Nifty
Closed The RBI Week Almost 0.5% Higher
Market Wrap: 04/08/2017 (17:00)
NSE-NF (Aug):10111 (+68; +0.68%) (TTM PE: 25.48;
Abv 2 SD of 25; Avg PE: 20; TTM EPS: 395; NS: 10066)
NSE-BNF (Aug):24958 (+151; +0.61%) (TTM PE: 31.23;
Abv 3 SD of 30; Avg PE: 20 TTM EPS: 795; BNS: 24827)
For 04/08/2017:
Key support for NF: 10070-10000
Key resistance for NF: 10155-10205
Key support for BNF: 24900-24700
Key resistance for BNF: 25050-25150
Hints for positional trading:
Time & Price action suggests that, NF has to sustain over
10205 area for further rally towards 10275-10325 & 10380-10455 in the short
term (under bullish case scenario).
On the flip side, sustaining below 10185-10155 area, NF may fall
towards 10070-10000 & 9935-9865 area in the short term (under bear case
scenario).
Similarly, BNF has to sustain over 25150 area for further rally
towards 25275-25500 & 25695 -25865 area in the near term (under bullish
case scenario).
On the flip side, sustaining below 25100-25050 area, BNF may
fall towards 24900-24700 & 24600-24400 area in the near term (under bear
case scenario).
Nifty Fut (Aug)/India-50 today closed around 10111, up by almost
68 points (0.68%) after making an opening session low of 10018 and late day
high of 10124; the Indian market gained in the last hour of trading boosted by
upbeat earnings & guidance from some of the blue chips and Govt’s
announcement that a mega CPSE ETF fund (Bharat-22) will be launched soon
comprising several SUUTI, PSU & PSBS to fulfill Govt’s huge disinvestment
targets by FY-18.
Indian Govt has a target of Rs.72500 cr as disinvestment in
FY-18 and out of this, only around Rs.9300/- has been achieved so far; in
FY-17, Govt was able to generate the disinvestment revenue at Rs.46247 cr.
As par reports, SBI, BPCL, IOC, BOB,
COAL INDIA, NALCO, AXIS BANK, ITC, ONGC, NTPC, REC, NHPC, INDIAN BK, NLC, BEL,
SJVN, NBCC, PFC, EIL, POWER GRID & NALCO are some of the stocks, which may
be included in this Bharat-22 ETF with certain weightage and there will be 15%
limit for individual stocks with sectoral limit of 20%; subsequently most of
the above stocks have a good run today, helping the overall market.
Also, oil marketing companies (OMC)
today helped the market after mixed result, but upbeat guidance & Govt’s
move to gradually end the subsidy on LPG & Kerosene coupled with the above
said ETF move.
Indian Govt today also agreed on
principle to form an international arbitration institution mechanism &
infrastructure in India, which may be also helpful for the foreign investors in
case of any dispute resolution.
Indian market was hovering in a range for most of the days
today, but in the last one hour all these news may have led short
covering/bargain hunting of some of the recent beaten down stocks after hawkish
cut by the RBI and banks, autos & other rate sensitive stocks has zoomed
coupled with metals & OMC; but it was dragged by RIL & Pharma stocks on
renewed US FDA concern.
RIL today was in pressure on reports that TATA group is
exploring options to sell all of its telecom assets to R-Jio; earlier there was
also some speculation that Bharti Airtel may be interested for Tata Tele; but
Bharti’s foreign partner Sing Tel may have some reservation for this M&A;
if RIL bids for Tata Tele, then it may be further stressful for their B/S,
which is already under huge R-Jio capex & debt.
Nifty was today helped by BPCL (may enter into gas business),
Eicher Motors (upbeat July sales & analyst optimism for good monsoon &
coming festival season), Coal India (CPSE ETF), Tata Steel (focus on India
business amid uncertainty about its EU operations with huge UK pension
liability of around $20 bln), NTPC, Hindalco & HUL.
Nifty was dragged by RIL, DRL, Sun Pharma (tepid report card
from Teva) Auro Pharma, HDFC, Bharti Airtel, Tata Power & ITC (report of
increase in cigarette prices, which may be negative for its volume and some
recent adverse US FDA reports on tobacco consumption).
Asian markets were mixed today tracking subdued global cues after another US political jitters
& concern of an impending trade war involving China & Russia with US.
China & also Russia has promised strict countervailing measures to curb
equivalent US exports to them, such as Soybean etc. Mixed report cards across
Asia may be also affecting the overall market sentiment today.
But, as par latest report, the planned “big” Trump announcement
later today, presumably on China sanctions may have postponed and that may have
helped to calm the nerve of the market later on.
US market (DJ-30) yesterday closed almost flat, but SPX-500
& NASDAQ closed in slight negative on plunge of FANG/tech shares; the
overall market sentiment including USD/US bond yields was also adversely
affected due to big miss in headline ISM Non-Mfg PMI report along with the
employment portion; although service PMI & factory orders were good. Overall
yesterday’s US economic data may be also termed as mixed.
But, market is more interested about US employment & wage
growth and thus today’s US NFP data may be vital, especially the average hourly
earnings growth, which is poised to come at 0.3%.
Still, apart from economics, politics may have also impacted the
US market sentiment yesterday as the special counsel Muller has issued a grand
jury subpoenas in the Trump-Russia election interference issue involving his
son’s meetings with the Russian lawyer, who may be an ex-KGB spy (lawyer) in
disguise; yesterday US senators has also introduced a legislation, whereby
Muller can’t be fired by the President (Trump).
Although, a grand jury subpoena may not guarantee filling of
criminal charges against Trump & Co, it may also turn out to be very
serious and aggravate the overall political chaos at WH, which is not good for
risk assets.
Back to home, Indian market (Nifty Fut/India-50) was also opened
almost flat amid subdued global cues, tepid PMI data & a neutral RBI; but
recovered smartly on some news of upbeat earnings & July auto sales figure.
Looking ahead, Indian market may continue to digest long term impact
of RBI policy and GST on the earnings, which is so far, may be termed as
good/mixed, but not a great surprise justifying a TTM PE of over 25 as of now;
thus lack of any meaningful domestic trigger may drag the market on concern of
stretched valuations in the days ahead.
Some market participants/analysts are also very much optimistic
about Nifty’s projected EPS for FY:18-19 and pegged it as 474-600 against
actual FY-17 EPS of around 394; i.e. jump of 20-26% (CAGR), whereas actual
average growth of Nifty EPS may be around 7% for the last few years; i.e. below
even double digit. Earnings of PSBS & some old generation private banks may
be the real draggers of the Nifty EPS apart from subdued earnings from IT &
Pharma.
As long as India’s legacy issues of stressed assets are not
resolved in a meaningful way, it may be very difficult to clock double digit
growth as due to issues of twin balance sheets; credit demand is also very much
muted. A strong INR may be also affecting the earnings of IT & Pharma,
while Nifty is itself an export heavy index.
Q1FY18 earnings may be also affected significantly due to GST
disruptions and as such, Q2-Q3 trend may be now closely watched to see the
positive effect of a good monsoon, effect of lower interest rate & an early
festive season in India this year. Technically, Nifty-Fut (Aug) needs to stay
above 10205 area now; otherwise expect some correction.
SGX-NF
BNF
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