Market Wrap: 18/08/2017 (17:00)
NSE-NF (Aug):9850 (-60; -0.60%) (TTM PE: 25.10; Nr.
2 SD of 25; Avg PE: 20; TTM EPS: 392; NS: 9837)
NSE-BNF (Aug):24094 (-168; -0.69%) (TTM PE: 30.28;
Abv 3 SD of 30; Avg PE: 20 TTM EPS: 795; BNS: 24074)
For 21/08/2017:
Key support for NF: 9825/9770-9705
Key resistance for NF: 9885/9905-9950
Key support for BNF: 23925/23850-23750
Key resistance for BNF: 24275-24400
Hints for positional trading:
Time & Price action suggests that, NF has to sustain over
9905 area for further rally towards 9950/9980-10005/10035 & 10095-10115
area in the short term (under bullish case scenario).
On the flip side, sustaining below 9885 area, NF may fall towards
9825/9770-9705 & 9660-9595 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 & 23600-23500 area in the near term (under bear case
scenario).
Nifty Fut (Aug)/India-50 today closed
around 9850, slipped by almost 60 points (-0.60%) after making an opening
minutes high of 9869 and mid-session low of 9794 amid panic selling in Infy as “war
of words” between the board & its founder (NRN) got murkier following
surprised (?) resignation of its CEO Sikka citing “recent
drumbeats of distractions & sickening personal attacks & allegations”
as primary reasons behind his sudden resignation.
As
Infy concall reveals uglier side of the board room battle, the scrip further
tumbled to around 14% coupled with another NRN letter bomb; thus dragging the
index (Nifty) by around 65 points alone at one point of time as it’s an heavy
weight scrip in the index. Sikka’s sudden resignation may have caused a
symbolic loss of around Rs.25000 cr for Infy investors today.
But,
towards the last hour of trading, Infy got some buying/short covering support
on buzz that Nandan Nilekani, another insider trusted Infy man may be the next
man in charge in place of Sikka and it closed around 10% lower; subsequently
Nifty also recovered from day low amid intense short covering & some value
buying. Also, assurance by Infy chairman that their buyback offer is still
valid and co will be guided by Sikka in this interim period may have also calmed
the nerves of the market today.
Incidentally,
Infy scrip yesterday made a 52 weeks high of around 1029 on buyback news and
today it made a 52 weeks low of 884 on Sikka’s resignation !! But, Sikka’s
resignation may not be very surprising, if one follows various events & the
co’s own declaration in its last financial report; the writing on the wall may
be very clear; but such knee-jerk reaction may be also very normal in such
scenario.
Sikka
was under significant pressure from NRN & other promoter/founders related
groups to declare a good buyback offer to return part of huge unutilized “cash
& cash equivalents in hands” to the share holders as the co may be finding
it tough to grow organically or inorganically, considering the changing landscape
of the Indian IT outsourcing industry. Almost all the other major IT cos has
declared such buyback offers in the recent past.
Indian
market (Nifty Fut/India-50) today opened around 9870, almost 44 points down
tracking subdued global cues tracking Barcelona terror & US political
hangover. The market soon came into further stress following surprised
resignation of Infy CEO Vishal Sikka amid an environment of trust deficit &
repeated interference in the functioning of the Co by its founders.
On
the other side of the Infy story, promoter/founders are accusing Sikka for huge
travel expenses by private jets, irrational salary increase & severance
payment to some former employees including Bansal and an unsatisfactory
performance.
Sikka
was instrumental in reviving the performance of Infy, since he took over in
2014 and market has a great trust in his ability; thus his sudden resignation
amid corporate governance & share buyback issues may have left the
investors in jittery and subsequently Infy is down today by almost 10%, dragging
the Nifty index by over 55 points alone. His resignation may also trigger more
attrition among other key Infy people.
