Wednesday 19 July 2017

Nifty Recovered Almost Yesterday’s Entire Loss Amid Mixed Global Cues & Some Rebound In ITC/RIL With Support Of Banks & Pharma



Market Wrap: 19/07/2017 (17:00)

NSE-NF (July): 9923 (+77; +0.78%) (TTM PE: 25.06; Near 2 SD of 25; Avg PE: 20; TTM EPS: 395; NS: 9899)

NSE-BNF (July): 24223 (+165; +0.68%) (TTM PE: 30.38; Near 3 SD of 30; Avg PE: 20 TTM EPS: 795; BNS: 24153)

For 20/07/2017:

Key support for NF: 9870-9810

Key resistance for NF: 9985-10005

Key support for BNF: 24000/23950-23850

Key resistance for BNF: 24250-24350


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 9985-9960 area, NF may fall towards 9905/9870-9835/9810 & 9770- 9715 area in the short term (under bear case scenario).


Similarly, BNF has to sustain over 24250 area for further rally towards 24350-24500 & 24700-24875 area in the near term (under bullish case scenario).


On the flip side, sustaining below 24200 area, BNF may fall towards 24000/23950-23800 & 23650-23500 area in the near term (under bear case scenario).


Nifty Fut (July) today closed around 9923, up by 77 points (0.78%) and almost recovered the entire loss of yesterday after making an opening session low of 9865 and late day high of 9925, boosted by good progress on monsoon (almost 98% of LPA in July as par IMD), midas touch of US FDA on the Indian Pharma by its ongoing spate of product approvals, mixed/stable Q1 earnings so far and positive Asian cues.

Almost all the major Asian markets were in green today tracking positive global/Asian cues after some fall in EUR & JPY coupled with optimism about China, where PBOC today again injected a net 100 bln Yuan to support the market; also Monday’s sell off in the Chinese small cap shares may have induced investors flocking for Hong Kong shares for safety and regulatory concerns.
There are some reports that China may consolidate (M&A) its PSUS in an effort of ongoing deleveraging and rebalancing. China (SSE) was trading around 3225, almost up by 1.15%, supported by metals after upbeat Chinese GDP data earlier this week.


There are also some buzz that despite no hope, Trump/some RNC members may go ahead with the repel of Obamacare only and some definitive tax overhauling codes may be released along with the ongoing US budget process. All these may be supporting the early Asian sentiment today.

Overnight, US market (DJ-30) was closed in slight red (-0.25%) amid ongoing US healthcare bill squabbling and subdued report cards (earnings, core operative metrics & guidance) and was dragged by Banks, financials & retails but supported well by FANG (Tech) shares; lower Fed rates & hopes of Trumponomics may be supporting the US market at this moment despite carnage in USD/US bond yields.

Back to home, Indian market (Nifty/India-50) is now trading in positive zone at 9875 (+0.30%) ahead of European opening; market may now focus more on Q1 earnings trend, which is mixed so far and may not be matching the initial euphoria. 

Although, investors/market is anticipating 15-20% EPS CAGR in FY:18-19; the reality may be quite different as for the last few years, actual EPS growth is much below double digit at around 7% on an average.

Apart from the earnings, the other key global tailwinds (Grey Rhino?) for the Indian as well as global market may be now ECB/Fed QE tapering (QT) and China credit tightening.

Also, ongoing NPA resolution (IBC) process may be keenly watched as it now seems that the actual resolution, if any, may take long time as much 12 months after initial admission in the NCLT and subsequent legal battles.

But, more concern may be the lack of private capex as corporates/business are increasingly becoming fearful to take loans from the Indian Banks for their expansion & diversification; subdued credit growth of around 6% may be a great concern as India may be also trying to deleverage like China.

As par some reports, an additional amount of around Rs.18000 cr ($8 bln) may be required by the Indian Banks to cover for the excess provisioning norms as directed by the RBI due to the NPA/IBC cases; but these affected Banks may have approached the FMO to ease the RBI provisioning rules and asked for 8 quarters for the entire provisioning instead of 3 quarters as instructed by the RBI; otherwise Bank’s capital may erode due to excess provisioning.

