Market
Wrap: 04/07/2017 (17:00)
NSE-NF
(July): 9620 (-2; -0.02%) (TTM PE: 24.34; Near 2 SD of 25; TTM EPS: 395; NS:
9613)
NSE-BNF
(July): 23246 (-66; -0.28%) (TTM PE: 29.24; Near 3 SD of 30; TTM EPS: 795; BNS:
23246)
For
05/07/2017:
Key support for NF: 9620-9560/9535
Key resistance for NF:
9670-9725
Key support for BNF:
23100-23000
Key resistance for
BNF: 23450-23650
Time & Price action suggests that,
NF has to sustain over 9670 area for further rally towards 9725-9775 &
9835-9875 in the short term (under bullish case scenario).
On the flip side, sustaining below 9650
area, NF may fall towards 9560/9535 & 9495-9440 & area in the short
term (under bear case scenario).
Similarly, BNF has to sustain over
23450 area for further rally towards 23550-23650 & 23800-23900 area in the
near term (under bullish case scenario).
On the flip side, sustaining below
23400-23350 area, BNF may fall towards 23240-23100 & 23000-22800 area in
the near term (under bear case scenario).
Nifty
Fut (July) today closed around 9620, almost flat & at the opening level and
made a technical “Doji” (indecisive) after making an opening session high of
9644 and day low of 9595. Indian market today opened in subdued note tracking tepid global/Asian cues after NK test fired
another ballistic missile (ICBM) early in the morning today and sudden plunge
of the US tech shares including Amazon (?) due to a
Nasdaq data error.
Indian market may have focused on RBI’s action of raising bond
limit for the FPIS yesterday, which may be in response to China’s bond market
reform (link with HKG exchange to facilitate more FPIS investments). Also, the
domestic market may be continued try to gauge the impact of GST on earnings
& economy in the near term as initial euphoria is begun to fade. Govt may
be also itself concerned for short term disruptions, shortage of products &
consequent black marketing.
But, the good news may be that almost 22 states has already
dismantled their state border check posts, which may facilitate hassle free
& quick movements of goods between different states; rest of the states may
also follow soon; but E-Way bill’s complex mechanism may be also a concern in
the coming days.
As par US rating agency Fitch, Indian economy may have benefited
in the long term due to GST, but there may be short term impact on growth &
earnings due to the present complex format of GST having multiple slabs of
taxes on the same product/service category.
Govt may have sacrifice the original concept of GST (one tax one
nation) by its political compulsions and looking ahead, we may see some
medications our of the current format; this may be just a beginning to track
all the business transaction in India, where tax compliance is ridiculously low
due to high compliance costs. But this may also be a great challenge for the
Govt as 80% of Indian economy may be still informal despite recent DeMo.
As par some reports, Indian Public Sector Banks (PSBS), which
are heavily stressed itself due to huge NPA may require additional Rs.25000 cr
to cover for the latest IBC/RBI/NPA provisions; Govt may provide around
Rs.10000 cr in FY-18 and they have to tap the market for the remaining amount
apart from selling non-core assets (deleveraging). But, going by their weak B/S
most of the PSBS except SBI/BOB/PNB may face considerable hurdles to raise
adequate fund from the market.
Some private sector Banks in India may also need to raise
additional capitals to cover for the additional NPA/IBC provisions as directed
by the RBI. This may further dilute their equity & EPS and may also be negative
for their valuations in the short term.
Talking about NPA/IBC process, today most of the so called “dirty
dozen” including Essar Steel has approached the Gujarat HC against RBI, SBI
& other lenders for the IBC process at NCLT challenging the validity of the
RBI directive terming it as arbitrary.
Now, it’s almost sure that such IBC cases will be ultimately
dragged to the SC and it may take years to settle the legal position of IBC at
HC & SC. Thus, hopes of a quick NPA resolution through this IBC process may
also take longer than sooner and market may be also deeply disappointed.
Technically, Nifty Fut (July need to sustain over 9560-9535
area; otherwise 9440 zone may come soon. Looking ahead, Indian market may focus
on Q2FY18 earnings to gauge the impact of any GST disruptions due to
de-stocking at various levels. Also, talk of increasing border tensions at
Ind-China LOC at Sikkim may keep the market in some risk-off mode.
Today Nifty was supported immensely by RIL and dragged most by
ITC after yesterday’s blockbuster rally. In addition, other banking stocks,
FMCG, auto & infra were also under pressure today. But HDFC, INFY ( buzz of
Singapore JV to offer IT solutions to Banks) saved the day along with RIL (R-Jio
optimism and favourable Oil price) today.
On the broader market, debt laden stocks were also under heavy
selling pressure as Banks has initiated IBC against them with no visible signs
of eligible buyers for their stressed assets. As par some reports, Banks may
have to sacrifice (waive off) around 60% of their loan exposure in large
stressed accounts having unviable projects.
Globally, most of the Asian markets were in red from
early green except Australia following reports of suspected FX (USDCNY)
interventions by PBOC to support Yuan; today’s action by PBOC may be the effort
of its ongoing war against Yuan bears and to support the Chinese corporates
against USD appreciation and protecting them against higher USD outflows in
terms of debt & dividend payments.
Overnight, US market (DJ-30) closed in positive (+0.61%) in a
holiday shortened session with another record high supported by
Banks/Financials & oil related energy shares & upbeat Mfg PMI data; but
dragged by ongoing rotational slump in Tech/FAANG shares due to concerns of
stretched valuations and pessimistic outlook as easy money policy of the global
central banks may end soon.