After
Tata Sons fiasco with Mistry, this Infy incident may also raise concerns among
the investors for the overall corporate governance of Indian promoters or
legacy founders and their relationship with the professional CEOS in their cos,
who are supposed to work for the betterment of the co independently without
much interference from the founders and is answerable only to the board; i.e.
it may be a fight between promoters & professionals.
Thus,
it may be best for the family oriented large Indian cos to appoint someone
eligible within their family as CEO rather than taking service of an outsider,
who may not be their “yes man” always; founders’ family have to come forward
directly to manage their own co at driver’s seat, rather than trying to operate
it through a remote control (puppet).
Traditionally,
Indian IT outsourcing industry is a huge USD (FX) earner and also one of the backbones
of the Indian economy. But now, with changing technical requirement coupled with
anti-globalization narratives in US and also in certain other countries like
UK, this may be a huge challenge for the Indian Govt as unemployment is rising
rapidly, which may also turning into a major political issue in the forthcoming
2018-19 general election for NAMO.
A
raising unemployment in the savvy IT sector may be also bad for the retail
banking NPA, which is already on the upper trajectory apart from the huge corporate
NPA.
Nifty
was today dragged by Infy, HDFC, HDFC Bank, VEDL, Sun Pharma, ZEEL, Tata
Motors, Axis Bank, SBI & Yes Bank. Infy alone dragged the Nifty by over 55
points today, while HDFC duo dragged it by around 19 points.
Nifty
was supported today by Bharti Infratel, HUL, TCS, Eicher Motors, ITC, RIL and
Bharti Airtel; telecoms were upbeat today as Govt may extend some sops to the
ailing sector, which may be in line for next stressed sector for the banks
after steel & power. ITC closed in positive today on buzz of increase in Cigarette
prices despite Govt’s warning about illegal advertisements of Cigarettes, which
may be legally not tenable.
Overall,
Banks & Pharma scrips were in pressure today, but a last hour short covering
rally made the Nifty to close 1% higher for the week against loss of 3.5% in
the last week, marked by “Shell cos” fiasco. Apart from Sikka episode, muted Q1
earnings & NPA concern may have also dragged the Indian market today amid
subdued global cues.
Globally,
almost all the major Asian markets from Sydney to
Tokyo are now trading in negative tracking subdued
global cues & a weak USD after the tragic terrorist incident at a popular
tourist place in Spain/Barcelona coupled with ongoing US political/policy
paralysis and resignation squabbling (rumour) of Cohn, a key architect of
Trump’s tax reform policy & his chief economic adviser and also the
potential replacement of Yellen.
Although,
Cohn has not resigned till now, he may be under immense pressure from intellect
& corporate US to distance himself from Trump amid his controversial stance
on the VA white nationalistic fiasco. Overall, US political & policy
paralysis coupled with poor visibility of Trumponomics may be huge negative for
the USD & risk assets including equity.
As
corporate America is deserting Trump one by one, market may be unnerved as
despite so much Trump tantrum, his corporate circle may be one of the elements
of confidence booster among the investors, as they still believed Trump’s
ability to deliver his Trumponomics narratives. But, now the whole rhetoric of
Trumponomics may be in serious doubt not only for the ongoing daily US
political entertainment, but may be also for limited fiscal maneuver room in
the US budget itself.
Even,
Trump’s own RNC GOP members now seems to be distancing themselves from his
controversial hardcore nationalistic/racist image and all these may be also an
indication that days of Trump as US Prez may be over; he may either resign or
impeached shortly.
Although,
yesterday’s overall US economic data may be mixed, the ongoing US political
drama, WH hangover coupled with Cohn’s resignation buzz and above all, the
tragic terror incident at Spain has made the USD & risk assets (US/global
equity) lower. As a result, overnight US
market (DJ-30/US-30) closed in deep red around 21751 (-1.24%) and SPX-500 (US-500) now also trading
almost flat around 2430 (+0.14%) on geo-political risk aversion.
