Market Wrap: 14/08/2017 (17:00)
NSE-NF (Aug):9809 (+68; +0.70%) (TTM PE: 24.79; Nr.
2 SD of 25; Avg PE: 20; TTM EPS: 395; NS: 9794)
NSE-BNF (Aug):24183 (+98; +0.41%) (TTM PE: 30.33;
Abv 3 SD of 30; Avg PE: 20 TTM EPS: 795; BNS: 24116)
For 16/08/2017:
Key support for NF: 9775-9705
Key resistance for NF: 9860-9930
Key support for BNF: 24000-23800
Key resistance for BNF: 24350-24600
Hints for positional trading:
Time & Price action suggests that, NF has to sustain over
9860 area for further rally towards 9895/9930-9980 & 10030-10095 area in
the short term (under bullish case scenario).
On the flip side, sustaining below 9840 area, NF may fall towards
9775/9760-9705 & 9660-9605 area in the short term (under bear case
scenario).
Similarly, BNF has to sustain over 24350 area for further rally
towards 24500-24600 & 24700-24900 area in the near term (under bullish case
scenario).
On the flip side, sustaining below 24300 area, BNF may fall
towards 24000-23800 & 23600-23300 area in the near term (under bear case
scenario).
Nifty Fut (Aug) today closed around 9809, rallied by almost
0.70% (68 points), thus snapping the 5 days fall, in which it has lost almost
3.5% as geo-political worries fade over NK-US issues to some extent with no
fresh disturbing news also from the Doklam (Ind-China) border stand off; Nifty
Fut made a late day high of 9838 and opening minutes low of 9777 amid a day of
short covering & also some value buying in banking & financials,
automobiles, metals, Pharma coupled with RIL.
A higher USD because of ease of NK geo-political issues and
tepid US CPI may be also positive for the export heavy Asian, European or even
US indexes.
Indian market (Nifty Fut) today opened around 9778, almost 40
points up tracking positive global cues. Most
of major Asian markets except Japan were trading in green amid supportive global cues after NK-US tensions fades to some
extent following reports that both the Govts were engaged in back-channel
diplomacy talk for months despite the ongoing “war of words” and NK’s missile
game and a bunch of senior US intelligence officials had also played down any imminent
conventional or nuke war between the two countries.
Indian market has also opened & traded in positive mood amid supporting
global cues after 5 days of relentless selling caused by geo-political tensions
from NK to Doklam, coupled with SEBI “Shelling” and muted report card from some
of the frontline blue chips, the domestic market has seen some short covering
today & selective value buying.
Looking ahead, Indian market may come under renewed pressure
after reports of cartelization by various suspected well known Shell cos, big
brokerage houses, Bollywood stars & developers; almost all the prime Govt investigative
agencies like ED, CBI, IT. SIFO are investigating these cases as a part of
surgical strike by the Govt on black money/corruptions & money laundering.
After terrible IIP data on Friday, all eyes may be also on the
WPI/CPI today, to gauze RBI’s concern and the Govt’s complacency over India’s
inflation trajectory, which is flashed at 1.88% for July against estimate of
1.30% (prior: 0.90%) as YOY; i.e. WPI increased by more than 100% in July on the
back of surging food inflation, while manufacturing inflation is almost flat.
Thus, Govt may be now in pressure in its lower inflation rhetoric for the last
few months, which might be a function of favourable base effect and slump in
food inflation
After higher trajectory of WPI at 1.88%, Indian CPI for July
came as 2.36% against estimate of 1.87% (prior: 1.46%, revised from 1.54%
earlier) on surge in food inflation, specially some vegetables like onion
(+150% in recent weeks), tomatoes (+500% in the last few weeks) etc on
production & supply disruptions due to extensive flooding in various parts
of the country and Pre-GST disruptions coupled with cease of favourable of base
effects & HRA effect (7-CPC).
A tepid Mfg inflation at WPI level may be also an indication of
Pre-GST disruption and lack of pricing powers by the manufacturers or subdued
consumer spending. Overall, a higher trajectory of inflation towards RBI target
of 4% in the coming months may ease some pressure on the Indian Central Bank to
be on hold at neutral mode in line with the major G-20 central banks; positive
for INR, but negative for EQ market as par text book, but in reality it may be
neutral now for the market as rate cut hopes already ebbed to significantly
after hawkish cut by the RBI/MPC.
Meanwhile, India’s trade balance & export figure for July
also flashed very subdued; export grew at only 3.94% (YOY) to $22.54 bln
against June’s 4.4% rise; while import rose at 15.42% to $33.99 bln, widening
the headline trade deficit to $11.45 bln from $7.76 bln a year earlier (YOY),
but narrows to some extent from the June figure of $12.96 bln.
Overall, imports of Gold surged by almost 95.05% in July, while
oil was up by around 15.02%, constituted almost 30% of the total import and the
trade data may be an indication that the Indian economy is facing some
headwinds amid weak domestic consumption, tepid private investments &
slowing export growth due to strength in INR and high real rate of interest in
the economy.
