Market
Wrap: 03/07/2017 (17:00)
NSE-NF
(July): 9628 (+111; +1.16%) (TTM PE: 24.34; Near 2 SD of 25; TTM EPS: 395; NS:
9615)
NSE-BNF
(July): 23325 (+124; +0.53%) (TTM PE: 29.27; Near 3 SD of 30; TTM EPS: 795;
BNS: 23273)
For
04/07/2017:
Key support for NF: 9620-9560/9535
Key resistance for NF:
9670-9725
Key support for BNF:
23300-23000
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 9650-9620
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 area, BNF may fall towards 23300-23100 & 23000-22800 area in the near
term (under bear case scenario).
Nifty
Fut (July) today closed around 9628, almost 111 points up as market cheered
smooth launch of GST and covered shorts in the earlier expectation of a major
GST disruptions; Nifty Fut (July) made a late day high of 9635 and opening
minutes low of 9539 and Cigarette maker ITC almost contributed 50% of the rally
on favourable GST rate & sales optimism; although as par industry veteran,
actual GST benefit may be quite limited due to various factors.
Indian
market today opened around 9548, almost 33 points gap-up tracking mixed global
cues & GST rollout in the weekend without any reports of major disruptions contrary
to earlier narratives; thus market may have covered its short positions created
on apprehensions of a major disruption, which might be overdone.
Overnight,
on Friday US market (DJ-30) closed in positive tone (+0.29%) amid mixed US
economic data, quarterly re-balancing of portfolio, concern of QT but supported
by banks.
Looking ahead, after initial euphoria
is over, Indian market may continue to gauge the impact of GST implementation
on the economy for both short & long term, as this just a beginning; one
point is that most of the
SMES & informal sector may be under severe stress due to higher compliance
costs of GST under the present complex format & their business models may
have to transform; otherwise they may eventually shut down their shutters.
The SME disruptions may have ripple
effect on India’s growth & consumption story in years ahead, unless present
GST model is modified to look into their concern. SME focused Banks may be also
under further NPA stress in the days ahead.
Meanwhile, India’s Mfg PMI came a
bit disappointed for June at 50.9, just above boom/bust line of 50 (prior: 51.6)
and is lowest in the last 4 months with weak demand & slow down in both
output and new orders; mfg outlook is also subdued. This may be an adverse
effect of pre-GST disruptions (de-stocking) on the Indian economy apart from
some DeMo related issues. Overall, PMI data may be in line with market
estimates this time.
Looking ahead, apart from GST
related issues, Indian market may now focus on Q1FY18 earnings, progress of
monsoon, which is so far at normal level, RBI policy action in Aug’17 for any rate
cut or not and any Govt action to change the FY from Apr-Mar to Jan-Dec and
subsequent presentation of FY-19 budget in Nov’17 (another disruption?).
Overall, Indian auto sales data for
June so far may be also in line and this is also supporting the domestic market
right now apart from favourable GST rates on automobiles, QSR, FMCG/Cigarettes,
cements etc. June sales of Ashoke Leyland increased unexpectedly by 10% &
subsequently the stock rallied by over 5%, boosting the overall market sentiment
as MHCV is an indicator of economic activity; although it may be also seasonal.
Technically, Nifty-Fut (July), which
is now trading around 9628, need to sustain over 9670 area for further rally;
otherwise it may came down towards 9495-9440 level.
Market may be also going to be in
some confusion for dilemma of long term benefit of GST over short term pain and
will watch how the Indian economy will adjust to the new normal, specially the
vast informal section of the economy & SMES.
On ground zero, in reality, as most
of the FMCG/Cigarette dealers, retailers are unregistered with GSTN, retail prices
(MRP) may not be cut by them as no input tax credit is available (benefit of
GST); same is true for Chemists (medicines shops), where disruptions may take
serious turn.
Today Nifty was supported by ITC
& FMCG, Auto, Cement stocks (favourable GST rates), Infratel (optimistic
outlook), Infy, TCS, HDFC twins, SBI & Tata Steel (hopes for a favourable
UK pension plan resolution & better production figures along with expected
consolidation in Indian steel sector).
