Market Wrap: 19/06/2017
(17:00)
NSE-NF (June): 9676
(+79; +0.83%) (TTM PE: 24.45; Near 2 SD of 25; TTM EPS: 395; NS-9658)
NSE-BNF (June): 23675
(+215; +0.92%) (TTM PE: 29.86; Near 3 SD of 30; TTM EPS: 795; BNS-23742)
For 20/06/2017:
Key support for NF: 9655/9620-9590
Key resistance for NF:
9725-9775
Key support for BNF: 23650-23500/23400
Key resistance for
BNF: 23875-24000
Time & Price action suggests that,
NF has to sustain over 9725 area for further rally towards 9775-9825 & 9865-9950/10050
in the short term (under bullish case scenario).
On flip side, sustaining below 9705
area, NF may fall towards 9655/9620-9590/9560 & 9530/9505-9470 area in the
short term (under bear case scenario).
Similarly, BNF has to sustain over
23875 area for further rally towards 24000-24115 & 24250-24435 area in the
near term (under bullish case scenario).
On the flip side, sustaining below
23825-23750 area, BNF may fall towards 23650-23500 & 23400-23250 area in
the near term (under bear case scenario).
Nifty
Fut (Jan) today closed around 9676, almost soared by 79 points after making an
opening session low of 9625 and late day high of 9697, snapping 6 days losing
streaks at one day, indicating strong buying momentum at every dip. Indian
market today opened around 9625 following positive Asian
cues amid hopes of a MSCI index inclusion for China’s share.
Global
cues were also positive this morning following upbeat Asian cues after big China
MLF/OMO liquidity injection, talk of easing of restrictions by China Security
Regulator on banks & other institutions to trade in futures. Positive China
home prices data may be supporting the UPBEAT global sentiment & metals;
China market is trading higher
Also, USDJPY was in
upbeat mood (risk on trade) after Japanese trade data came below expectation,
although both import & export figures were upbeat. Import surged primarily
due to imported oils & other energy products. A weak Yen is positive for
Japanese economy and Nikkei is trading higher.
Overnight, on Friday
US market closed almost flat in slight positive territory supported by energy
shares (some rebound in oil); but dragged by consumption/retail stocks,
following deflation concern after Amazon acquired a US grocery giant (Whole
Foods); also Friday’s US economic data was tepid. On late Friday Trump’s lawyer
has denied any FBI investigation on Trump for obstruction of justice issue
(Comey) as reported in WaPo and also confirmed by Trump’s own tweet and this
may be also supporting the USDJPY/risk trade.
But some dovish
comments by Fed’s Kaplan undermining further rate hikes by Fed amid tepid
inflation may be also indicating some divergence of views in Fed & with
Yellen. A dovish Fed may be good for easy money & risk/EM trade, although
it’s too early now and market will focus on host of 6 FOMC speakers this week
for their views; today Dudley & Evans are scheduled to speak and both of
them may be known doves.
European stocks were
also trading in positive zone steady ahead of preliminary Brexit talks despite
another London terrorist incident, which is now occurring quite regular
interval, putting political pressure on Theresa May. Brexit Minister Davis will
start negotiations in Brussels on today, which will be followed by a Brussels
summit on Thursday and Friday where British Prime Minister Theresa May will
interact with fellow EU leaders (not negotiate). Market may be concerned for a
hard Brexit stance from EU officials amid weakening political position of
Theresa at home.
Elsewhere in France,
polls result showed a strong parliamentary majority for President Macron
following Sunday's vote, although slightly below expectations; but gave him a
powerful mandate to push through his pro-business reforms. This has also
supported the EU market along with another opinion poll in Germany indicating
for a better approval rating for Merkel.
Back to home, Indian market was also opened in gap up tracking
positive global cues and ended in green. The domestic market sentiment got major
boost after visible action of RBI pushed IBC act against the so called “dirty dozen”
(12 most stressed NPA accounts covering for almost 25% of the Indian Banking
NPA), including Bhusan Steel & Power, Essar Steel, Monnet Ispat &
Energy, Lanco Infratech etc; subsequently banks has contributed almost 50% of
today’s Nifty rally (AXIS/HDFC TWINS/ICICI/SBI/INDUSIND/KOTAK/BOB) except Yes
Bank.
