Market Wrap: 26/07/2017 (17:00)
NSE-NF (July): 10029 (+56; +0.56%) (TTM PE: 25.39;
Abv 2 SD of 25; Avg PE: 20; TTM EPS: 395; NS: 10021)
NSE-BNF (July): 24698 (+175; +0.71%) (TTM PE:
31.04; Abv 3 SD of 30; Avg PE: 20 TTM EPS: 795; BNS: 24671)
For 26/07/2017: For NF/BNF-July/NS/BNS
Key support
for NF: 10015-9935
Key resistance for NF: 10050-10115
Key support for BNF: 24700-24400
Key resistance for BNF: 24800-24875
Hints for positional trading:
Time & Price action suggests that, NF has to sustain over
10050-75 area for further rally towards 10115-10195/215 & 10265-10315 in
the short term (under bullish case scenario).
On the flip side, sustaining below 10030 area, NF may fall
towards 9965/9935-9885 & 9825-9780/9765 area in the short term (under bear
case scenario).
Similarly, BNF has to sustain over 24800 area for further rally
towards 24875-25050 & 25275-25580 area in the near term (under bullish case
scenario).
On the flip side, sustaining below 24750 area, BNF may fall
towards 24400-24200 & 24100-24000 area in the near term (under bear case
scenario).
Nifty Fut (July) today
closed around 10029, surged by almost 0.56% after making an opening minutes low
of 9964 and closing minutes high of 10031; thus it’s able to close above the
historic 10k level for the 1st time ever on back of positive global
cues, commodities (metals & oil) optimism & consequent reflation trade
perception, upbeat earnings by most of the corporates today, especially Yes
Bank & also HDFC (EBITDA) & also supported by Pharma & metals,
while IT & PSBS dragged the market to some extent.
Overall, better Q1
earnings, Aug rate cut hopes by RBI, global optimism about reflation following
upbeat results from Caterpillar and ongoing forced short covering for the P-Notes
FNO may be guiding the Indian market to record highs with no visible sign of
fatigue; today’s advance/decline ratio was at 1:1, with balanced market
breadth.
But, Aug rate cut by RBI
may have been already discounted by the market, going by the recent price
action of Bank Nifty and other rate sensitive stocks; looking ahead it may be a
one off hawkish hike @0.25% to bring the repo rate at 6% in Aug, if RBI actually
obliges to the growing pressure of domestic audience and even FMO amid
increasing confusion over India’s inflation & growth (GDP) trajectory.
Although, Indian CPI was
at 1.54% in June, this may be due to favourable base effect & sudden plunge
in food inflation due to good corporate supply chain management and may be also
for the DeMo related jitters (lack of sufficient demand & excess production
due to good monsoon); but core CPI is still hovering around 4% and recent surge
in some of the vegetable prices by over 500% and some reports of profiteering
after GST implementation may keep the inflation hawk Patel as owlish.
Indian consumers may be
also affecting due to “shrinkflation” rather than food inflation, as companies
has reduced the size of the pack significantly, keeping the price almost same
or even little upper for the last few years; thus even a modest yearly wage
growth of around 10%, which may be one of the highest in the word may not be
sufficient to counter the real inflation pressure and significant uptick in
discretionary consumer spending.
After all, India may be
at the opposite end of the curve, when all the major central banks are planning
for QT/rate hikes, India is thinking of rate cuts, although it’s growing around
6-7%; an economy, which is growing at such phenomenal rate does not require
multiple rate cuts from its central bank; otherwise, it may be turned into an
excessive hot economy.
For real effect, India
need to cut more towards at least 3-4% for comparable rates with the DM/China
at headline CPI at around 1.5-2%; but that may not be possible unless banks transmit
the full benefits of RBI rate cuts and Govt lowers the high deposit rate in
small savings instruments, which is politically difficult.
Apart from that, any
drastic rate cut by India may also cause its high bond yield to plunge and FPIS
may exit the bond market, which may be too costly for the Govt to finance its
deficit.
