Market Wrap: 28/06/2017
(17:00)
NSE-NF (June): 9502
(-10; -0.11%) (TTM PE: 24.03; Near 2 SD of 25; TTM EPS: 395; NS-9491)
NSE-BNF (June): 23258
(+29; +0.12%) (TTM PE: 29.23; Near 3 SD of 30; TTM EPS: 795; BNS-23236)
For 29/06/2017:
Key support for NF:
9470/9440-9400/9340
Key resistance for NF:
9530/9560-9615/9675
Key support for BNF: 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 9675-9700/9735 in
the short term (under bullish case scenario).
On flip side, sustaining below 9600-9560/9530
area, NF may fall towards 9470/9440-9400/9340 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 23000-22700 & 22450-22300 area in the near term
(under bear case scenario).
Nifty
Fut (June) today closed around 9502, almost flat (-0.11%) after making an
opening session high of 9524 and day low of 9472 in a day of consolidation
after yesterday’s steep fall tracking subdued global cues and ongoing domestic
concern of GST disruptions and higher NPA/IBC provisioning norms.
Indian
market today opened around 9503, lowered by 16 points following
tepid global cues. Overnight US market (DJ-30) also closed in negative (-0.46%)
after IMF downgraded US GDP for 2017-18 and “Trumpcare” bill is being delayed
again under the present format.
Also, EU antitrust
fine of $2.7 bln on Google for skewing its search results and abusive dominant
position (monopoly) may have affected the sentiment of the US Tech (FAANG)
shares and together with that some cautious comments about US stock market
bubble by some influential Fed members (Williams/Fischer) and also Yellen has
kept the US market down yesterday. USD/US bond yields were also depressed
yesterday after initial run up following better than expected US consumer
confidence.
Talk of QT (Quantitative Tightening) by the major central banks
(Fed/ECB/PBOC/BOE & BOJ ?) may not be good for the risk assets (EQ) going
forward:
An unexpected hawkish
stance from Draghi yesterday boosted the EUR for hopes of an imminent ECB QE
tapering and made the EU/global stocks lower. Fed is also on the QT path and
suddenly most of the major central banks are trying to follow the Fed path and
already changed their stance into neutral monetary stance form accommodation.
Dearth of easy money (QE) may not be good for the risk assets (EQ) in the
coming days.
Back to home, Indian
market today continues to face stress ahead of GST launch on Friday midnight in
the present complex format and FNO Exp tomorrow; long roll over may be limited
this time until the market has got clearer picture.
Also, NPA/IBC
provisioning worries and 4% below normal rain in June so far may be affecting
the domestic market sentiment and all these global & domestic factors may
be influencing the investors to book profit or unwind long as the valuations
may be also bloated; due to GST disruptions, market may be also apprehending
that earnings for Q1-Q2 will not only be affected, but subsequent 2-3 quarters
may also be affected.
Apart from GST, change
in FY and accounting norms (Ind-AS) from next year may also be affecting the
market sentiment as banks are required to provide more provisions under new
accounting system and also for the NPA/IBC issues. Another point may be that
just referring the NPA cases to IBC/NCLT court, resolution may not happen overnight;
it may be a long drawn process and even if the company/project goes for
liquidation, the lenders (Banks) may not get their money back so easily.
As par one of the
former RBI Gov, by referring the IBC NPA cases to the RBI, Govt as an owner of
the PSBS may be passing the bucks to the central bank(regulator) rather than
punishing the Banks itself for the NPA mess.
Nifty today dragged by
RIL (concern of stretched B/S due to incremental capex), Asian Paints, M&M,
ITC, HUL (concern of GST ?), ZEEL, HDFC & SBI (NPA/IBC higher provisioning
concern).
Nifty was supported
today by TECHM, Idea, Bharti, Infratel (infra status for the telecom towers in
GST), Yes Bank, ICICI Bank, Ultratech & Ambuja Cement (favourable GST rate)
& Metals (Tata Steel, Hindalco)
Metals sector was
upbeat today after rebound of iron ore prices tracking better GDP forecast for
China; also US may soon impose prohibitory import duty tax on China steel due
to North Korea issue as China is not able to bring the NK leadership on line
!!.
