Nifty Closed Almost Flat After Briefly Scaling The 10k Mt’ Everest In The Opening Trade Amid Concern Of Stretched Valuations & Mixed Global Cues Ahead Of Fed

Market Wrap: 25/07/2017 (17:00)

NSE-NF (July): 9973 (+17; +0.17%) (TTM PE: 25.23; Near 2 SD of 25; Avg PE: 20; TTM EPS: 395; NS: 9965)

NSE-BNF (July): 24525 (+153; +0.63%) (TTM PE: 30.84; Near 3 SD of 30; Avg PE: 20 TTM EPS: 795; BNS: 24521)

For 26/07/2017:

Key support for NF: 9935-9860

Key resistance for NF: 10005-10050

Key support for BNF: 24700-24875

Key resistance for BNF: 24500-24300

Hints for positional trading:

Time & Price action suggests that, NF has to sustain over 10005 area for further rally towards 10050-10115 & 10195-10250 in the short term (under bullish case scenario).

On the flip side, sustaining below 9985 area, NF may fall towards 9935-9860 & 9775-9715 area in the short term (under bear case scenario).

Similarly, BNF has to sustain over 24700 area for further rally towards 24875-25050 & 25275-25580 area in the near term (under bullish case scenario).

On the flip side, sustaining below 24650-24600 area, BNF may fall towards 24500-24300 & 24100-24000 area in the near term (under bear case scenario).

Nifty Fut (July) today closed around 9973, up by almost 17 points (+0.17%) after making an opening high of 9995 and late day low of 9951; but Nifty Spot today opened around above the elusive 10000 level itself on back of surge in HDFC Bank & RIL and made a high of around 10011, but soon after that retraced a bit amid some selling spree and closed around 9965, almost flat (-3 points).

Although, Indian market today opened around the 10k Mt’ Everest on the back of HDFC Banks & RIL optimism, it could not sustain there, may be due to concern of stretched valuations and mixed global cues ahead of Fed tomorrow.

With today’s move, Nifty has rallied over 2100 points from Dec’16 low of around 7900 to 10000 in almost 7 months; by over 26% from the DeMo induced low. Some of the primary reasons may be political stability in India after huge unexpected win by NAMO despite DeMo blues followed by a prudent RBI action to stabilize INR without any unnecessary rate cuts/monetary stimulus to counter the DeMo jitters.

Apart from these, stable macro, normal monsoon, smooth roll out of GST and overall robust fund flows by both FII & DII and also by the Indian household savings (after DeMo) may have supported the market quite strongly despite concern of stretched valuations and various global jitters.

Some of the stocks, such as RIL and Bank Nifty have also supported the market on hopes of a Aug rate cut by RBI and a quick resolution of NPA. Double digit earnings growth this year may be another factor for the relentless rally in the Indian market.

Overall, Nifty which was at 1000 base value in 1996 at the time of launching is now today around 10000, thus gave a whopping 900% return in almost 21 years

Today, Indian market may have faced some selling pressure after opening firm at record level, may be because of some report that Govt may tinker with the FRBM target of 3% fiscal deficit of GDP this year by seeking some additional fund for capex/social sector speding.

Nifty was today supported by Telecoms (Idea-Voda merger nod by CCI and some stimulus for the telecom sector by the Govt), Banks (HDFC/ICICI/Axis/Yes/SBI/BOB on earnings/NPA optimism & RBI rate cut hope), metals (Hindalco/Tata Steel) for China optimism (more demand & constrained supply) and IT scrips (TCS/INFY) for renewed optimism about the sector tracking global bounce back (FANG shares/NASDAQ).

Nifty was dragged by ZEEL (earning disappointment), RIL, FMCG & Pharma and some selective scrips/sectors where Q1 report card was tepid due to Pre-GST disruptions.

Looking ahead, at Nifty 10k, valuations may be quite stretched at TTM PE of over 25.30, which is historically a bubble zone, whatever be the narratives; technically, Nifty now has to sustain over 10050 area for further bull rampage; otherwise bears may prevail in the days ahead; Nifty 10k mission may be complete for the time being; earnings has to match now!!

Some of the tailwinds of the Indian market may be subdued earnings, tepid private investments, huge banking NPA, fragile PSBS (issues of twin B/S), subdued credit growth, low per capita GDP and overall, lower tax to GDP ratio; hopefully GST & DeMo will improve the last parameter.

Apart from these, global chorus of QT, US Political jitters, China tightening and NK-US geo-political tensions may be some of the global headwinds for the entire risk assets including India.

EU market is also trading strong on back of some upbeat earnings & rebound in commodities (Oil/metals), higher EZ PMI & German IFO, which ignited some hopes of reflation trade.

NF

 BNF