Market Wrap: 17/08/2017 (17:00)
NSE-NF (Aug):9914 (+9; +0.09%) (TTM PE: 25.07; Nr.
2 SD of 25; Avg PE: 20; TTM EPS: 395; NS: 9904)
NSE-BNF (Aug):24295 (-180; -0.74%) (TTM PE: 30.49;
Abv 3 SD of 30; Avg PE: 20 TTM EPS: 795; BNS: 24237)
For 18/08/2017:
Key support for NF: 9865-9815
Key resistance for NF: 9950-9980/10005
Key support for BNF: 24250-24150
Key resistance for BNF: 24425-24525
Hints for positional trading:
Time & Price action suggests that, NF has to sustain over
9980 area for further rally towards 10005/10035-10095 & 10115-10160 area in
the short term (under bullish case scenario).
On the flip side, sustaining below 9950 area, NF may fall
towards 9895/9865-9815 & 9765-9705 area in the short term (under bear case
scenario).
Similarly, BNF has to sustain over 24525 area for further rally
towards 24600-24725 & 24900-25025 area in the near term (under bullish case
scenario).
On the flip side, sustaining below 24475-24425 area, BNF may
fall towards 24250-24150 & 23950-23850 area in the near term (under bear
case scenario).
Nifty Fut (Aug) today closed around 9914, almost unchanged (+0.09%) after a
moderate day of volatility, in which it made an opening session high of 9940
and mid session low of 9882. Indian market (Nifty Fut-Aug) today opened in
slight gap up around 9927 (+20 points) tracking muted global cues but some
RBI/Govt sops of farm loan for certain categories & a hawkish RBI minutes,
dashing for any further rate cut hopes in 2017.
But, after trading strong for the fast few hours, it came under
some selling spree on weak opening of EU market as EUR got strong amid US
political jitters & a dovish FOMC minutes coupled with some adverse new
flow both in national & international media about the ongoing India-China
border standoff in various LOC, which may take serious geo-political turn at
any point of time despite regular flag meetings between the two armies.
Also, concern of shell cos & Govt’s war on black money,
muted Q1FY18 earnings and RBI tightening on NPA coupled with restriction of
fresh commercial lending, especially to various real estate developers may have
adversely affected the Indian market sentiment today and without contribution
from Infy, VEDL & HDFC, Nifty could have ended in moderate red; these 3 cos
has contributed almost +42 points in Nifty.
Indian
market may have today focused on RBI/Govt sops for some categories of farm loan
(discounts in interest rate), which may be positive for PSBS and also some
selected private banks having relevant farm loan portfolio.
Indian Market
May be Also Dragged By Muted Q1FY18 Earnings And Concern Of Ind-China Border
Standoff:
But,
muted Q1FY18 Nifty earnings, down by almost 8.4% (YOY) due to adverse report
cards from PSBS, Pharma, IT, Automobiles, FMCG, consumer durables & staples
for various reasons including a common cause of Pre-GST disruption may be highly
disappointed as Nifty EPS continue to be under the 400 mark for several years
despite so called green shoots.
Looking
ahead, Q2FY18 also may not be rosy amid subdued guidance on general slowdown of
the economy for challenge in GST adaption, especially by small traders, DeMo blues
(war on black money) and resultant formalization of the economy, which may also
delay the overall economic recovery.
For
now, Govt capex is supporting the GDP, but ongoing euphoria about farm loan
waivers in various states may be also affecting the State Govt capex now and in
turn, Central Govt capex may be also in pressure coupled with increasing
expenditure on PSBS recapitalization & infra/defence spending and lower
revenue from telecom sector.
Thus,
an extended slowdown in consumption, private investments, hiring & earnings
downgrade can’t be ruled out; market may be assuming very high EBITDA margin
& profitability for FY: 18-20, which may be far from reality!!
Also,
a hawkish RBI minutes released yesterday may have dashed the hope of any
further rate cuts by MPC in 2017 and coupled with that, US political risk,
Trump’s NK narratives to divert attention from his political drama, ongoing
border tensions with China-India and an eventual Fed/ECB QT from 2018 may be
some of the headwinds for the Indian market despite power of domestic
liquidity, which may be also in question amid Govt’s war on black money, eyeing
for the 2019 general election.
Nifty
was today supported by Infy (buyback offer shortly), VEDL (upbeat metals for
global growth optimism & China supply constraint), HDFC, IOC, NTPC, Bharti
Airtel (some telecom sops buzz by the Govt/IMG & extension of spectrum
payment period at reduced bank interest rate), ITC , Eicher Motors & RIL (
no fresh notice from the Govt demanding for more fines; all the disputed amount
are under BS provision and arbitration).
Nifty
was dragged by HDFC Bank, Adani Ports, Maruti, Kotak Bank, Yes Bank, L&T,
Indusind Bank, Tata Motors, Cipla, SBI, Bosch & HUL.
Overall
banks, FMCG, Pharma stocks dragged Nifty, while IT counters helped it a lot
today. Bank Nifty today saw a sharp sell off at the closing hours, dragging the
overall market may be due to weekly exp day volatility on today (Thursday)
coupled with a hawkish RBI minutes released yesterday and pessimistic outlook
for the overall banking sector amid high NPA from corporate to retail &
muted credit growth and pressure of RBI to transmit more rate cuts.
Pharma
stocks were under pressure today due to concern of adverse new Pharma policy on
Indian drug makers, which are accused of exorbitant prices & sub-standard
quality by various generic cos for decades.
Globally,
most of the major Asian markets barring China
& South Korea were trading in red tracking muted global
cues after Trump dissolves all his business advisory council in an epic turn of
US politics & the tragic VG incident following resignation of all the
leading members (prominent business heads & CEO) amid an environment of
intolerance, racism & violence and Trump’s stance on the whole affairs.
