historically it may be the primary source of concern after Fed hike; but
PBOC has already tightened its monetary policy and Yuan is now relatively
strong. So, even if PBOC do not tighten now, USDCNY, which is now around 6.75,
may not break the 6.90-6.95 barrier.
But, as a result of a
hawkish Fed, which is not only talking about multiple rate hikes, but also
implementing it despite soft US economic data and also in the process of
normalization of its B/S, other major central bankers may be now forced to be
neutral or even hike by following Fed in order to keep the policy rate
differential at present level. Thus, the era of easy money may be over for the
time being, which is also not good for the risk/EM assets.
Back to home, RBI (India) may be constrained to be neutral in order
to keep the policy parity with a hawkish Fed despite room for rate cut. All
eyes may be now on the GST (disruptions) and PSBS consolidation & NPA
resolution; Indian market may continue to digest the impact of GST on the
Q1& Q2FY18 because of de-stocking both at manufacturing &
dealers/retailers level for concern of input tax credit issues and changes in
taxes.
Apart from GST concern, domestic market sentiment may be also
affected by reports of acute cash shortage in different states as ATMS are
running dry; SBI has reported almost 51% currency shortage in its ATMS. As cash
withdrawal restrictions by the Banks are not in place now, informal economy may
be again limping back, raising question of the overall DeMo exercise.
There was also some apprehensions about the efficacy of the
Govt’s move to consolidate different smaller PSBS with some selected larger
ones on region basis as this may not solve the core issues of NPA and
recapitalization. On the other side, bigger PSBS having relatively strong B/S
as of now may also be affected due to this merger/consolidation move. Already core EBITDA margin of big PSBS are in
question now and the proposed consolidation may make the core operating margin
weaker.
Private banks were under some pressure today after report that
ICAI has written to the RBI, questioning the auditor’s role in the NPA
divergence issue with the RBI report.
Today Nifty was helped by RIL (report of retail fuel outlets
under Jio banner with BP), Auro Pharma (USFDA approval and optimistic
management guidance about US business) and other Pharma scrips for USFDA
approval of certain drug molecules.
Nifty was dragged by BPCL, ONGC, Gail (concerns of GST on oil
products and daily price revision system; Govt’s move to consolidate or merge
different Oil & Gas companies into 2-3 large entity; RIL’s plan of fuel
retailing similar to telecom disruptions). Also, IT (TCS/INFY), PSBS (BOB/SBI),
Private Banks (HDFC/ICICI/INDUSIND/AXIS/YES Bank) dragged the index. Metal
counters were looking strong initially after reports of price surge of China
steels due to planned production cut; but later they were also succumbed to
general market weakness.
Elsewhere, in UK, BOE was in neutral mode as expected amid soft
UK economic data & political concerns. But market was surprised by votes of
3 hawks in MPC for a rate hike; subsequently GBPUSD jumped but later again
nosedived due to reality of UK political situation, Brexit uncertainty; it also
seems from the overall language of BOE that they are quite confused amid higher
inflation & weaker currency coupled with lower growth.
Meanwhile,
GBPUSD again come into pressure as market may be realizing that despite some
surprised hawks in MPC, Carney may not in mood to hike rates amid intensified
UK political jitters; Theresa’s own leadership may be now in question.
Also,
market was looking for some more BOE policy clarity in today’s evening Mansion
House event, where Hammond & Carney were supposed to deliver some speech
regarding UK monetary policy; but due to recent London fire incident, the event
is cancelled for the time being. So GBP bulls might be disappointed, although
BOE may publish the official speech of Carney later on. It was this Mansion
House, where Carney first indicated about UK rate hikes in 2014; market may be
looking for something similar now.
USDJPY
is now trading around 110.30, jumped by almost 0.71% and approaching the key
resistance zone of 110.60 after Yellen sounded quite hawkish contrary to
earlier market expectations of a dovish stance. The rally is being further
supported by Fed’s stance of gradual tapering of its QE bond (B/S) and upbeat
US economic data just published.
Today’s US economic data came as:
NY
Empire manufacturing index: 19.8 vs 4.0 expected (PRIOR:-1.00)
June
Philly Fed index: 27.6 vs 24.0 expected (PRIOR: 38.8)
Initial
jobless claims: 237K vs 242K estimate (PRIOR: 245K)
IIP
(May): 0.0% vs +0.2% expected (PRIOR: 1.1%)
Thus,
except IIP, all the other US economic data today is quite upbeat; but tepid IIP
data may be also negative for the USD and market may again raised concern about
true underlying US economic strength to withstand multiple Fed rate hikes.
In any way, USDJPY now need to stay
above 110.60-111.75 for further rally; tomorrow’s BOJ meet may be
vital now. BOJ is expected to be neutral as of now; but any indication of QQE
bond tapering to counter Fed’s gradual tapering may also risk the USDJPY rally.
Technically, GBPUSD (1.2704) now need to sustain above
1.27952-1.28205 for any further rally; otherwise it may fall towards
1.25290-1.23640 in the coming days.
SGX-NF
BNF
USDJPY
GBPUSD
Article Courtesy: frontiza.com
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https://t.me/MarketLive_free
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