Nifty
Closed The Month of July Almost 5.80% Up On The Back Of Dovish Fed, Stable Q1
Earnings So Far, Good Monsoon & Forced P-Notes FNO Short Covering
Market Wrap: 31/07/2017 (17:00)
NSE-NF (Aug): 10102 (+60; +0.60%) (TTM PE: 25.51;
Abv 2 SD of 25; Avg PE: 20; TTM EPS: 395; NS: 10077)
NSE-BNF (Aug): 25129 (+195; +0.78%) (TTM PE: 31.58;
Abv 3 SD of 30; Avg PE: 20 TTM EPS: 795; BNS: 25104)
For 01/08/2017:
Key
support for NF: 10075-9995
Key resistance for NF: 10150-10205
Key support for BNF: 25050-24850
Key resistance for BNF: 25150-25275
Hints for positional trading:
Time & Price action suggests that, NF has to sustain over
10150 area for further rally towards 10205-10275 & 10325-10380 in the short
term (under bullish case scenario).
On the flip side, sustaining below 10130-10115 area, NF may fall
towards 10075-9995 & 9955-9890 area in the short term (under bear case
scenario).
Similarly, BNF has to sustain over 25200 area for further rally
towards 25275-25485 & 25695-25965 area in the near term (under bullish case
scenario).
On the flip side, sustaining below 25150 area, BNF may fall
towards 25050-24850 & 24750- 24600 area in the near term (under bear case
scenario).
Nifty Fut (Aug) today
closed around 10102, galloped by nearly 60 points in the last hour of trade tracking positive EU
markets and hopes of RBI rate cuts & better NIM of SBI/other PSBS following
drastic cut/realignment of savings deposit rates. Nifty-Fut today made an
opening minutes low of 10038 and a closing session high of around 10114 in a
day of moderate volatility.
Indian market (Nifty Fut) today opened
around 10038, almost flat tracking mixed global cues amid renewed NK
geo-political tensions in the weekend (another ICBM test), poor US economic
data and on-going Trump political drama; but an
upbeat China MFG PMI data may have boosted the Asia-Pacific market sentiment,
after some early set back.
Overnight US market was also closed mixed and DJ-30 closed
almost flat (+0.15%) at another record high on mixed/poor earnings and fall in
USD, which may be positive for US export earnings and economy (imported
inflation). Looking ahead, SPX-500, which is now trading around 2465, needs to
break above 2495-2505 area for further rally up to 2585-2605 zone; otherwise it
may again come down towards 2435-2400 area in the coming days.
Although, US headline GDP came in line with estimates at 2.6%
for Q2, the fact that Q1 figure was further revised down to 1.2% from prior
1.4% and further crunching suggests that the internal components of Q2 GDP were
not also very upbeat, specially the employment/wage index portion.
Overall, average Q1 & Q2 GDP is now stands around 1.9%,
which may be far away than Trump’s rhetoric of 3% and also much below than
average street estimates of around 2.5%; after tepid Q1 & Q2 GDP, almost
all the economists has lowered their Q3 estimate by around 0.3%.
Moreover, NK has tested a long range ICBM as planned on Friday,
which may be capable of hitting US main lands and all these along with on-going
US political entertainment, health care issues, debt ceiling, various
reshuffling in WH has made the USDJPY lower, which in turn has also affected
the risk-on sentiment to some extent. Overall, US consumer sentiment may be
also affecting now on poor visibility of the whole Trumponomics narratives.
But, upbeat Mfg PMI data, indicating PPI price pressure has made
the China & Hong-Kong market to trade in positive (reflation trade) with
surge in iron ore & metals. Thus, most of the Asian markets are now in
positive.
Today,
China MFG PMI for July flashed as 51.4 against estimate of 51.6 (prior: 51.7);
although apparently the PMI data may be subdued, it’s well above the 50
boom/bust line despite China’s ongoing deleveraging, factory capacity cut etc.
Moreover,
the fine print of the China MFG PMI suggests that both input & output
prices has surged, which in turn may be indicating a higher China PPI & subsequent
transmission of Chinese inflation/reflation to the rest of the world (US/EZ),
being starved of the elusive 2% CPI, China being the global factory of the
world.
Today’s
upbeat China MFG PMI may also suggest better prospects of construction sector
and better confidence among the companies there.
Back to home, Indian market today traded most of the times in
moderate green tracking risk-on sentiment of Hong-Kong market, which generally
drives the regional market sentiment and soared in the last hour of trade.
Looking ahead, all eyes of the Dalal Street may be on the Mint Street (RBI) day
after tomorrow apart from the on-going Q1FY18 report cards, which may be termed
as mixed so far.
Market may be already discounted a 0.25% rate cut by RBI this
time, considering the lower headline CPI for June & also for the last few
months. Looking ahead, RBI statement may be also closely watched as it may be a
“hawkish one off cut” for CY-2017 to accommodate the growing rate cut chorus
from various quarters.
But, RBI may be quite hawkish this time, even if it may cut as
various channel checks suggest that food inflation is surging back in the last
few weeks as seasonal factors has been priced in and we have heavy floods in
different parts of the country, affecting both production & transportation
of vegetables/other food items.
