Market Wrap: 24/08/2017 (17:00)
NSE-NF (Aug):9880 (+18; +0.18%) (TTM PE: 25.15; Nr.
2 SD of 25; Avg PE: 20; TTM/FY-17 EPS: 392; NS: 9857)
NSE-BNF (Aug):24330 (+1; +0.00%) (TTM PE: 30.53;
Abv 3 SD of 30; Avg PE: 20 TTM/FY-17 EPS: 795; BNS: 24274)
For 28/08/2017:
Key support for NF: 9845-9785
Key resistance for NF: 9905-9945
Key support for BNF: 24200-24000/23900
Key resistance for BNF: 24400-24575
Hints for positional trading:
Time & Price action suggests that, NF has to sustain over
9905 area for further rally towards 9940-9980 & 10030-10075 area in the
short term (under bullish case scenario).
On the flip side, sustaining below 9885 area, NF may fall
towards 9845-9785 & 9750-9705 area in the short term (under bear case
scenario).
Similarly, BNF has to sustain over 24400 area for further rally
towards 24525/24575-24675 & 24775-24875 area in the near term (under
bullish case scenario).
On the flip side, sustaining below 24350 area, BNF may fall
towards 24200-24000 & 23900-23750 area in the near term (under bear case
scenario).
Indian market (Nifty Fut) today closed around 9880, marginally higher by 18
points (+0.18%) after making a mid day low of 9852 and closing session high of
9889; market today was basically supported by Infy, Pharma coupled with merger
& consolidation (M&C) optimism of some big PSBS (SBI/BOB) after reports
that Govt may not merge strong banks with the weaker ones.
There was also some buzz that 2-3 strong PSBS may be merged to
create competitive entities at par with SBI; i.e. in essence, Govt may be also
looking to create larger banks on lines with SBI.
Although, this M&C buzz of PSBS was there for the last few
months and Govt has also confirmed the same yesterday, there was no such
jubilation among the big PSBS scrips as market may be concerned that due to
Govt forced M&C of stronger PSBS with weaker ones, stronger banks may
suffer; recent merger of SBI & its associates may be one such instance,
where consolidated numbers/NPA are now looking quite scary.
Thus, if Govt take the policy of not merging the stronger PSBS
with the weaker ones, then it may be good for strong & bigger PSBS like
BOB, PNB; there may be no fresh M&C for SBI as it has been already done.
But all these trail balloons may be now immature as there is
long way to go for such M&C and this may also create some political
controversy as bank unions may also oppose & are quite strong and by simple
M&C, the core question of NPA resolution may not be resolved by itself,
although a well known PSB brand, like BOB, PNB may be convenient to raise
recapitalization funds from the market, making the overall process smooth also
for the Govt also.
Indian market today opened also marginally higher tracking mixed
global & domestic cues and most of the trading session gyrated within a
narrow range today with visible pressure on Bank Nifty, may be today was the
weekly exp day for the same.
Indian
Govt & also some FIIs today has expressed its concern over bad image of
corporate India for the ongoing Infy battle and the Tata group incident last
year; issues of corporate governance may be at stake in this battle of Indian
promoters vs professionals.
As
par some reports, the whole Infy board may resign before Nilekani starts his 2nd
innings or any other CEO starts a fresh innings; but it may be a well thought
game plan by the founders to regain the company control again with negligible
stake of just 3.43% (NRN group) and overall 12% stake at the combined promoter
levels.
There
was an worrying news from the Indian monsoon front, which is so far 6%
deficient pan-India with some serious deficiency or distribution impact over
some areas in South & Western India affecting cultivation of selected
pulses & vegetables. On the other side, heavy floods in some parts of the
country is also affecting cultivation & production of some key vegetables/food
products.
Nifty
was today supported by Infy, Auro Pharma, Sun Pharma, Tata Motors, L&T,
Lupin, Cipla, DRL & Axis Bank, together which they contributed almost 30
points, while it was dragged most by RIL, HDFC twins, Adani Ports, ITC &
Kotak Bank by almost 20 points.
Overall,
Infy & healthcare stocks were in demand, while RIL, HDFC twins and FMCG
stocks capped the gain and Nifty also closed almost flat (+0.02%) for the
truncated week ahead of an Indian holiday tomorrow. Market consolidated after
recent fall triggered by SEBI move on “shell cos” & Govt’s war on black
money coupled with concern of stretched valuations & muted Q1FY18 earnings
and above all the great “Infy soap opera”.
Pharma
stocks were upbeat today for quicker product approval by US FDA (deregulation)
& buzz of a favourable domestic Pharma policy coupled with bargain hunting.
Also
shares of liquor cos were upbeat for favorable SC clarification over its recent
order of highway ban on liquor sale. The ban is not applicable for licensed
bars & beverage outlets with the municipal area, in bounds of the
city.
Looking ahead, Indian market may focus on true impact
of PSBS merger & banking products cross sell by NBFC, which was announced
by the Govt/RBI yesterday and was instrumental in the closing hour’s sharp
rally. Beside this, NPA resolution & RBI Dy Gov’s comments yesterday
calling for giving a 3 month window to the banks to clean it up (?) and some
past policy paralysis by the central bank may be also in focus.
In
addition, stretched valuation & muted Q1FY18 Nifty earnings, which saw a
de-growth of 8.4% on YOY basis (?) may be another headwind apart from Govt’s
war on black money (Shell cos) and ongoing China border tensions.
China
has reportedly issued an advisory warning for its citizens to visit India on
account of viral attacks, frequent road & train accidents coupled with
floods!! China may be trying its best to do “something” face savings about the
“prestigious” Doklam border issue ahead of its party congress in Sep-Oct’17.