This
may be a huge blow to Trump & his narratives of Trumponomics as these
business councils were one of his strength despite daily political drama. These
councils were formed with much fanfare after Trump took charge of the oval
office to guide his administration in areas of trade, tax reforms,
deregulations and investments in US to help US employment & to “make
America great again”.
Thus,
this disbanding of Trump’s strategy & policy council may be a serious blow
to his presidency and eventually, he may resign coupled with rising pressure on
his alleged Russian links investigation. Although, a resignation or an
impeachment of Trump may be a temporary black swan event for the marker (risk
assets), it may be positive in the long term as an element of daily political
entertainment & uncertainty may be removed in his resignation from WH.
Also,
yesterday’s FOMC minutes may be termed as dovish as several members are
concerned over lower trajectory of US inflation for not only short/midterm, but
also for longer term (2 yrs), which is a surprise as Fed/Yellen thinks the current
subdued inflation is transitory & also idiosyncratic.
Fed
is also concerned over rising asset (stock) prices as it has eased financial
conditions despite multiple rate hikes by 3 times in the last 6 months. But,
FOMC minutes yesterday also virtually confirmed a gradual BS tapering in the
“upcoming” policy meets, most probably from either Sep or Dec’17, starting with
no reinvestments of the matured bond amount principle and then gradually
selling un-matured bonds in the market.
Fed
may be also concerned over tepid private/public investments in US due to fiscal
policy uncertainty and poor visibility of Trumponomics amid intense US
political turmoil almost on daily basis.
Thus,
Fed may not take the risk of dual QT (both rate hikes & BS tapering) in Dec’17
and will go only for gradual QE/BS tapering first, which may be also equivalent
to a rate hike for the US economy as bond yields will surge on the back of
greater US TSY bond supplies and if everything, from economics (inflation, GDP,
employment/wage growth etc) to politics (Trump & Co) are fine, then Fed may
go for further 3 rate hikes in 2018 starting from March’18 (Q1).
Although,
Fed may be now taking some excuses of lower US inflation to not hike in Dec’17,
several US policymakers have also acknowledged the fact that subdued US wage
inflation & CPI may be a structural issue, which can’t be solved by QE
alone.
The
tepid US wage growth may be a function of ageing US demography, lack of
relevant working skills, automation & also globalization. Thus inflation
model of 1980’s may not be relevant now and thus the 2% inflation goal may be
remained as elusive, unless the Govt stimulate the economy in a structural way;
i.e. it needs fiscal stimulus rather than monetary stimulus. The same
perception may be also applicable for other G-10 economics including EU &
Japan.
All
these US economical & political jitters has made the USD lower despite some
hawkish effort from Fed’s Mester later in the day arguing for another 2017 rate
hike inspite of lower inflation and ECB’s dialing back of Draghi’s QE signal
talk at the Jackson Hole Symposium next week. USD is also under pressure from
Trump’s rhetoric of trade war with China over NK issues and his narratives on
NAFTA involving Canada & Mexico.
A
lower USD may be now bad for global markets, most of which are dependent on
exports, but it may be also good for US market & economy. Thus, despite so
much US political headwinds, US market
(DJ-30) yesterday closed almost flat around 22024 (+0.12%); SPX-500 is now trading around 2465,
almost flat (-0.05%) on weaker USD ahead of ECB minutes today.
US
market is also being supported by upbeat earnings, but the rally may not be
broad based and may be limited to few stocks, having greater weightage on the
index. FFR is now showing only a 40% probability of a Dec’17 rate hike, down
from around 50% just before the FOMC minutes. A lower USD is positive for US
earnings.
Elsewhere,
Australia (ASX-200) closed around
5779, almost flat (-0.10%) on higher AUDUSD amid upbeat commodities and AU
employment report. Telecom sector is also dragging the AU market today after
Telstra slashed its dividend by 30% for 2017.
Japan (Nikkei-225) closed
around 19703 (-0.14%) on lower USDJPY (higher Yen), which is negative for its
export oriented economy. JPY today got more strength after an upbeat JP trade
data, reflecting robust export (+13.2%) to China & US and also solid
domestic demand (private consumption) amid good import (+16.3%). Today’s JP
trade data may be also good for global economic recovery narrative along with
Japan despite an overall strong Yen.
China (SSE)
was trading around 3268, in deep green (+0.68%) on upbeat earnings of tech
shares and metal optimism. Today PBOC fixed USDCNY slightly lower at 6.6709 vs
6.6779 yesterday and made a net injection of 50 bln Yen through its daily OMO.
Metals are upbeat on perception of strong global demand & tight supplies
coupled with lower USD.
Hong-Kong
(HKG-33) was trading almost flat around 27345 (-0.20%) on lower USD, but upbeat
tech shares amid strong earnings by Tencent and miners; but oil/energy related
sectors may be in pressure today.
South-Korean
market (Kospi) also surged by 0.65% after NK’s Kim back off from his Guam
missile attack rhetoric and subsequent cool down by Trump, terming Kim’s
decision as “wise” and avoided a “catastrophic” war situation. SK’s Prez also warned NK about crossing the
red line, if it go ahead with a nuke ready ICBM test, but has also remind that
US will have to take Seoul’s approval for any military action on NK.
Meanwhile,
Crude Oil (WTI) was trading around
46.78, almost flat (+0.10%) after overnight plunge from around 47.98 tracking
mixed inventory report amid surprised crude drawdown, but unexpected gasoline
storage & US oil production surge.
Asian Market Update:
FX UPDATE:
Asian Market Update:
FX UPDATE:
SGX-NF
BNF
GBPUSD
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