Fertilizer stocks were also in
limelight after favourable GST rate made in the last hour on Friday, just
before GST launch.
Globally, Japan (Nikkei-225)
closed marginally higher (+0.11%) on weak USDJPY after debacle of Abe in the
local Tokyo election, which may force BOJ to continue its ultra loose monetary
policy for foreseeable future. There were also some reports of corruption by
some high profile LDP (Abe) leader.
In the morning today, although
overall Japanese economic data (Tankan survey & PMI) was upbeat, core CPI
published on Friday may be very subdued and far away from BOJ’s goal. Thus, Yen
is losing some strength and Nikkei is trading higher as Japan is an export
oriented economy.
China (SSE) is trading almost
flat (-0.01%) after its bond trading linkage via Hong Kong in order to
facilitate more investment from the global investors, which may result an
initial inflow of around $250 bln in the China bond market for ease of
trading/investments in a $9 tln market; FPIS are now holding around 1.5% of
China bond.
PBOC today fixed the Yuan at
strongest level since Nov’16 at around 6.7772 compared to 6.7744 on last
Friday; one theory behind China’s ongoing effort for the stronger CNY (Yuan)
may be that it’s helping Chinese corporates in the USD dominated loan &
dividend payments.
PBOC today again drained out
around CNY 70 bln from the China money market in its ongoing effort of
deleveraging citing excess liquidity in the system due to Govt capex.
Hong Kong (HSI/HKG33) is also
trading almost flat (+0.20%) after below expected top line growth from casino
operator Macau and pressure on tech shares.
Australia (ASX-200) is closed in
negative (-0.60%) amid mixed economic data ahead of RAB tomorrow which is
expected to be in neutral mode with a hawkish stance following QT bandwagons
from the global central bankers including Fed.
In commodities space, Oil (WTI)
is trading higher around 46.30 (+0.59%) tracking 1st net decline in
US oil drilling rigs this year on slump of Oil below $45 and some seasonal
factors. An imminent expiry of Saudi deadlines over Qatar issues may be also
supporting oil at this moment; but reports of Libyan & Nigerian oil output
increase may also limit any significant rally from here.
Apart from mixed Asian cues,
positive European market on the back of a falling EUR & upbeat EZ PMI may
have also supported the Indian market sentiment today.
European
market starts the new quarter in upbeat mode as EURO bund yields fall and
prospect of a higher NIM regime as central banks are increasingly talking about
QT, which has also boosted the banks and commodities (Glencore) for optimistic outlook.
GBPUSD
also fall to some extent today after below expected Mfg PMI data for June,
which came as 54.3 against estimate of 56.5 (prior-56.3-R). Overall data may be
indicating a subdued picture of the UK economy in the months ahead amid UK
political jitters & Brexit uncertainty; BOE may be forced to be in neutral
gear. But FTSE has gained by almost 0.47% on weak GBP, as it may help Britain’s
export.
Gold
has broken the technical support of 1230 and now trading around 1226 in a
holiday thinned market amid increasing QT tunes from G-10 central bankers and
an upbeat US & global stock markets. Also, EU political stability and
global disinflation may be negative for Gold.
Today’s
overall upbeat US economic data till now may be also supporting USD and
negative for Gold. ISM Mfg PMI for June came as 57.8 against estimate of 55.2
(prior: 54.9); ISM Mfg employment data also came good at 57.2 (EST: 53.3;
PRIOR: 53.5).
Overall
US economic data may be quite good but market may be still confused about soft
US wage inflation and in that sense will focus more on Friday’s NFP job report.
US Prez Trump today indicated about a blockbuster NFP data this week in one of
his tweets targeting some media houses for “fake news”.
In
the previous occasion, Trump hinted at blockbuster US GDP for Q1 and it was
indeed came true last week. Although it may be pure coincident, because a US
Prez is not officially entitled for any early US economic data access, but
market may be starting to believe in Trump.
In
any way, combination of a strong US Mfg PMI and hopes for a blockbuster NFP
number is boosting the USDJPY above 113.05 level and Gold is plummeting right
now.
Technically, consecutive closing below
1230-1225 area, Gold may be heading for 1214-1195 & 1180 area in the coming
days.
GOLD
SGX-NF
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