Asian market update:
Globally, Japan
(Nikkei-225) closed lower (-0.47%) on weakness of Yen, being an export oriented
economy; but it’s being supported by Banks & Financials on hops of a
hawkish Kuroda (BOJ) today for higher rates (QE tapering ?).
China also closed
slightly lower (-0.24%) after PBOC drained out further liquidity (CNY 50 bln)
in its ongoing deleveraging effort ahead of Communist Party convention; PBOC
also pegged CNY slightly higher against USD today and also indicated that there
may be no further tightening in H2CY17; but ongoing Fed tightening may be a
concern. Also, a top China think tank has forecasted better Chinese GDP at 6.8%
in H2CY17.
Australia (ASX-200)
closed up 0.66% on higher iron ore prices and better China growth prospect.
In commodities space,
Oil is trading around $44, down by 0.50% after unexpected built up of crude
inventories in the private US API report yesterday; all eyes are now on the
official EIA report today. Technically, WTI-Oil has taken support of 42.00 and
now need to sustain over 43.75 area for some rally towards 45.15 zone in the
short term; despite OPEC jawboning and some geo-political concern regarding
Qatar & Syria issues, supply glut from US shale oil (better technology
& lower production cost) and Nigeria & Libya may be the major headwind
for Oil.
Gold is now trading
around 1252, up by 0.19% on weak USD; technically Gold is now taking support of
the 1235-1230 zone and only sustaining over 1255-1260 zone, it may gain more
momentum towards 1275-1295 zone again. Despite some safe heaven appeal and
concern of various geo-political tensions, a global hawkish monetary policy by
Fed/ECB and subdued inflation may be negative for Gold.
European market
update:
European market also
opened lower following tepid global/US cues amid concern of a fresh ransomware
cyber attack on global scale. Also, a strong EUR as a result of hawkish Draghi
has affected the sentiment of the EU market today; but it recovered a bit later
and Indian market also covered some shorts ahead of FNO exp tomorrow, thus
limiting today’s slide.
Talking
about EURUSD, it’s just plunged a little while ago and now trading around
1.13320 (-0.05%) from earlier day high of 1.1390 after ECB sources
(VP-Constancio) clarified that market misinterpreted Draghi’s statement
yesterday and the remark was totally in line with ECB’s existing policy and it’s
nothing new.
As
par ECB, Draghi’s speech yesterday was intended to strike a balance between
recognizing EU’s economic strength and warning that monetary stimulus is still
needed. Although, ECB/Draghi may be famous for such “game of ping-pong” in
their jawboning, the market may have also read too much in yesterday’s Draghi
comments, which didn’t have any single word about any taper tantrum (gradual
tapering of ECB’s QE bonds of around $2.6 tln).
As
par Draghi yesterday: "While there are still factors that are weighing on
the path of inflation, at present they are mainly temporary factors that
typically the central bank can look through”; the comments are fairly benign in
nature.
But,
in reality ECB may be running out of eligible QE (German) bonds, but fearing
adverse reaction from the market, may not be ready yet to recognize it and
trying to give an impression that they can extend the QE indefinitely.
Meanwhile
slide in EUR is helping the European & global risk trade (EQ) to recover
the lost ground by some extent after initial drops today. All eyes are now on
the star studded central bankers policy panel being hosted by ECB in Portugal
and market may watch them carefully (Draghi, Kuroda, Carney & Poloz); among
them Draghi may be most closely watched for another “slip of tongue” or not.
Meanwhile,
GBPUSD jumped to almost 1.30 (1.2965) after Carney (BOE) turned hawkish quite
contrary to his earlier dovish stance just a few days ago and commented in the ongoing
Portugal ECB forum that “some removal of stimulus may become necessary in the
coming months if economy improves”. It now seems that central banks are really
changing their QE path to QT.
Elsewhere,
Oil is also on the fire and eyeing $45 level after surprised drawdown of
gasoline stock.
NF
BNF
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