Market Wrap: 22/08/2017 (17:00)
NSE-NF (Aug):9794 (+25; -0.26%) (TTM PE: 24.91; Nr.
2 SD of 25; Avg PE: 20; TTM/FY-17 EPS: 392; NS: 9766)
NSE-BNF (Aug):24083 (+104; +0.43%) (TTM PE: 30.16;
Abv 3 SD of 30; Avg PE: 20 TTM/FY-17 EPS: 795; BNS: 23974)
For 23/08/2017:
Key support for NF: 9760-9705
Key resistance for NF: 9845-9890
Key support for BNF: 23900-23800
Key resistance for BNF: 24275-24375
Hints for positional trading:
Time & Price action suggests that, NF has to sustain over
9845 area for further rally towards 9890-9940 & 10000-10040 area in the
short term (under bullish case scenario).
On the flip side, sustaining below 9825 area, NF may fall towards
9760-9705 & 9660-9585 area in the short term (under bear case scenario).
Similarly, BNF has to sustain over 24275 area for further rally
towards 24375-24525 & 24650-24775 area in the near term (under bullish case
scenario).
On the flip side, sustaining below 24225-24150 area, BNF may
fall towards 23900-23800 & 23600-23450 area in the near term (under bear
case scenario).
Nifty Fut (Aug) today closed around 9794, slightly higher by
almost 25 points (+0.26%) after making an opening session high of 9837 and low
of 9770 in a day of moderate volatility.
Indian market
(Nifty Fut), today opened sharply higher around 9810, almost 46 points up amid
supportive global/Asian cues despite another NK warning that US/SK will face “merciless
revenge” for its annual military drills.
But
soon after opening higher, Indian market again plunged & recovered a bit
tracking positive EU cues and again slumped towards the closing session despite
no major negative global news flow. Concern of “shell cos” and renewed China
rhetoric about Doklam LOC stand-off may be affecting the market sentiment now.
China
today commented that if they enter India on the pretext that Indian border
infra posed a threat to Beijing, it will be an utter chaos and termed Indian
version of Chinese road building at Doklam as “ridiculous & vicious”.
Nifty
was today supported by IOC, HDFC, ITC, BPCL, Sun Pharma, HDFC Bank, Axis Bank,
ONGC, ZEEL & DRL, while it was dragged by TCS, Eicher Motors, LT, Hero
Motor, India Bulls Hsg, NTPC & RIL.
Overall
Pharma counters were in limelight today followed by Telecoms on hopes of some
stimulus as being recommended by IMG. ONGC was in demand today for merger buzz
with HPCL. All oil marketing cos are also in demand such bas IOC & BPCL.
Infy
today closed in slight positive (+0.23%) amid news of meeting with the FM by
its Co-Chairman with an assurance that everything will be alright soon.
Tomorrow, NRN may attend an investor concall to explain his side of story amid
intensified “war of words” among various stakeholders.
SEBI
is also keeping a close watch on the Infy developments in a worrying
environment of corporate governance issues between the Indian promoters &
professionals after the Tata Sons-Mistry fiasco.
On
the broader market, HCL Infosystems surged by over 9% on distribution agreement
with Apple India for their i-phones & other products in India.
Going by the current wave of
volatility, it seems that the Indian market may be concerned over muted Q1FY18
earnings, which fall by around 8.4% for Nifty (YOY) in contrast to earlier rhetoric
of a double digit growth expectation.
Naturally,
Indian market may now try to adjust its stretched valuation in the coming days
as at Q2FY18 Nifty EPS of around 333 (??), fair valuation may be around 6660
(333*20) at an average PE of 20 !!
Even
if we assume the projected FY: 18-19 EPS at around 425-451, considering all the
green shoots narratives, the fair value may be around 8500-9020
(425*20-451*20); but FY-18 EPS at 425 may be looking very challenging as of
now, considering DeMo, GST blues, Govt’s war on black money (negative for
Indian consumption) and stressed corporate/business & banks (issues of twin
B/S).
But
whatever are the narratives, Indian market may be enjoying the power of
domestic liquidity, especially after DeMo, but that liquidity may be now in
question after Govt’s continuous war on black money & shell cos. Thus,
every bounce back in the market today may have faced steep selling, may be it a
part of portfolio unwinding.
Indian
market may now focus on any stimulus for the fragile telecom sector and outcome
from today’s FSDC meeting, which will be chaired by the FM. On positive news
front, some banks have indicated that they have received good interest from
some interested parties (prospective buyers) from EU, Asia and also from India
for some steel cos put under block in the IBC/NCLT cases.
Globally,
most of the major Asian markets barring Japan are
now trading in green tracking positive global cues, return
of risk appetite in absence of any fresh NK rhetoric and arrest of the Spain
terror mastermind coupled with optimism about Trump’s defence spending pledge
and change in strategy for the Afghanistan policy and with some tax reform
narratives by the TSY Secretary.
Overall,
whatever be the reasons, be it some optimism over Trump’s legislative agenda,
his balancing tone for the VA incident or arrest of the Spain terror mastermind
& killing of a suicide bomber yesterday, USDJPY covered some shorts from
its vital support zone of 108.50 ahead of Jackson Hole Symposium and risk trade
bounced back to some extent yesterday coinciding with the completion of cycle
from “lunar eclipse” to a rare “solar eclipse”.
Overnight US market
closed mixed; while DJ-30 & SPX-500 closed in slight positive around 21704
(+0.13%) & 2428 (+0.12%); NASDAQ closed in mild red (-0.05%) on a relatively
light volume in the last week of summer holiday. Defence sectors was in demand
on Trump’s defence spending spree & war hysteria, which may be a good way
of fiscal spending (Govt capex) to boost US economy and also export income from defence related hardware
& software.
