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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