Market Wrap: 21/08/2017 (17:00)
NSE-NF (Aug):9764 (-90; -0.92%) (TTM PE: 24.88; Nr.
2 SD of 25; Avg PE: 20; TTM/FY-17 EPS: 392; NS: 9754)
NSE-BNF (Aug):2352 (-145; -0.80%) (TTM PE: 30.11;
Abv 3 SD of 30; Avg PE: 20 TTM/FY-17 EPS: 795; BNS: 23937)
For 22/08/2017:
Key support for NF: 9740/9705-9660/9585
Key resistance for NF: 9795/9830-9885/9905
Key support for BNF: 23925/23850-23750/23600
Key resistance for BNF: 24275-24400
Hints for positional trading:
Time & Price action suggests that, NF has to sustain over
9830 area for further rally towards 9885/9905-9960 & 10000-10040 area in
the short term (under bullish case scenario).
On the flip side, sustaining below 9810-9795 area, NF may fall
towards 9740/9705-9660 & 9585-9520/9495 area in the short term (under bear
case scenario).
Similarly, BNF has to sustain over 24275 area for further rally
towards 24400-24525 & 24675-24750 area in the near term (under bullish case
scenario).
On the flip side, sustaining below 24225 area, BNF may fall
towards 23925/23850-23750 & 23600-23450 area in the near term (under bear
case scenario).
Nifty Fut (Aug) today closed
around 9764, plunged by another 0.92% (90 points) after making an opening
session high of 9884 and closing hour low of 9755 on weak global cues (Korean
tensions), US policy paralysis, Trump Tantrum coupled with Infy saga, muted
Q1FY18 earnings, NPA woes and report of a large China war drill (military
exercise) in Tibet/western part of the country, keeping in view the ongoing
border standoff with India at Doklam.
As par Chinese media, the main
purpose of the present war drill is to “scare” India and force it to remove its
soldiers from the Doklam LOC. Although, as par the Indian HM, India & China
may resolve this Doklam & other border issues through dialogue & in
diplomatic way, market may be concerned for any “mini war” with China both at
the border and at the trade level and coupled with that muted Q1FY18 earnings
and Infy saga may have affected the Indian market sentiment today.
Indian market (Nifty-Fut) today opened around 9870, almost 20 points in
positive territory tracking muted/mixed global/Asian cues amid some strength in
Hong-Kong market. But soon after opening, Nifty, Bank Nifty and also midcaps
nosedived for the above mentioned concerns; Bank Nifty was down
by around 0.80%, while small & midcaps index declined by 1 & 1.5%;
advance/decline ratio was around 1:2.
Indian
market may have focused today on Infy
jitters as it now appears that both the warring sides (Sikka/board & NRN)
have some narratives, but overall focus of the co may be distracted due to this
ongoing ugly war of words and filling of several US lawsuits alleging investor
loss over co mismanagement and sudden exit of Sikka.
Thus,
Infy today again slumped by over 5% despite an “attractive buy back” offer and
dragged the Nifty by over 20 points alone; as par reports many of the founders
may tender (sell) part of their holdings for the buyback @1145/share, which may
be indicating their willingness to pare stake in this iconic IT outsourcing co.
Market
may be also concerned about the buyback offer itself now due filling of several
US lawsuits; if the so has no idea to utilize its huge cash reserve in any
business plan (organic or inorganic), then it should reward all its
shareholders by declaring an appropriate bonus or special dividend rather than
the buyback.
Nifty
was today dragged by Infy, IOC, Adani Ports, RIL, HDFC Bank, VEDL, SBI, Tata
Motors & Kotak Bank, while it was supported by TCS, Axis Bank, HDFC,
M&M, Eicher Motors, ICICI Bank & TECHM. FIIs continue their selling
spree today with net sell of Rs.1983.39 cr against DIIs buying of Rs.474.72 cr
in the Indian equities (provisional figures). Overall, IT, PSU, Pharma, infra,
auto, oil & gas were under pressure today.
Looking
ahead, Nifty-Fut (Aug) has to sustain over 9740-9705 area; otherwise 9660-9585
& even 9495 zone may come soon; for any recovery, it need to sustain over
9830 zone. Govt’s war on black money and the UID linkage with trading/demat A/C
may be also affecting the Indian market sentiment.
Downgrade
of Q2FY18 OR the overall FY-18 earnings may be also on the card following muted
Q1FYA18 earnings, which saw a YOY decline of around 8.4% for Nifty; except some
new generation private banks (IIB, Yes, Kotak bank & HDFC duo) and some
metals, most of the other banks & PSBS, Pharma, IT, Auto, FMCG has reported
subdued nos and guidance due to DeMo & GST pain and on INR strength.