Food inflation & favourable base effect may be one of the
few primary drivers behind recent fall in India’s headline CPI, although core
CPI is hovering around 4% & is still sticky. It’s may be very much
interesting this time for the RBI statements/comments/Q&A on the back drop
of growing bandwagon for global QT; if Fed is continue with its planned QE tapering
and multiple (3) rate hikes in 2018, the US bond yield may surge and it may be
very difficult for the RBI to go ahead with any drastic cut, considering the
attractive bond yield differential Of India.
Also, in Q2FY18, we may have some GST disruptions as channel
checks suggest that most of the small & medium retailers, dealers are not
GST registered till now and old stocks are relinquishing fast; there may be
also some de-stocking issues in Q2.
Today,
Indian market was supported by Banks on rate cut hopes by RBI on 2nd
Aug, IT, OIL & Gas and LT (upbeat guidance although overall report card may
be quite subdued) & infra sector whereas it was dragged by Pharma, FMCG
& select private banks.
SBI
is in great move today after it cut/realigned deposit rate on certain savings
A/C, which may save it around Rs.3700 cr as par its March financial statement.
Some of the other PSBS has also cut their respective deposit rate, which may be
indicating that a RBI cut is indeed coming this week.
Interestingly,
SBI did not cut its MCLR today and cut only S/B deposit rates, which may help
its NIM by 0.14%; other PSBS may also gain around this level, but private banks
may gain more in NIM around 0.50%, if they go the SBI way.
But,
the issue may be also that while PSBS are now cutting certain savings deposit
rates, some private Banks, such as Yes bank has not announced such cut so far
and they traditionally offer much more attractive S/B deposit rate; thus competition
may also cause some outflow of S/B deposits from the PSBS (SBI) in the months
ahead.
Looking
ahead, Nifty Fut (Aug) need to sustain over 10115 area for more rally towards 10150-10205
zone; otherwise it may come down and sustaining below 10075 area, may further
fall towards 9995-9955 zone in the coming days; if RBI does not cut rate day
after tomorrow, then expect some price & time correction; even if cut the
rate with a hawkish tone, the market may correct.
Today
Nifty was supported by SBI (+4.48%), Powergrid (analysts optimism), Hindalco,
Tata Steel (upbeat China PMI data, surging metals and buzz of an imminent JV
with the German Co), BOB (deposit rate cut may help NIM), ONGC, RIL (surging
oil around $50), Infy & other IT counters.
Even
HDFC duo, which has dragged the market initially on failed deleveraging story
of its Life Insurance arm (HDFC Life) with Max India, also recovered at the
closing hours, pushing the Nifty higher.
Nifty
was dragged today by Sun Pharma, DRL (poor Q1 report card), Lupin, Cipla, Auro
Pharma, ITC (adverse report by US FDA on tobacco) & Yes Bank.
Also,
Moody’s upbeat view about Indian economy to grow around 8% in the next 3-4
years despite DeMo blues may have boosted the Indian market sentiment today.
Meanwhile,
India’s Fiscal deficit for April-June almost reaches 80.8% of FY-18 Budget estimates
and infrastructure output for June came as 0.4% against prior 3.6% (YOY). Both
the data may not be so much upbeat. All eyes may be on the MFG PMI tomorrow ahead
of RBI.
Elsewhere,
Australia (ASX-200) is now closed around 5720, almost up by 0.20%, but well off
the highs despite lower AUD & upbeat China MFG PMI data today. Market may
closely watch RBA statement day after tomorrow for any talk down effort of AUD,
considering its recent strength and some dovish jawboning of the RBA Gov &
Dy Gov after the 3.5% neutral rate fiasco; RBA is expected to be neutral this
time and market is expecting no immediate hike now.
Japan
(Nikkei-225) is closed around 19925, down by almost 0.17%, on stronger Yen
(lower USDJPY) and an upbeat June IIP data (although slightly below estimate),
showing significant rebound from May. As always, an upbeat JP economic data may
be good for Yen and bad for export heavy JP index.
China
(SSE) is closed around 3275, almost up by 0.63% despite NK overhang on upbeat
MFG PMI data today, which may be also indicating that it is on the path of
sustainable 6.5%+ GDP growth in the coming days. Today PBOC also fixed the
USDCNY at slightly lower level and maintain its neutral stance on the money
market. MSCI also warned China today about some of its small caps, which are
being suspended for trading for a very long time.
Hong-Kong
(HKG-33) was trading deep in green around 27295, up by almost 1.10% and basically
driving the Indian market sentiment.
Overall,
today Asian market is being supported by metals, mining (upbeat China MFG PMI) and
Oil & gas (higher crude), but dragged by some retail stocks (subdued report
cards).
Crude
Oil (WTI) was trading around 49.95, up by almost 0.50% on Venezuela oil
sanction by US, threat of another Sanction of Russia, tight US oil production
rig figures and OPEC/Saudi jawboning about further production & export cut.
Technically, Crude now need to sustain over 50.05-50.25 area for further rally;
otherwise it may come down.
Elsewhere,
although, most of the major European markets were trading in green, with
Stoxx-50 now tradi8ng around 3475 (+0.21%) boosted by an upbeat EZ core
inflation & mining stocks, thanks to China’s Mfg PMI data today.
But, an
upbeat core CPI may also induce ECB for a QE tapering from Jan’18 as expected. Also
upbeat earning from some of the blue chips has boosted the EU market sentiment
today. But, overall, a strong EUR/EU bund yields may not be good for the
risk-on trade.
SGX-NF
BNF
CRUDE OIL
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