As par latest Reuter’s survey, India is expected to grow around 7.3% in FY-18 and 7.6% in FY-19 from present GDP growth of 6.10% after dismal economic performance in Q4; average CPI is forecasted as 3.5%-4.3% in FY: 18-19 from present level of 1.54% and RBI is highly expected to cut by 0.25% next month (3rd Aug) to bring the Indian repo rate at 6%.

Today US rating agency, Fitch has also forecasted India’s FY-17 real GDP growth at 7.4% supported by stable economic growth.

At present, RBI is maintaining neutral stance in accordance with the trends of major G-10 central Banks, which are now increasingly signaling a shift towards gradual rate hikes (QT); thus RBI may also find it difficult to accommodate the pressure of domestic audience & even the FMO to cut, even if headline CPI is hovering much low of RBI’s inflation target (may be due to favorable base effect and consistent falling in food prices due to demand/supply mismatch after DeMo).

Another point may be that an economy, which is poised to grow above 7.5-8% in the coming days, does not need further rate cuts from the central Bank; thus either the entire GDP calculation methodology has some issues or the survey is wrong in its economic projection.

Today, there was also some report that RBI may announce a standing deposit facility (SDF) in line with global practices for liquidity management without need for any co-lateral securities as in SLR and all these may have boosted the sentiment of Banks, which in turn supported the Indian market today by a great extent.

Technically, Nifty Fut (July) now has to sustain above 9985-10005 area for further rally; otherwise it may fall towards 9835-9715 zone in the coming days; India-China standoff at Sikkim LOC may be turning into a serious “war of words/bullets” as China is reportedly deploying heavy military hared wares there and India also strengthening its military presence at the Sikkim LOC.   

Nifty was supported today by Pharma (Auro/Sun/Lupin/DRL-multiple blockbuster products approvals from US FDA), FMCG (rebound/value buying in ITC for hopes of GST cess roll back on Cigarettes and comments by the CBEC that the GST cess may not result in increase of MRP, being input tax credit in nature ?) & Metals (surge in China steel prices), RIL (Govt’s $3 bln fine may be overdone).

Nifty was dragged by INFY (resignation of a key management person) Cement counters (Ultratech/ACC and also Ambuja Cement on closer scrutiny of the Q1 report card), Infratel and ICICI Bank.

As par some reports, Indian Banks may have to take a combined NPA haircut of around Rs.2.4 bln for the top 50 NPA/IBC cases (Govt’s NPA ordinance).

Elsewhere, Australia (ASX-200) closed around 5736, up by almost 0.90%, supported by rebound in big banks, which were in selling spree for the last few days amid greater regulatory requirement of capital by CY-2020; thus near term impact on the EPS may be limited. Apart from this, these big banks were also in pressure for subdued earnings and some regulatory tax impositions by both the Australian federal & state Govt.

Japan was almost flat around 20020 (+0.10%) on some drops in Yen; South Korea & Taiwan has also changed little; but being supported by Techs across the region following similar overnight surge in Nasdaq. BOJ may drop the inflation target in tomorrow’s meet as par some reports.
Hong-Kong (HKG-33) was trading in positive around 26665, almost up by 0.50% on some regulatory investigation easing associated with a big HK corporate yesterday and basically driving the regional/Indian market sentiment ahead of super Thursday tomorrow (BOJ/ECB).

Meanwhile, European market (Stoxx-50) is in moderate green today (+0.50%) on drops in EUR and some upbeat earnings.

US market (SPX-500) is also now trading at record high around 2467 (+0.28%) tracking upbeat results from MS & being supported by FANG/TECH stocks; talk of passage of a modified version of Trumpcare & tax reform buzz by Ryan in Dec may be also boosting the US market sentiment right now apart from fall in EUR.

Looking at the chart, SPX-500 now has to sustain above 2475-2485 area for more rally towards 2525-2540 zone in the near term; otherwise it may fall back towards 2400 area in the coming days. 



SGX-NF


BNF


SPX-500

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