Indian Govt may redraft its FDI policy and may also advance the
2019 general election to 2018 in order to synchronize the central
(Parliamentary) election with state elections (election reform), so that a LS
majority is automatically relevant to RS numbers, unlike the present situation
With general election is now just 1-2 years away, NAMO may now
concentrate on the success story of the past reforms rather than launching any
fresh mega reform for India until next term and under this policy, Govt may
sharpen its attack on the black money/corruption and may also take the help of
GST & UID narratives to block various loopholes.
Thus, Govt may take the rhetoric of surgical strike on the black
money (DeMo, Shell cos crack down etc) in the next general election campaign to
tackle some of the other real issues like huge un/under employment in the
Indian economy. So, market may be under some stress for the ongoing fight
against corruptions/Shell cos money laundering angle in the days ahead.
Technically, Nifty Fut (Aug) now need to sustain over 9860 area
for more short covering rally towards 9930-10030 zone; otherwise, sustaining
below 9775 area, it may again fall towards 9705-9605 zone in the days ahead.
Indian banking NPA/NPL may be now a serious headwinds not only
for the banks (PSBS), but for the Govt also, who is basically the owner of
these banks, saddled with almost 11% GNPA; some of the disgruntled PSBS has
even reported almost 25% GNPA; most worrying factor may be now higher
trajectory of retail NPA (SMES/Agri/Home Loans/PL) apart from the corporate
stressed assets.
Overall, average provisioning of the NPA may be now around 50%,
which is also far lower than the standard RBI requirements of 75%. FMO is now
exploiting any legal provision or scope for asset sales under RBI/IBC cases
(bankruptcy) as some of the big housing projects like J.P. Infratech has now
turned into a political controversy with scores of retail buyers are now
chasing the co, which is under IBC now with undelivered housing projects.
A distress sale under liquidation of huge assets under such
bankruptcy may not fetch right value & eligible buyers also. Moreover, Govt
borrowers are now getting benefits of lower RBI repo rate, while for the
general retails or even corporates, it’s still significantly higher and the
overall Indian banking transaction costs are also on the higher side, compared
with the global peers.
Traditionally, Indian banks may have one of the highest NIM
spread in the G-20 economics, which may be another reason for unviable
projects/business and today’s NPA mess.
Nifty today was dragged by IT counters (TCS, INFY, WIPRO,
TECH-M) Bosch, Bharti Airtel, SBI, ITC & BPCL, while it was supported by
RIL, Cipla, Sun Pharma, Grasim, Tata Steel, Hindalco, ICICI Bank, Maruti &
Yes Bank.
Elsewhere, Australian
market (ASX-200) is closed around 5730, up by almost 0.70% on lower AUDUSD (commodity currencies risk
aversion, subdued China data & USD strength following ease of NK tensions);
AU shares are also being supported by energy, IT and Banks & financials but
also dragged by some muted earnings.
Japan (Nikkei-225) is closed around 19537, down by almost 1% despite relative strength in USDJPY (+0.49%) on
general NK risk aversions today & reverse flow of smart money from safe
heaven assets (JPY/CHY/Gold) to riskier assets (USD, EQ ); market today may
have also ignored the upbeat JP GDP data for Q2, being as exceptional & it
may not be sufficient to alter the BOJ QQE on the backdrop of a subdued
inflation, despite some change in tone by various Abe policy makers.
As JP market was closed on Friday meltdown, it may have just
tried to catch the global market level (SPX-500) today.
China (SSE) also trading in deep green around 3237 (+0.90%) as
geo-political worries fade to some extent over NK-US issues ignoring a tepid
set of Chinese economic data today, which may be a slight indication of a
hard-landing on various regulatory tightening & deleveraging.
PBOC today also fixed the USDCNY little lower at 6.6601 vs
6.6642 on Friday and remained as neutral for the daily injection of funds
(OMO); may be a subdued China data may force PBOC to relax some tightening
rules for the Chinese economy ahead of the all important Party congress in
Sep-Oct’17; Chinese leaderships now want a stable China economy without being fuelled
any excessive credit.
PBOC has also emphasized to maintain its prudent &
accommodative monetary policy on n weekend communication, which may have also
boosted the China market sentiment today.
Similarly, Hong-Kong
market (HKG-33) also trading higher around 27220 (+1.20%).
Oil (WTI) is now trading around 48.55, down by almost 0.40% on subdued
demand forecast by IEA with a rise in US shale production.
Gold also eased a little to around 1282 on strength in USD &
some ease in NK tensions, although the hermit state has claimed on the weekend
that over 3 mln volunteers had offered to join its army and US CIA/other
intelligence officials are also expecting an imminent NK missile test amid its
independence day celebration.
A positive EU market
supported by easing of NK-US geo-political tensions to some extent, lower EUR
and upbeat banks & metals may have also boosted the Indian market sentiment
today.
EURO Stoxx-50 is now up by around 1.25% with DAX (1.20%), FTSE
(0.74%) & CAC (1.15%) are all in deep green, thanks to a higher USD across
the board and subdued EZ IIP data. All eyes may be now on tomorrow’s NK
Liberation Day Celebration tomorrow, if they celebrate it with another
ICBM/missile, possibly being supplied by Ukraine, an ally of US in this strange
world of geo-politics. Trump may also back in tweet mode after some setback in
the weekend US racists’ incident.
SGX-NF
BNF
USDJPY
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