Looking
ahead, SPX-500 now need to sustain over 2420-2415 zone; otherwise 2395-2370
zone may be clearly visible as market sentiment may be now clearly being driven
by geo-politics, rather than economics. The repeated easy terrorist attacks by
a moving vehicle in different parts of EU, targeting innocent man & women
and also tourists may be a blow to EU’s huge tourism industry & employment.
Elsewhere,
Australian market (ASX-200) also
closed in deep red around 5747, down by almost 0.60% on a higher AUDUSD coupled
with some negative report about AU bank’s credit rating by Fitch on account of
CBA’s money laundering issues involving illegal cash deposits; banks &
financials are dragging the AU market to some extent.
Japan (Nikkei-225)
closed in red around 19470, down by almost 1.18% tracking a higher Yen (lower
USDJPY) amid ongoing US political jitters and flight to safe heaven assets on
Barcelona terror incident; JPY is also getting higher against EUR & GBP,
putting more pressure on the export heavy JP index today. But upbeat JP
corporate earnings may be also supporting the overall market sentiment there,
but banks, financials & insurers are dragging the Nikkei today.
China (SSE) was almost
flat around 3269 (+0.01%), being supported by upbeat metals & miners on
global/EU growth optimism coupled with tighter supply; solid earnings from some
of the leading tech cos. A mixed China housing price report may be also
affecting the overall market sentiment, as cool down of housing boom may be an
indication that China GDP growth is topping out.
Today
PBOC fixed USDCNY a little higher at 6.6744 vs 6.6709 yesterday and injected
net 20 bln Yuan in its daily OMO operations; for the week, it injected a net
110 bln Yuan against net drain of 30 bln Yuan last week. This may be also
helping the overall stability of China market this week ahead of Party congress
and ongoing PBOC effort of deleveraging & regulatory tightening.
Hong-Kong
(HKG-33) was trading around 27060, down by almost 1% on higher USD &
subdued global cues as Trump trade fades; it’s also being dragged by banks
& financials today, but being supported by upbeat techs & metals.
Meanwhile,
Crude Oil (WTI) is now trading
around 47.25, up by almost 0.40% after overnight plunge from 47.17 to almost
46.45 tracking a mixed EIA report, which indicates a higher gasoline
inventories & US shale supply despite a surprised Crude drawdown in line
with API report; technically, 46.30 zone mat be an immediate support for the
WTI now.
Gold is also hovering
around 1295, up by almost 0.45% on geo-political risk aversion and a weak USD;
sustaining above 1297-1310 area, it may further rally towards 1355-1375 zone in
the days ahead.
Elsewhere,
EU stocks are also in deep red
tracking terror in Spain/Barcelona & intensified political hangover at WH
and subsequent risk aversion flows into safe heaven assets; USD is getting
weaker across the board and a strong EUR is negative for EU economy &
stocks.
Overall,
market sentiment may be now clearly being driven by geo-politics, rather than
economics. The repeated easy terrorist attacks by a moving vehicle in different
parts of EU, targeting innocent man & women and also tourists may be a blow
to EU’s huge tourism industry, hotels, airlines & subsequently, EZ
employment.
Also,
market may be increasingly jittery about Trump’s political immaturity, which
may be the prime reason behind today’s WH policy paralysis; yesterday Trump dissolved
his infra council even before it began functioning, which may be an indication
of gravity of the underlying situation.
The
poor visibility of Trumponomics rhetoric may be a major headwind for the
reflation or Trump trade coupled with distancing of the corporate America from
Trump, who may be enjoying some kind of benefit of doubt by the market so far,
being a non-political person having a great business sense & deal maker!!
The Euro Stoxx-50
is now 0.90% down and similarly FTSE-100,
CAC-40, IBEX-35 (Spain) are all down by around 1% and DAX-30 is down by around 0.60%. Apart from Airline, hotels &
other tourism related stocks, Banks are also in pressure for concern of lower
Fed rate, which may be negative for their NIM, operating in US as they can’t
increase their lending rate with a dovish Fed.
SGX-NF
BNF
USDJPY
No comments:
Post a Comment