US market slumped after Trump Jr
released e-mail trails which revealed Trump-Russia involvement in the US
election.
Market
Wrap: 11/07/2017 (17:00)
NSE-NF
(July): 9793 (+16; +0.16%) (TTM PE: 24.77; Near 2 SD of 25; Avg PE: 18; TTM
EPS: 395; NS: 9786)
NSE-BNF
(July): 23603 (-60; -0.25%) (TTM PE: 29.67; Near 3 SD of 30; Avg PE: 20 TTM
EPS: 795; BNS: 23585)
For
11/07/2017:
Key
support for NF: 9755-9715
Key resistance for NF:
9835-9875
Key support for BNF: 23600-23400
Key resistance for
BNF: 23800-23900
Time & Price action suggests that,
NF has to sustain over 9835 area for further rally towards 9875-9915 &
9975-10050 in the short term (under bullish case scenario).
On the flip side, sustaining below 9815
area, NF may fall towards 9715-9665 & 9600-9560 area in the short term
(under bear case scenario).
Similarly, BNF has to sustain over
23800 area for further rally towards 23900-24000 & 24115-24250 area in the
near term (under bullish case scenario).
On the flip side, sustaining below
23750 area, BNF may fall towards 23600-23400 & 23300-23000 area in the near
term (under bear case scenario).
Nifty
Fut (July) today closed around 9793, almost flat (+0.16%), but well off the day
high of 9829 and made a closing session low of 9781 amid some last minutes
selling after both result of Indusind Bank & South Indian Banks shows incremental
trajectory of NPA/NPL (stressed assets).
Today, Indian market (Nifty-Fut) opened around 9800 at another
record level & almost 26 points up tracking positive global/Asian cues and
some surge in Hong Kong market (HSI) boosted by tech stocks. Most
of the Asian markets including China were trading in positive zones today
tracking rebound in Tech shares after recent sell off as investors may be again
focusing on the sector ahead of earnings season.
Overnight US market (DJ-30) was closed absolutely flat (-0.03%)
supported by Techs, Banks amid Q2 earnings optimism, which will start from
today; market is expecting around 8% growth in SPX-500 earnings on YOY basis
this time on an average. Also energy related shares lend some support to the US
market yesterday as Oil rebounds above 44.50 mark on buzz about some production
cut requests to Libya & Nigeria.
Going forward, Indian market may also focus on Q2 earnings, which
is resumed from today with report card from Indusind & South Indian Bank; although
report card of Indusind Bank is inline of market estimates (mixed); South Bank
mat have disappointed today at a glance. Indusind Bank closed almost flat today,
but South Banks closed almost 4% lower.
Also ongoing GST implementation and its effect on the economy
and earnings on the corporate India may be in focus in addition of further
action from P-Notes FNO holders after SEBI restriction circular; for the last
two days, we have seen some short covering from them in order to comply with
the SEBI instructions. The big question is will they also unwind their long
positions amid strict regulations by the SEBI and another probable subdued
earnings quarter.
Tracking global cues, Indian market today was supported by Techs
(IT), such as INFY, TCS & TECHM and also Tata Motors initially due to
P-Notes FNO short covering; but later they also have surrendered some of the
intra gains, pushing the Nifty lower.
Regarding Q1FY18 earnings, market may be not so much
enthusiastic amid concern of Pre-GST disruptions and incremental NPA provisions
(PSBS); but expectation may be quite high from some Private Banks this time.
At present, TTM EPS for Nifty may be around 395 (FY-17) and at
9800 Nifty (Spot), TTM PE is around 24.81, just a bit lower of 2-SD bubble zone
of 25 and may be very expensive against its long term average (fair value) of
18.
At present run rate, FY-18 projected EPS may be around 418 and in that
scenario, projected fair value of Nifty may be around 7525 at PE of 18 (average
EPS growth may be around 8%; whereas TTM PE is quoting around 25 !!); clearly
the Indian market is rallying on hopes of earning recovery to 15% from 8% (i.e.
almost 100% jump !!) and power of liquidity; but the earning recovery story is
elusive so far repeatedly.
Indian market today got some boost from lower CPI estimate to be
released tomorrow at around 1.70% for June against prior figure of 2.18%; IIP
for May is slated to come around 1.9% against April figure of 3.1%. Thus dual
combination of lower growth (GDP/IIP) and lower headline CPI may be ideal for
RBI to cut in Aug’17.
But, RBI’s Patel being an inflation hawk may take the “wait
& watch” approach to see more evidences of lower inflation and to change
its policy stance again from neutral to accommodative. Also, core CPI of India
may be quite sticky around 4.5-5% and coupled with that apprehension of GST
disruptions, de-stocking & inflations and global chorus of QT may force
RBI/MPC to be on the neutral side just to keep the policy parity with USD at
present ideal level for the central Bank.
RBI may not disrupt the attractive Indian bond market by being
ultra dovish on the back drop of a stressed corporate sector and fragile Banks
(PSBS & some private Banks) and limited transmission capabilities of the Banks due to various
structural issue.
Looking ahead, Nifty Fut (July) has to sustain above 9835-9875
area for conquering the 10k milestone; otherwise expect some correction amid
increasing chorus of QT tunes by the global central banks (Fed/ECB) and high
probable tepid Q2 report cards.
