Market Wrap: 23/08/2017 (17:00)
NSE-NF (Aug):9859 (+74; +0.76%) (TTM PE: 25.13; Nr.
2 SD of 25; Avg PE: 20; TTM/FY-17 EPS: 392; NS: 9852)
NSE-BNF (Aug):24317 (+274; +1.14%) (TTM PE: 30.59;
Abv 3 SD of 30; Avg PE: 20 TTM/FY-17 EPS: 795; BNS: 24317)
For 24/08/2017:
Key support for NF: 9845-9785
Key resistance for NF: 9905-9980
Key support for BNF: 24275-24150
Key resistance for BNF: 24375-24575
Hints for positional trading:
Time & Price action suggests that, NF has to sustain over
9905 area for further rally towards 9940-9980 & 10030-10075 area in the
short term (under bullish case scenario).
On the flip side, sustaining below 9885 area, NF may fall
towards 9845-9785 & 9750-9705 area in the short term (under bear case
scenario).
Similarly, BNF has to sustain over 24375 area for further rally
towards 24575-24675 & 24775-25075 area in the near term (under bullish case
scenario).
On the flip side, sustaining below 24325 area, BNF may fall towards
24275-24150 & 23900-23750 area in the near term (under bear case scenario).
Indian market (Nifty Fut) today
closed around 9859, soared by almost 74 points (+0.76%) after making a
midsession low of 9797 and closing hours high of 9874 amid reform optimism of
banks & financials coupled with bounce back of Infy on buzz of Nandan Nilekani
being brought back in the co as CEO to restore its image. Nilekani is a
co-founder of Infy, an iconic Indian IT co and is very close to the other
founder NRN group.
Beside reports of PSBS merger (15 merged enteritis) plan by the
Govt, a RBI Dy Gov (Viswanathan) commented that RBI/Govt want to use the reach
of NBFC to push (distribute) banking products and RBI is also working on
harmonization of NBFC regulations; but RBI is not in favour of allowing NBFC to
take public deposits.
Indian Govt has decided to set up an
alternative mechanism to create around 15 large/mid-sized PSBS (public sector
banks) under certain conditions with an aim to create a limited number of
strong PSBS (lenders) amid present mess of huge banking NPA.
These news flows may have acted as a trigger and banks &
NBFC rallied quite smartly triggering short cover in other scrips & also
Nifty Fut, which broke the initial technical resistance of 9850 area on a sharp
movement. Infy & RIL also helped the market quite lot today and together
HDFC Bank, ICICI Bank, HDFC, SBI & VEDL almost contributed around 53 points
in the Nifty rally of 74 points. Bharti Airtel was also in limelight today amid
hopes of some telecom stimulus by the Govt and upbeat subscriber addition
figures last month (July’17).
Nifty was dragged by Bharti Infratel, Eicher Motors, TECHM, TCS
& ITC to some extent by around 10 points altogether and overall
advance/decline ratio was more than 1.1.
But the sharp short covering rally in
the banking scrips may be overdone as overall PSBS merger process may be quite
tedious and will take considerable time & effort and also may be doubtful
about the core question of profitability and NPA resolution.
Previously, Govt was supposed to
create a pool of 5-6 large PSBS like SBI, but now the Govt may be considering different
plan considering the reality of the situation with certain other conditions.
Distribution of banking products by NBFC may not be new and it may not result
huge improvement in earnings, but may create an environment for easy merger
& consolidations between some stressed NBFC & solid private banks,
eager for expansion (like Indusind Bank & Bharat Financials merger talks).
Indian market (Nifty Fut) today opened around 9811 amid mixed
global cues on Trump’s US debt ceiling & Mexican border wall rhetoric
coupled with tax optimism and most of the trading sessions were hovering in a
defined range, thus consolidating before the next move, waiting for some cues.
Today’s banks & financials new thus acted as a mini trigger for the market
after muted Q1 numbers coupled with concerns of Govt’s war on black money and
China-India “war of words” over border stand-off.
Today
metals sector also rallied on domestic steel demand optimism & higher
global/China prices; industry is expecting around 5% CAGR in Indian demand
coupled with stable prices. Tata Steel was also upbeat on buzz that they have
approached Essar steel to buy the stressed co, now under IBC/NCLT mechanism. As
par reports, Essar steel may be also getting enquiries from certain other big
names in global steel industry, considering its location & technology. Looking
ahead, Indian market may also focus on slump in metal prices after China
regulatory warning.
Indian market (Nifty Fut) today
opened around 9811 amid mixed global cues and most of the trading sessions were
hovering in a defined range, thus consolidating before the next move, waiting
for some cues. Today’s banks & financials new thus acted as a mini trigger
for the market.
