Nifty Closed
The Week Almost 3.6% Lower, The First Weekly Loss In The Last 6 Weeks Dragged By
SEBI “Shelling”
Market Wrap: 11/08/2017 (17:00)
NSE-NF (Aug):9738 (-117; -1.19%) (TTM PE: 24.58;
Nr. 2 SD of 25; Avg PE: 20; TTM EPS: 395; NS: 9711)
NSE-BNF (Aug):24080 (-226; -0.93%) (TTM PE: 30.17;
Abv 3 SD of 30; Avg PE: 20 TTM EPS: 795; BNS: 23986)
For 14/08/2017:
Key support for NF: 9695/9665-9605
Key resistance for NF: 9780-9830
Key support for BNF: 23800-23600
Key resistance for BNF: 24250-24450
Hints for positional trading:
Time & Price action suggests that, NF has to sustain over
9830 area for further rally towards 9895-9950 & 10020-10065 area in the
short term (under bullish case scenario).
On the flip side, sustaining below 9800-9780 area, NF may fall
towards 9695/9665-9605 & 9560-9525 area in the short term (under bear case
scenario).
Similarly, BNF has to sustain over 24300 area for further rally towards
24450-24550 & 24700-24900 area in the near term (under bullish case
scenario).
On the flip side, sustaining below 24250-24150 area, BNF may
fall towards 24090-23800 & 23600-23300 area in the near term (under bear
case scenario).
Nifty Fut (Aug)/India-50 today closed around 9738, slumped by
another 117 points (-1.19%) after making an opening session high of 9800 and
late day low of 9710, tracking geo-political tensions from NK to Doklam and
terrible report card by SBI as both corporate & retail/SME NPA surges
significantly despite ongoing RBI/IBC efforts to crack down on stressed assets.
Indian market (Nifty Fut-Aug/India-50) today opened around 9777,
down by almost 100 points tracking subdued
global cues amid intensifying “war of words” & game of chicken between
Trump & Kim. Trump further escalated the war-mongering mood this morning by
tweeting that “military solutions are now fully in place, locked & loaded,
should North Korea act unwisely”.
Among all these simmering NK geo-political tensions, Indian market
today is closed in deep red after making an early recovery to 9800 amid
lingering geo-political tensions from NK to Doklam, coupled with concern of
stretched valuations due to muted/mixed Q1 earnings and SEBI “Shelling”.
Today all eyes were also on SBI report card, the largest lender
of the country to gauze the underlying trend of corporate/SME/retail NPA. But
it disappointed in every asset quality front miserably and thus market
succumbed further as it is no longer interested in absolute profit figure of
the bank, which is a function of provisions at these days.
Indian market sentiment was further affected today after Govt
basically downgraded its GDP estimate, but kept the headline CPI projection
around 4% in its semiannual economic survey on strength of INR, challenge of
farm loan waivers & an effective implementation of GST.
This was further confirmed later in the day today after IIP
plunged in June at (-) 0.1% against estimate of 0.6% (prior: 1.7%). Indian IIP
turns negative for the 1st time in last two years and may be also an
indication of deflationary trend in the economy after an average IIP of around 3%
in the last few months (IIP was 2.8% in May); but it may be also due to pre-GST
disruptions.
Market was also under severe pressure today after some reports
indicate that there are serious allegations of money laundering and cooking of
accounts against some of the well known suspected “Shell cos” originating from
2009-11 in relation to PACL scam and coal block allocation issues; SIFO, ED,
IT, CBI are all investigating the matters.
Technically, Nifty Fut (Aug) now has to sustain over 9695/65
area; otherwise the zone of 9605-9560 may come soon; for any bounce back, it
has to sustain over 9830 area for 9895-9950 zone in the coming days.
Nifty was today supported by Pharma (DRL, Auro Pharma, Lupin),
IT (INFY, Wipro), OMC/Oil & Gas (BPCL, Gail) and Axis & Yes Bank.
Nifty was dragged by RIL, Metals (Hindalco-subdued report card),
SBI (worsening asset quality), BOB, Sun Pharma, ONGC etc; most importantly report
card from some other PSBS were also very tepid on asset quality fronts.