Although Market may be expecting a quick NPA resolution from
these IBC actions for these legacy NPA accounts and similar actions for other
large & small NPA/NPL, the core issue may be that, IBC act is still not
challenged in the SC and we may see various legal hurdles. Even if, Bank
acquires the stressed projects & other assets of the borrowers, it may be
even more difficult to find a suitable buyer for the same as the core viability
of the project may be in question. So, the actual resolution process of the NPA
may remains very slow in the days ahead.
Apart from resolution of NPA issues, risk-on trade improved
after the GST Council on Sunday relaxed return filing rules for businesses for
the first two months of the tax rollout even as it stuck to the 1st
July roll out. Although, relaxation of return filling and E-Way bill may have
supported the market sentiment to some extent today, various states have also
expressed apprehension for revenue due to delay in return filling.
Looking ahead, Indian market may focus on GST implementation
from 31st July as FM yesterday confirmed the same citing no luxury
of time for any further delays; although it is in expected lines, market may be
also concerned about short term GST disruptions under the present complex form
and overall compliance costs may be also huge.
Indian market
sentiment also got some boost by Sebi’s plans to relax its norms for direct
registration of foreign investors and fast-track the listing process for
companies, including startups, as part of efforts to make the Indian stock
market more attractive for investments (deregulation).
Apart from Banks,
today Nifty was supported by Tata Steel (purchase of stake by Tata Sons from
Tata Motors), RIL (optimism about R-Jio’s mobile/data subscriptions), L&T
(winning of a huge order of Rs.2231 cr), Adani Ports (recent rating upgrade by Moody’s),
Kotak Mahindra Bank & Tata Motors DVR (inclusion in BSE Sensex), ITC &
TCS.
Nifty was dragged
today by DRL, Sun Pharma (renewed US FDA regulation concern), INFY, Wipro,
TECHM (IT scrips), Eicher & Tata Motors, Maruti (GST rate concern & pre-GST
discount doll out/ selling), Yes Bank, ONGC, Coal India & ACC.
Overall, as a result
of unexpected hawkishness from Fed, BOC amid an environment of subdued or even
falling inflation may be spurring further asset reflation resulting in risk assets
rally (global stocks, USD). Also subdued US bond yields may be encouraging some
commodity carry trade (AUD/NZD/CAD) supporting the overall risk-on global trade
at this moment.
Meanwhile, USDJPY
caught a bid today, after surprised hawkish & puzzling comments from Fed’s
Dudley, who is a known dove. Overall, Dudley’s comments may be similar to
Yellen and contrary to Kaplan’s view on Friday, who was skeptical about US
inflation. But today Dudley has basically dismissed Kaplan’s dovish view and
subsequently USD/US bond yields are gaining strength across the board. Dudley
has expressed no concern on subdued inflation and thus, there is nothing to
worry about US monetary policy normalization (rate hikes).
But,
Dudley’s comments about flattening of yield curve not a negative signal for the
US economy may be confusing because history shows that every time this
happened, US & global economy has gone into recession. An inverted yield curve
(flattening) occurs when short term interest rates yield more than longer term
rates and in that scenario, Banks see little incentive to fund longer term
loans (e.g. home loans), resulting in a severe recession depending on the
intensity of the asset bubbles. Having said that, it may be also noted that Fed's tapering of B/S may also support the steepening of the UST curve
As
par some experts, “Fed desperately wants this QT to be an easy, smooth,
paint-drying type of process, but there’s no chance. The whole purpose of
quantitative easing (QE) was to inflame the markets higher. Why shouldn’t the
reverse happen when we do quantitative tightening (QT)”?
Thus,
QT may be a big worry for stocks & bonds, although it may be quite positive
for USD.
Technical Analysis: Short Term
USDJPY:
111.25 (LTP)
Key Technical Levels:
S1:
110.25
S2:
109.25
S3:
108.80-108.15
S4:107.20
PIVOT: 111.50-111.75
R1:
112.20
R2:
112.95
R3:
114.45
R4:
115.65
Time & Price, chart pattern & momentum oscillator action
suggests that, USDJPY has to sustain over 111.75 area for further rally towards
112.20-112.95 & 114.45 -115.65 in the short term (under bullish case
scenario).
On flip side, sustaining below 111.50 area, USDJPY may fall towards
110.15-109.25 & 108.80/108.15-107.20 zone in the short term (under bear
case scenario).
SGX-NF
USDJPY
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