Financials were in demand on Fed’s nod for higher dividend pay
outs & buy backs in addition to optimism about higher interest rates due to
high probable QT by the global central banks and subsequent higher NIM. Oil was
being supported by sudden fall in US oil rigs count last week and talk of tensions
in the GCC/Qatar issues.
Although US market is closed today, looking ahead SPX-500, which
is now trading around 2423, need to sustain above 2415 area; otherwise
2400-2385 zone may be in the card.
Elsewhere, Australian stocks (ASX-200) surged today (+1.50%)
after RBA keeps the rate on hold as expected; but the statement may be termed
as quite dovish against earlier market expectations of a hawkish tune, keeping
in view the ongoing QT chorus of the global central banks. As a result, AUDUSD
falls from the cliff and ASX-200 surged, AU economy being a commodity &
natural resources export oriented economy; ASX-200 today was supported by
financials, energy stocks.
Japan (Nikkei-225) was trading in slight positive earlier in the
day amid some fall in Yen; but news of another NK missile game (test) made the
Yen stronger for safe heaven demands and thus Nikkei-225 was closed in slight
red (-0.12%). But, South Korean stocks (Kospi-200) saw a modest pull back after
news of NK missile test.
Gold is now slightly up at around 1225 (+0.11%) on safe heaven
demand & some fall in USD after yesterday’s plunge as a result of upbeat US
economic data and ongoing bandwagons by global central banks for a QT.
Crude Oil (WTI) is also down today around 46.85 (-0.50%) after
hitting hurdle of 47 yesterday on favourable US oil rig counts; looking ahead
Oil need to break above 47.25 today for 47.95; otherwise may retrace to 46.25
area today.
Meanwhile,
NK confirms that they have tested an ICBM quite successfully by hitting the
precise target with a flight of 39 mins and altitude of 2800 km & a
capability of hitting target anywhere in the world; certainly this is not a
missile game anymore, if the NK claim is true and thus there is some risk-off
mood in the global/EU market and European & Indian market also came into
pressure.
All
eyes may be now on Trump’s tweets for his reaction after NK missile test; any
adverse reaction from US may make the risk trade more difficult from here.
Apart
from geo-political concerns, market may also focus on FOMC minutes tomorrow and
US NFP data on Friday to gauge Fed’s appetite for a global chorus of QT
(Quantitative Tightening).
Meanwhile, European/Global
stocks has recovered to some extent after early jitters from NK led ICBM
test, which may land as far as USA (Alaska) according to the claim made by the
NK authority. Incidentally, NK has done similar tests on the same day as today
in 2006 & 2009; looking ahead, G-20 meeting may be an interesting forum to
see the reaction for NK.
Overall economic data from EZ today was mixed with tepid PPI
& UK construction PMI; but some upbeat jobless data from Spain. As a
result, EURUSD lost some strength today (-0.25%), bund yields were down and that
helped the EU stock market recovered from early losses helping the Indian
market also to some extent; financials has also supported the EU market today amid a holiday thinned trade
(US market is closed today).
AUDUSD is
plunged today below 0.76 level (LOD: 0.7597) from session high of 0.7688; thus at
one point fall more than 1% after RBA sounded more dovish contrary to market
expectations of a hawkish tune in tandem with the G-10 central bankers. RBA
today hold the AU repo rate at 1.5% as expected; but commented that a rising
AUD would complicate the economic adjustment; with today’s low at 0.7597,
AUDUSD has corrected by more than 1.5% from its recent top of 0.7715.
Apart
from a strong AUD, RBA also raised some concerns on subdued AU employment
growth, tepid wage inflation and subsequent slow consumption along with increasing
leverage of housing loan. But, RBA was quite optimistic on overall AU business
conditions & growth and increasing reflationary strength of global economy.
Before
RBA today, AU retail sales for May printed quite upbeat at 0.6% (MOM) against
estimate of 0.2% (prior:1%), although it came lower than April. Also, ANZ Roy Morgan
weekly consumer confidence came quite spirited at 114.5 against prior 111.8;
but a dovish RBA has spoilt the day for the AUD bull today.
Overall,
recent AU economic data may be quite upbeat except pockets of concerns and
rebound of iron ore prices along with import growth from China & attractive
AUD yield may be some of the primary reasons behind AUD strength. Today, sudden
appreciation of Chinese Yuan (CNY/CNH) by suspected PBOC intervention and
yesterday’s upbeat US economic data may have also affected the AUD.
Looking
ahead, 0.75492-0.75330 zone may be a big technical support for the AUDUSD and
only sustaining below that it may further fall towards 0.7370-0.7330 area in
the coming days with a defined top of around 0.7716-0.7745 before reaching 0.80
on the appeal of a carry trade commodity currency despite dovish but neutral
RBA.
Overall, increasing noise about global QT (Fed/ECB/BOE/BOC) may
be a coordinated effort by the G-10 central banks to signal the market well in
advance that era of easy money may end sooner rather than later and along with
that, ongoing geo-political jitters may have affecting the risk-on sentiment;
EM may be most affected in the days ahead.
Although, RBA was sounded
dovish today, going ahead they may be forced to join the global QT chorus to
simply maintain their policy parity with USD everything being equal, if Fed
actually starts the B/S tapering from Sep’17 with an hike in Dec’17.
SGX-NF
BNF
AUDUSD
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