Infy
saga is another headwind for the Indian market now as the corporate governance
issue for this iconic co may be also a similar symbolic issue for the corporate
India; market may be concerned that, although Nilekani joining as CEO with a
restructured board may restore the confidence of all the concerned stake
holders, fundamentals of the co will not change overnight.
But,
for the time being, restoration of confidence in this iconic Indian IT
outsourcing co may be the primary objective to keep the warring house in order
and to talk on one tone; rest will follow naturally. In that sense, 850-815
area for Infy may be a good support zone for accumulation, everything else
being equal.
In
another significant development, India’s top court (SC) has upheld the right to
privacy act and declared that “Privacy is a fundamental right”. Although this
SC verdict may not affect the Indian market, but it may affect Govt’s ambition
to keep everything from bank A/C, PAN to any subsidy with the Aadhaar biometric
card (UID) card and in turn, Govt’s war on black money or money laundering.
After
this verdict, it may be untenable for the corporates to share private data as
present UID act is only required for social welfare schemes & tax purposes.
But various Govt policies interfering with privacy may be also struck down at a
glance. But it seems that even after the SC order, Govt is bating for “limited
privacy with reasonable restrictions”.
Globally,
most of the major Asian markets barring Australia
are now trading in red tracking mixed global cues amid concern
of US shut down (debt ceiling) & renewed optimism about Trump’s tax reform
plan.
Overnight US market
also closed in negative due to Trump’s earlier political rhetoric about shut
down of US Govt, if his Mexican wall narrative (funding) is not passed by the
US congress; DJ-30 closed around 21812, down by 0.40%, while S&P-500 closed
around 2444, edged down by 0.34% and NASDAQ dropped by 0.30% to around 6278.
US
market was dragged by Lowe (muted earnings), J&J, Walt-Disney & Cisco.
Overall consumer discretionary & industrial shares coupled with Techs were
in pressure yesterday in a light volume amid concern of an inevitable Fed/US
rate tightening (QT) ahead of Yellen’s speech at Jackson Hole and a stretched
valuation of S&P TTM PE at around 17.4.
After
years of easy money policy, it now seems that both Fed & ECB will go for QE
unwinding followed by BOJ sooner rather than later and thus market may be also
worried to some extent as it is an uncharted territory, never tried by Fed
before; market may not be sure about the overall effect of a gradual BS
tapering by Fed and its effect on the US bond yields.
Both
USD & US market came into renewed pressure yesterday (NY session) after
Fitch issued a warning about US sovereign rating cut for this debt ceiling/US
Govt shut down political drama. US house speaker Ryan also supported the Mexican
border wall rhetoric but no Govt shut down, thus tried to play down Trump’s
narrative.
But
in the early morning Asian session today, another report popped up that Trump
has a fruitful discussions with the house RNC GOP leader McConnell on middle
class tax relief, defence spending, border wall & other issues and that was
instrumental for some rebound in USD and risk trade ahead of Yellen at Jackson
Hole tomorrow.
Market
may be optimistic about Trump’s legislative agenda as if, a Prez Trump may be
different from Politician Trump; his public comments in political rally may be
quite different from his actual actions at WH; Trump is committed to sign
anything put in front of him by the US congress. In any way, Trump is doing a
great job for the overall market volatility!!
US stock future (SPX/US-500)
is now trading around 2441, almost unchanged amid US political dilemma and
looking ahead, it has to sustain above 2455-2465 for any further strength,
whatever be the narratives.
Elsewhere,
Australia (ASX-200) closed around
5740, almost flat (+0.10%) on weak AUDUSD, supportive for AU exports and also
partly helped by upbeat large mining cos & energies (higher oil). AUDUSD is trading around 0.78745, down
by almost 0.50% on China concern of metals coupled with reverse commodity
currency carry trade on drops in yield differentials and regional politics
ahead of NZ election.
Japan (Nikkei-225)
closed around 19354, down by almost 0.42% on strong Yen as USDJPY dropped below
109 overnight on Trump’s US shut down rhetoric; although it has now recovered
to almost 109.25 on renewed optimism about US tax reform. JP market is also
being dragged by top steel makers today after reports that Toyota Motor was
looking to cut prices of steel supplied to its component makers for next contractual
period.
China (SSE)
also closed around 3271, down by almost 0.50% on China-US trade war concerns
coupled with a strong Yuan policy of PBOC, which fixed USDCNY a little lower today at 6.6525 vs 6.6633, tracking overnight
broad weakness in USD. PBOC today also drained out net 100 bln Yuan today by
its daily OMO operations.
Hong-Kong (HKG-33)
is trading around 27500, up by almost 0.30% after yesterday’s exchange shut
down due to a severe typhoon, which has also affected the scrips of casinos
& hotels due to widespread power cuts & flooding.
Meanwhile,
Crude Oil (WTI) is trading around
48.11, down by over 0.50% after yesterday’s rally to 48.48 amid a favourable
EIA inventory report as rising US shale oil output & gasoline storage may
have dampened some of the optimism in decline of US crude inventories despite a
seasonal summer driving factors. Technically, WTI is now facing good resistance
around 48.60-48.80 zone.
Elsewhere,
EU market is in green by around
0.55% on Stoxx-50 in a range bound market amid dilemma of US debt ceiling &
tax reforms optimism ahead of Jackson Hole tomorrow on concern of a
“super-EUR”; inevitable ECB QE tapering, even if Draghi will remain silent.
Overall,
EU market is being affected by guidance warning from mobile phone &
electrical retailer Dixons, but being helped by Provident Financial after
recent plunge on bargain hunting.
SGX-NF
BNF
USDJPY
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