Today, Nifty was supported by Hindalco, Bajaj-Auto, Tata Motors
(earnings optimism & P-Notes short covering), NTPC, BPCL, M&M (optimistic
outlook) and INFY/TCS (global tech rebound and P-Notes short covering ahead of
result). Nifty was today dragged by Idea, Bharti Telecom, BOB, ITC, Lupin, SBI
& ICICI/AXIS Banks.
Asia-Pacific market update:
Elsewhere, Australia (ASX-200) closed almost flat around 5727
(+0.10%), paring early gains tracking movements of commodities.
Japan (Nikkei-225) is closed around 20195, up by almost 0.57%
tracking weakness in Yen ahead of Yellen’s testimony and BOJ jawboning to keep
JGB yields lower at any cost. Also, Japanese market is being supported by some
tech stocks as well as tech investor stocks such as Soft Bank today.
Hong Kong (HKG33/HSI) is trading upbeat around 25900, up by
almost 1.5% supported by blue chip Techs such as Tencent; today Hong Kong
market may be supporting the regional (Asia) equity sentiment significantly.
China (SSE) is also recovered from early losses and is now
trading around 3224, up by almost 0.33%; earlier it was down for some
regulatory tightening buzz for insider trading norms by the fund managers.
Today, PBOC has kept a neutral stance with no drainage by RR and
injection of equivalent fund through OMO after 12 consecutive days of outflow
of around 780 bln Yuan.
European market update: Europe
Also Trading Rangebound For Lack Of Any Meaningful Cues Ahead Of BOC &
Yellen’s Testimony Tomorrow:
Meanwhile, European market is trading in a narrow range for lack
of any meaningful cues ahead of BOC and Yellen’s testimony tomorrow. Overall,
defensive sector is dragging the EU market, while some M&A news is supporting
the market.
Germany (DAX) is trading around 14468, almost up by 0.20%; but
off the day high; France (CAC) is in negative at around 5152 (-0.25%), while
Italy (MIB) is trading in slight positive at around 21226 (+0.17%).
FTSE is trading in red around 7336 (-0.45%) after strength in
GBP on the hopes for some hawkish stuff in a change of stance from BOE’s Dy Gov
(Broadbent), a known dove. But to the utter disappointment of GBP bulls, he has
not offered any comments about UK monetary policy and the cable slumped
thereafter.
Earlier today, GBPUSD may have also got some strength from an
upbeat BRC retail sales data, which flashed as 1.2% for June against estimate
of 0.5% (prior: -0.4%). Also, comments from UK’s Foreign Minister (Johnson)
that Brexit bill from EU is “extortionate” may have dampened the spirit of GBP
bulls as it may indicate more Brexit uncertainties.
Oil on a roller coaster drive amid OPEC
squabbling:
Oil
is now trading around 44.50, almost flat but off the session low of 43.82 amid
ongoing OPEC squabbling for more production cuts.
In the early Asian session today, Crude Oil (WTI) has made a
session high of around 44.88, up by almost 0.50% amid optimism of some oil
production cuts by Libya & Nigeria; but still there is significant
apprehension of supply glut and even if they cut to some extent, it may be very
insignificant, considering overall supply & demand dynamics. Recent supply
glut of Gasoline & low demand of the same may be also hurting the sentiment
of Oil bulls.
Amid
all these apprehensions today, Oil slumped suddenly after reports that Saudi
Arabia has breached the OPEC-NOPEC production cut agreements by producing little
more in June at 10.07 mbpd against quota of 10.058 mbpd; although it may be very
negligible, the June figure is quite high compared to May figure of 9.88 mbpd;
subsequently Oil hits the LOD at around 43.82.
Overall,
this fractional deviation from Saudi may be also indicating that they are no
longer willing to take leads in production cuts and thus other members also don’t
need to follow either; the whole OPEC production cut narratives may be also in
grave danger.
Another
point may be that since start of this OPEC-NOPEC production cut agreement,
Saudi Arabia has taken a lead by producing less to cover for extra productions
required from some other members due to various geo-political & legacy
issues. So, this may be an indication of a breach of trust among OPEC producers.
Before Dec’16 (OPEC-NOPEC agreement), Saudi Arabia usually pumped around 14.75
mbpd.
Again,
just minutes before a Qatar source commented that the nation is committed to
OPEC production cuts and Oil is heading towards HOD of 44.88; looking at the
chart, Oil now needs to stay above 44.95/45.15-45.5
area for any further rally towards 46.70-47.60 area; otherwise 43.70-42 zone
may come soon as Qatar is not a significant player in the Oil field.
On the broader picture, consecutive closing below 42 area, Oil
may further fall towards 37-35 zone in the near term in the ongoing Oil duet
between Sheikhs (Arab producers) & Shales (US producers) and production cut
squabbling among OPEC-NOPEC producers.
Update:
Oil further rallied to 45.26 just now after OPEC confirmed 97% overall
production cut compliance in June. Also EIA trims down both US crude production
estimate along with slight downward revision for 2017-18 global oil demand
which may be positive for Oil as it is indicating rebalancing of oil supply
& demand by 2018.
USDJPY
and US stocks are slumping further as Trump Jr will testify before US senate
intelligence committee shortly.
SGX-NF
BNF
CRUDE OIL
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