As
on 30th June’16 (Q1FY17), Nifty EPS was around 364 and if Q1FY18
suffers 8.4% YOY decline as par various analyst reports, then current TTM EPS
may be around 333 (??) and in that scenario, current TTM PE of Nifty may be
almost 29.52 at Nifty 9830, against average PE of 20; in that sense fair value
of Nifty may be around 8660 (333*20); market may be too much optimistic or even
irrational about future Nifty earnings growth (FY:18-19) !!
NPA
resolution & PSBS recapitalization may be now prime concern; as par some
estimates, two leading PSBS (SBI & PNB) accounts for more than 25% of the
NPA. Govt/FMO is now very hopeful on the IBC mechanism on the notion that after
IBC, defaulters are now running behind the banks/lenders to settle, which is
quite opposite to earlier scenario under SARFASI & other mechanism.
But,
whatever may be the narratives, Govt and banks also want actual resolution of
stressed assets and not liquidation. For resolution, it seems that there are
now two ways; either to pay back & settle the NPA or change the present
management under the ownerships of the banks/lenders.
Both
the above resolutions may be elusive as the underlying projects or stressed
assets are not viable in most of the cases and even a management change can’t
resolve the stressed assets, the root cause of which may be structural in
nature barring some exceptions.
In
any way, banks have to undertake a deep hair cut, but for that their BS need to
be strong enough to take the shock. Thus, RBI may be also concerned about NPA
resolution & PSBS recapitalization and coupled with growing retail NPA,
overall GNPA of the Indian banks may be now around 25% on an average.
As
a significant development, the Essar oil & Rosneft M&A deal closure of
$12.9 bln has been announced today officially; it may be great news for some of
the Indian lenders (ICICI, AXIS, Yes, IDBI Bank & SBI), as they have
significant exposure to the stressed Essar group.
Overall,
around Rs.4000/- cr from the deal will be used to repay the Indian lenders and
that may reduce 50% exposure at the Essar group levels; but no money will come
to Essar steel, which is now under IBC process & NCLT litigations. As this
M&A deal is on the expected lines overseen by the Indian PMO, concerned
over the stressed corporate, there is no significant such reaction in the market
or in the concerned lender’s scrip movement today.
Globally,
most of the major Asian markets barring China &
Hong-Kong were in moderate red amid US-SK war drill and subsequent war
of words between NK & US coupled with WH squabbling and policy paralysis.
NK has issued several warnings for the US against the military exercise and may
also undertake further missile/ICBM tests to demonstrate its military firepower
to US & Co.
On
Friday weekend, late NY session, USD & risk trade got some strength
following Bannon’s exit as a chief WH strategist, who was seen as a
“nationalist” but also “obstructionist” against some of Trump’s policies and
his core policy makers like Cohn (chief economic adviser) & TSY Secretary
(globalists). Bannon may be also one of the key architects of Trump’s “America
First” policy.
Although,
Trump is now trying to rejig his core WH team, market may not be so much
convinced as it may invite more troubles from a person like Bannon, who are
instrumental in Trump’s unexpected US election win; as the war of words between
Bannon and Trump & Co is getting intensified, market may be jittery to some
extent about Trump’s ability to pursue his agenda of Trumponomics and resultant
US policy paralysis.
Thus,
geo-politics now may be impacting the USD more than economics and under such
scenario, market may be also concerned about Yellen’s ability to normalize the
US monetary policy (rate hikes) despite decent US economic data; USD is under
some stress due to ongoing WH entertainment (political drama).
Thus,
overnight (Friday weekend), US market
(DJ-30/US-30) closed in negative around 21675 (-0.35%), despite Bannon’s
removal by Trump was seen as a balancing act by the US Prez, who is under fire
from almost every side after his soft stance in the racist VA incident and his
frictions with his own RNC members for this issue in particular. There was also
some renewed apprehension of Cohn resignation in the market circle.
In
any way, Bannon’s inglorious departure from WH may have not changed any of
Trump’s trade protection or Mexican border wall narratives and thus market may
also be unconvinced about any major change in Trump’s daily rhetoric coupled
with major differences with the corporate America.
Also,
dual terrorism incident at Barcelona followed by some similar small mishaps in
different parts of the EZ may have affected the overall risk-on sentiment and
also affecting the tourism sector and market may be also concerned over
increasing EU security compliance cost in its budget, although it may also
provide some employment even at the cost of exchequer (Govt Capex).