Overall, 36 scrips out of Nifty 51 has closed in moderate to deep red today.
EU market was also under pressure tracking NK tensions and higher EUR
& mixed earnings; so far Trump’s “Fire & Fury” comments may have caused
global equities to lose around $1 tln in the market capitalization in the last
few days; politics now have a bigger role than economics!!
EURO Stoxx-50 is now trading around 3415, down by almost 0.53%
and more over fell by almost 2.7% so far for the week, the largest weekly
decline since Nov’16, the US presidential election time.
DAX-30 is now trading around 12000, almost flat for the day
after making a low of 11927 so far and flirting with the 200-DEMA of around
11900 zone. Similarly, FTSE & CAC are down by around 0.80%, trying to cover
some shorts ahead of the weekend.
Indian market (Nifty Fut-Aug) today opened around 9777, down by
almost 100 points tracking subdued global cues amid
simmering NK-US tensions and China-India border standoff at Doklam; almost all the major Asian markets are in stress
today as yesterday, Trump renewed his NK rhetoric
again by commenting that his previous “Fire & Fury” reference may not be
enough for Kim and NK must get their act together; otherwise things will happen
to them, they never thought possible.
In the process, Trump also vowed to increase the US defense
budget by billions of dollars in an attempt for increased fiscal spending for
the US economy!! But, his defense secretary preferred to take more diplomatic
approach to tackle this NK issues, stressing that tragedy of a war well known
and that a military conflict could be catastrophic.
NK, on the other side vows to mercilessly wipe out the
provocateurs (Trump), saying that US will suffer a shameful defeat!!
Among all these war-mongering & game of chicken between
Trump & Kim, China’s stand may be neutral if NK first attacks US military
base and US/SK retaliates; but if US & SK carry out any pre-emptive strikes
against NK to overthrow Kim and try to change the current geo-political pattern
of the Korean peninsula, China may not be a silent spectator and will prevent
them from doing so; ultimately China may not like a large US military presence
in its border/sea area.
Thus, all these lingering NK-US geo-political tensions coupled
with terrible US PPI data yesterday and some dovish script from Fed’s Dudley is
making the USDJPY lower and it plunged below the 109 mark ahead of crucial US
CPI data today; appeal of safe heavens of Yen, EUR, Gold has made the risk
trade off and moreover a surging EUR is negative for the global stocks in
addition of strong Yen and other export heavy Asian currencies.
From the overall NK narratives so far, it seems that Trump may
keep his “Fire & Fury” momentum for some more days as it’s very helpful to
keep the USD down to make his dream of “America Great Again” and also to divert
attention of the core issues of US economy & his failure to pursue
legislative agenda like Trumpcare & US debt ceiling issues in addition of
poor visibility of Trumponomics rhetoric (US tax reform & fiscal spending).
Overnight, US market (DJ-30) also closed lower around 0.93% down
tracking NK tension flare up, terrible US economic data, lower USD and slump in
FANG/Tech stocks coupled with some muted earnings. At a glance, SPX-500, which
is now trading around 2435 has immediate support of 2420 and sustaining below
that 2400 area may be clearly visible as of now.
Indian market may be in further stress from the ongoing
China-India border stand-off at Doklam, which may take serious turn as some
complex geo-political issues and business interest of China is involved there (CEPC-OBOR
road connectivity), much to the dislike of India.
Apart from further SEBI “Shelling” and concern of muted/mixed Q1
earnings & stretched valuations, RBI’s dividend to the Govt of around
Rs.30656 cr vs expectations of around 1 lakh cr (DeMo profit?) and prior figure
of around Rs.65800 cr may be very disappointing and may also cause a big fiscal
hole despite upbeat indirect tax collections and improved tax/GDP ratio as a
fall out of DeMo.
Overall, keeping in view the May’2019 general election theme,
Govt may continue its war on black money/corruption narrative by digging more
on Shell cos, which may be a perfect vehicle for money laundering and also by
linking every financial transaction with UID & GST.