But,
US market was yesterday dragged by Techs, financials & energy related
shares (lower oil prices), while miners/basic materials helped it a bit (higher
metal prices on EU/global growth optimism coupled with tighter supply).
At
the same time it’s may be easier for Trump to pass defence related capex bill
from the US congress rather than passage of other common bills like health
care, infra spending or even tax reform amid US political jitters.
Incidentally, India may be now a “prime customer” of US’s defence industry and
is on a buying spree as an emergency even on elevated prices to counter the
growing threat of China.
Although
Trump put Pakistan on clock today for harboring & sheltering terrors, which
America is fighting for decades in Afghanistan and giving aids of billions of
dollars to Pak, Trump has also urged India to take more active roles in
Afghanistan in lieu of strategic partnership with US and trading relation of
billions of dollars.
In
brief, Trump has now changed his Afghanistan policy in contrast to his earlier
election day rhetoric as sudden withdrawal from that country may also help the
terrors (Taliban, ISIS), which are eager to attack US & its allies
globally.
Thus,
now US force will stay further in Afghanistan with greater presence and Trump
has also urged its allies for more force/active roles there with financial
support; really Trump is a smart business man/deal maker!! Thus geo-political
tensions from NK to Doklam to Afghanistan may be also helpful for higher defence
spending & Govt capex to boost GDP across the spectrum.
US stock future
(SPX-500/US-500) is now trading around 2435, up by almost 0.28% on risk
appetite and some fall in EURUSD & positive EU cues and some M&A buzz.
EURUSD is trading now around 1.1795, down by 0.18%; a lower EUR bund yields may
be helpful for EU equities in general, being an export oriented economy.
Technically,
SPX-500 has taken some support from the vital 2415 area yesterday and now
sustaining above 2435-2450 zone, it may gain more upwards momentum.
Elsewhere,
Australia (ASX-200) was closed around
5750, up by almost 0.40% despite positive/flat AUDUSD on strength in metals
& miners coupled with BHP Billiton optimism; BHP announced to triple its
final dividend, helped by higher earnings amid recovery in commodity prices
& cost cutting measures despite a below estimate bottom line. The co may
also sell its US based oil & gas business as a part of its deleveraging
effort.
Japan (Nikkei-225) was
closed almost flat around 19384 (-0.05%), but well off the high of 19437 on a
stronger Yen, as USDJPY still flirting under 110, now around 109.30 (+0.34%),
recovered from yesterday’s low of around 108.63 to 109.46 till now; a stronger
Yen, up by almost 5% since July’17 may not be good for JP exports.
China (SSE) was trading
almost flat around 3290 (+0.10%) on strength in Yuan; PBOC has fixed USDCNY a
little lower at 6.6597 vs 6.6709 with net drain of 10 bln Yuan today. PBOC is
making Yuan stronger progressively over the few months from 6.95 area, most
probably to discourage the USD outflow, even if costs some of China’s export
edge.
PBOC/China
may be now planning to make Yuan further strong around 6.50 as par some top
China policy maker; USDCNY around 6.50 may also make Trump happy and thus may
be helpful to avert a trade war with US too!!
Today,
China market was also helped by China Unicom, which is up by almost 2.8% after
yesterday’s 10% upper circuit rally apart from general optimism in metals &
miners.
Similarly,
Hong-Kong (HKG-33) is now trading
around 27415, up by almost 0.90%, being helped by Great Wall Motor, a frontline
China auto maker on its interest in buying the iconic “Jeep” brand from Fiat
Chrysler; it’s up by 10% in upper circuit.
Asian regional markets
from SK to Singapore & also Taiwan are up today by around 0.5-0.8% on
higher USD & optimism over tech shares.
Meanwhile,
Crude Oil (WTI) is now trading
around 47.85, up by almost 0.70% on hopes of faster rebalancing as US shale
oils may be exported more in the coming months on favorable spread between
Brent & Crude coupled with moderate weather, which may in turn help to
lower the US Crude inventories.
Crude
Oil fall yesterday after OPEC reported 94% technical compliance coupled with
Kuwait oil minister’s comments after the OPEC meeting yesterday that further
output cut extension talks may be discussed in Nov’17. As par Kuwait oil
minister, oil inventories fell more than expected in the past few weeks and a
fair oil price will be decided by the market and a falling US shale oil
inventories is a sign of OPEC-NOPEC production cuts success!!
Technically,
whatever be the rhetoric, WTI needs so sustain now above 48.50-48.75 area for
any further rally; otherwise sustaining below 48.35, oil bears may have some
edge in the coming days.
Elsewhere,
EU market (Stoxx-50) is trading around
0.72% higher on lower EUR (after tepid German ZEW economic sentiment) and
upbeat metals/miners, snapping 3 days losing streaks but that failed to inspire
the Indian market sentiment today.
Apart
from basic materials (metals & miners), EU stocks are today also being
helped by health care and BHP Billiton optimism. DAX-30 is now trading around
1.10% higher, while FTSE-100 & CAC-40 are up by around 0.66% each.
Notably,
in UK, Provident Financial tumbled by almost 64% on Q3 guidance/profit warning,
which is second in the last three months after the lender changed its business
models by employing full time employees rather than contractual part time
workers/agents for its home credit business; also its CEO may be resigning!!
Meanwhile,
US stocks have also opened higher on
hopes of an imminent tax reform plan by Trump. There are some reports that
Trump’s top aides and leading congressional leaders have made significant
strides in shaping a US tax overhaul, which may be acceptable by all the
concerned stakeholders and subsequently may also be passed by the congress.
Asian market update: 22/08/2017
FX market update: 22/08/2017
Asian market update: 22/08/2017
FX market update: 22/08/2017
SGX-NF
BNF
USDJPY
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