US stock future (SPX-500/US-500)
is now trading around 2422, down by almost 0.20% further on US political
turmoil & Korean tensions coupled with weak Asian & EU cues.
Technically, now sustaining below 2430 it may be weak and further break down
below 2415 area, may fall towards 2395-2370 in the coming days.
Market
may focus on Jackson Hole Symposium this week for Draghi & Yellen comments
& any signal of QE tapering; although Draghi may remain tightlipped about
ECB QE tapering, considering the recent strength in EUR. Fed’s Yellen may also
debate about relatively lower US bond yields & higher stock prices in her
“Financial Stability” topic, which may be an indirect indication of QE bond
tapering, even she may refrain from signaling in a Sep’17 BS tapering
specifically or any specific policy guidance. Apart from these, huge option
expiry related to EURUSD this week & subsequent volatility may be also in
market focus.
Elsewhere,
Australia (ASX-200) was closed
around down by almost 0.40% despite flat AUDUSD (-0.05%) amid NK risk-aversion
and on weakness in AU banks, health care & telecoms but some strength in commodities
(higher oil & metals) coupled with upbeat earnings from a front line metal
co (Fortscue). But share of an AU steel co (Bluescope) is down by over 20%
after subdued earnings due to US competition & lower margins.
Japan (Nikkei-225) was
also closed in red around 19393 (-0.40%) on higher Yen, USDJPY is now trading
around 109, down by almost 0.20% on NK tensions & US policy paralysis.
Today Reuter’s JP Tankan index also came upbeat as JP manufactures’ confidence
rose to a decade high in Aug’17. In Japan, oil stocks are helping, but softness
in autos, financials & techs are dragging the market to almost 3.5 months
low today.
China (SSE) was trading
around 3287, up by almost 0.56% despite heated exchange of war rhetoric between
US & NK as US-SK military drill commenced this morning as scheduled. China
market today is being supported by China Unicom (a big telecom operator, under
some stress) optimism & restructuring plan by raising fresh funds around
$11.7 bln, shrugging off some earlier confusions.
Today
PBOC fixed USDCNY little lower at 6.6709 vs 6.6744 on broader USD weakness and
drained 50 bln Yuan by its daily OMO operations and on the weekend, China’s
vice president has also called for more punishments for the financials
regulation violators with ongoing effort of regulatory tightening in a balanced
& coordinated way coupled with more innovations rather than too much regulations
(personal view).
The
surge in scrip of China Unicom is also helping the Hong-Kong market (HKG-33) today, which is now trading around 0.50%
up, at around 27130; Unicom is up by around 8%.
Meanwhile,
crude oil (WTI) is almost flat
around 48.50 (-0.05%) ahead of a OPEC meet; on Friday weekend, oil rallied from
low of 46.77 to almost 48.87 on exp roll over (?), Venezuela geo-political
tensions & probable US sanctions and also on Libya production issues
coupled with a steady reduction is US shale wells as oil is continously
hovering below $50 mark. Also, a soft USD may be good for oil & other
commodities like metals & gold.
In
any way, whatever be the narratives, oil now need to stay over 48.80-49.00 area
for more rally towards 49.65/50.40-52.00 mark; otherwise a fall towards
47.85-46.65 can’t be ruled out.
A
weak EU market amid muted global cues,
higher EUR and repeated terror incidents in different parts of the EZ may have
further affected the Indian market sentiment today, thus dragging the market
further. NK warned on Sunday that the “reckless behavior, driving the situation
into the uncontrollable phase of a nuclear war”, indicating its uneasiness over
the US-SK military drill in the Korean Peninsula, which has started today and
scheduled to be till 31st Aug. Market may be also concerned about NK’s
foundation day on 4th Sep.
EURO Stoxx-50
is now trading around 3430, down by almost 0.48%; overall EU market sentiment
may be slightly supported today by some M&A buzz and consumer shares
coupled with techs & basic materials/miners (higher metal/iron ore prices).
Metals are rallying over EU/global growth optimism coupled with tight supply
& China deleveraging/curbs and a soft USD.
DAX-30 & CAC-40
are down by around 0.50%, while FTSE-100
is almost flat (-0.10%), while global market is now looking to the solar
eclipse today for a “good time” ahead, which is under stress for various
reasons from the days of “lunar eclipse” recently; market may be losing faith
in fundamentals and thus looking into astrology, which may be an indication of
lack of confidence and not a good sign at all.
BNF
EURUSD
No comments:
Post a Comment