Govt may be extremely right in its approach to fight corruption
ethically & morally, but it may not be good for the overall Indian market
& economy structure. But again, today’s pain may be tomorrow’s gain; for
the time being margin funding issues because of “Shelled cos” may be turning
into a serious headwind, especially for the HNI & heavily leveraged retail
investors/traders.
Indian Govt today tabled its mid-term economic survey (Part-II),
in which it has basically blamed the RBI for inaccurate forecast of CPI by
above 1% for the last 6 quarters out of 14 and predicted a headline CPI below
4% by March’18 and also slightly downgraded the FY-18 GDP forecast at 6.75-7.5%;
i.e. Govt may be expecting an average GDP of around 7% in FY-18, but it may be
quite tough to achieve that.
Govt also pointed out at deflationary forces weighing on the
economy and current RBI repo rate is at least 0.25-0.75% above the neutral rate
assuming an average headline CPI of 3.5% +1.5% neutral rate; i.e. RBI repo rate
should be around 5%, whereas it’s now at 6%. As par the Govt, current spree of
farm loan waivers by various states may also cut economy demand up to 0.7% of
GDP.
Although, loan growth by the private banks may be robust, PSBS
are taking more calibrated approach to contain NPA from old landings rather
than adding more fresh loans; i.e. one can expect subdued credit growth from
the PSBS in the coming days.
From the overall version of the economic survey, it seems that
Govt may continue to bat for more RBI rate cuts to make India into an low cost
interest economy, where high RRI may be a legacy issue and also responsible for
today’s NPA mess. But, high deposit rate on small savings & Indian high
bond yields may be some of the real issues; Govt/RBI has to face to cut rate
drastically in the coming days.
Also, in reality, the present ultra low CPI of around 1.55% may
be a function of favourable base effect and sudden plunge in food inflation,
which may be also transitory. The adverse effect of farm loan waivers in the
economy may be also due to extreme political populism stance taken by the
ruling party (BJP) in the UP election to counter the adverse effect of DeMo.
Thus, Indian market sentiment was further affected today after
Govt basically downgraded its GDP estimate, but kept the headline CPI
projection around 4%.
Elsewhere, Australia
(ASX-200) is closed around 5693, down by almost 1.90% on simmering NK
tensions after Trump escalated further “war of words” despite some fall in
AUDUSD; banks & financials, metals/commodities/miners are all dragging the
AU market today. Some RBA jawboning also helped the AUDUSD to go lower to some
extent today.
Although Japan (Nikkei-225)
is closed today for a holiday, Nikkei-Fut is trading in deep red around 19400
on lingering NK tensions & higher Yen on safe heaven appeals; so far it
made a low of around 19295; spot was closed around 19730 yesterday.
China (SSE) is also in deep red around 3209 (-1.63%) mirroring NK
geo-political tensions and a strong Yuan as PBOC fixed USDCNY at 6.6642 vs
6.6770, the strongest since Sep’16 with neutral money market stance; but for
the current week, PBOC drained net 30 bln Yuan vs 40 bln last week its ongoing
effort to deleverage the Chinese economy and credit fuelled growth. China Govt
concern on soaring metal prices may be also affecting the overall market
sentiment.
Hong-Kong (HKG-33) is also trading in deep negative today around 26930 (-1.90%)
following Trump’s rhetoric that NK should be very very nervous, even if it did
anything in term of thinking of an attack; it’s being also affected by
mixed/muted earnings from some of the pivotals and some news of China clampdown
on some internet firms on ground of anti-national security contents; tech
shares are also in pressure.
SK stocks (Kospi-200) today fell around 1.70% on NK concerns and sell off in major
tech & retail stocks, including Samsung.
Oil (WTI) also plunged to 48.25 today from yesterday’s high of 50.20
level on concern of Russian production surge coupled with ongoing squabbling
about Libya-Nigeria production and increased export supply by Saudi Arabia.
Also, report of subdued China demand for Crude may be affecting the morale of
Oil bulls today.
Gold is trading almost flat around 1287, after hitting a multi month
high of around 1289 earlier today on safe heaven demands.
Asian market update:
FX market update:
Asian market update:
FX market update:
SGX-NF
BNF
USDJPY
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