Indian market today witnessed
mild selling around noon after knocking the door of 10k, apparently on some
news that Govt may shortly announce the change of FY effective from Jan’18; but
upbeat earnings from Yes Bank and another report that EPFO may invest around
Rs.22500 cr in ETF this year (FY-18), may have also boosted the market sentiment
and may have also caused huge short covering ahead of FNO exp tomorrow and thus
Nifty closed above the 10k mark. Also, RBI action yesterday to increase the corporate
bond purchase limit by FPIS may have helped the market today.
Indian market today
opened around
9975, almost flat tracking mixed global cues; China/HKG markets
were in red today amid neutral PBOC & ongoing effort of deleveraging and
some reports of US sanctions on certain China companies/entities over the NK
issues.
Today Nifty was supported by Yes Bank (+6%) for upbeat report
card and stock split (1:5), Indusind Bank, ICICI Bank, Tata Steel (global metal
optimism), RIL (telecom & oil optimism), M&M (planning for diverse product
portfolio), ITC, HUL & Pharma counters.
Nifty was dragged by Axis Bank (subdued earnings & elevated
stressed assets), ZEEL (tepid report card/GST disruption on ads), Asian Paints
(poor earnings due to pre-GST de-stocking), BOB, IT, Cement & Telecoms
(poor Bharti Airtel earning due to R-Jio disruption).
Globally, although, market may be waiting anxiously for Fed’s
plan of QE tapering, ECB/EUR yields may be more important than Fed in the days
ahead as Fed QT may be already discounted; the issue is now “when & what”
(time & quantum of QE tapering) by Fed.
But, if Fed does provide today a definitive hint of QE tapering
from Sep’17, market may also assume that ECB and other major G-10 central banks
will follow Fed soon, which may be a global coordinated QT action; no major
central banks, including Fed will act alone in such major policy change to
avoid a disorderly market/FX movement.
Fed is also poised for another rate hike in Dec’17 subject to
inflation caveat and certain other parameters after QE tapering.
Elsewhere, Australia (ASX-200) closed around 5777, up by 0.90%
on some fall in AUDUSD tracking subdued headline CPI & some dovish comments
by RBA Gov; although core CPI was at expected levels. ASX-200 is also being
supported by upbeat commodities (copper & oil) and mining shares, apart
from Banks.
Japan (Nikkei-225) also closed in positive around 20050 (+0.48%)
tracking lower Yen amid some usual dovish scripts by BOJ Dy Gov and overnight
rallies of USJPY on hopes of a hawkish Fed & Trumpcare, despite ongoing US
political drama.
China (SSE) closed in slight red around 3235 (-0.25%) today on
concern of regulatory tightening; Hong-Kong (HKG-33) is also trading almost flat
with negative bias around 26875 following tepid China; but being supported by
Oil & Gas to some extent.
In commodities, Crude Oil (WTI) is now trading around 48.25,
almost up by 0.95% tracking surprised drawdown report from API overnight and
hopes of a faster rebalancing following Saudi jawboning; oil is also being
supported by a recent report that the present US shale oil production boom may
peak shortly.
Technically, Oil now need to sustain above 49.15 area for more
rally towards 49.65-50.00/50.50 & 52 zone; otherwise it may come down and
sustaining below 48.10-47.85 area, may further fall towards 47.30-46.75 &
45.50 area in the coming days amid ongoing war between bulls & bears ahead
of official DOE/EIA report today.
Positive EU market tracking upbeat oil & metals coupled with
some encouraging earnings, Greece bond market optimism & some fall in EUR ahead
of Fed, may have also supported the Indian market sentiment at the closing
hours today.
In another political master stroke of NAMO, Bihar CM today
resigned in order to break the “Mahabandhan” (alliance with Lalu &
Congress), citing the ongoing CBI cases against Lalu & Co for various
alleged corruptions, just to form another virtual NDA Govt as Lau &
Congress may have no political future now in Bihar.
The whole political development may pave the way for BJP for a
back door entry in Bihar and may be also positive for the market; but with
virtual majority in the RS & no political opposition, market may expect
more on the reform front from the Govt now; especially labour and land reform
with thrust on employment and quality job creation (improvement of wage growth
and standard of living for the general public).
NF
BNF
CRUDE OIL
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