But, market may be also concerned over
stretched valuations, NPA resolutions, Govt’s “war of black money & shell
cos”, Infy saga, and ongoing China-Ind “war of words” for the Doklam &
other border issues apart from Korean tensions & US political jitters
coupled with Fed/ECB tightening.
Today
metals sector also rallied on domestic steel demand optimism & higher
global/China prices; industry is expecting around 5% CAGR in Indian demand
coupled with stable prices. Tata Steel was also upbeat on buzz that they have
approached Essar steel to buy the stressed co, now under IBC/NCLT mechanism.
Looking
ahead, Indian market may also focus on slump in metal prices after China
regulatory warning and buzz of an imminent PSBS merger to only 15 entities from
around 30 public sector banks. Market may be also concerned over extra cess on
GST for the high end autos; but due to some reasons, Govt is delaying the
ordinance and for that some auto cos are in demand today.
Govt
has given in-principle nod for mergers among PSBS on some selective basis &
conditions; PSBS are in upbeat mood today; although this move may be on the
expected line.
Also,
Indian Govt is closely watching imports of steel from China and may also impose
some additional duties to protect the domestic steel industry, most of which
are fragile as of now except, Tata & JSW Steel.
IMG/Telecom
policy may be also in the limelight and thus telecom shares are upbeat today on
hopes of some stimulus from the Govt to save it from being another stressed
sector apart from steel, power, developers & textiles.
Indian
Govt/CBDT is also considering some tax reforms & TDS to plug the money
laundering/tax avoidance loopholes including application of GAAR provisions in
some cases; Govt may notify these changes in its next budget (FY-19).
As
par reports, today’s scheduled INFY institutional concall by its warring
founder NRN has been cancelled and Nandan Nilekani may be appointed as INFY
head for the time being as urged by the institutional investors; Infy is now on
the front foot on this positive news as it may help to restore the confidence
of this iconic co among various stakeholders.
Globally,
most of the major Asian markets barring Australia
are trading in green today but well off the highs tracking
mixed global cues amid Trump’s political rhetoric & pledge of building the Mexican
border wall, even if it calls for a US debt ceiling (shut down); yesterday
market was very upbeat in the NY session over Trump’s tax reform optimism.
It
seems that now-a-days Trump is now very busy with his political campaign after
his controversial stance in the recent racist/nationalist VA incident amid US
policy paralysis; but Trump is also getting good gatherings (supporters) at his
rally amid debate of nationalism & globalism despite his dwindling approval
level. Trump may be also under the influence of his “Political Guru” NAMO and
trying hard to be a “good diplomatic politician”, which WH requires urgently at
this moment of political crisis.
In
one such political rally in Arizona today just few hours ago, Trump commented
that “if we have to close down our Govt, we are building that (Mexican) wall’.
He also hinted about termination of NAFTA agreement in an appropriate time and
urged for US congress help to pass his tax reform agenda. Trump also virtually
thanked NK’s Prez Kim and said that “he respects the fact that Kim is
respecting us”. Also, US Sec of state Tillerson commented that NK’s restraint
may lead to negotiations
Yesterday, there are some reports that Trump’s top aides and
leading congressional leaders have made significant “strides” in shaping a US
tax overhaul, which may be acceptable by all the concerned stakeholders and
subsequently may also be passed by the congress. There was some reports that,
US may cut around $450 bln of taxes in personal & corporate tax without any
corresponding cut in fiscal spending!!
Some upbeat comments from US house speaker Ryan about US tax
reform proposal that its gaining traction may have also helped the risk-on
sentiment yesterday.
Also there was some soft approach towards NK by various US
officials & leaders despite NK’s narratives of a “merciless revenge” for
the ongoing US-SK military drill and coupled with that Trump’s change in tone
for a more balancing approach in the VA racist incident may have boosted the
risk appetite sentiment & morale of USD bulls to some extent ahead of the
Jackson Hole Symposium.
Market is expecting a hawkish Yellen signaling for a definitive
BS tapering at Jackson Hole and thus USDJPY
got some short covering and fresh buying from the triple bottom area of 108.50
and risk trade resumed to some extent coupled with pause in EU terror
activities.
USD may be also being supported by US stock optimism where
despite so much US geo-political jitters, overall earnings yield is far better
than bond yields amid an environment of solid corporate profits, lower USD,
lower US rates; it’s like a goldilocks situation in US right now; a decent real
wage growth coupled with a soft inflation and moderate US consumer spending.
But,
US imposed sanctions on some individual & corporate entities in China &
Russia over allegations of helping NK’s Nuke ambitions and failure to bring Kim
on the negotiation table; although this may not be significant for both China
& Russia, China has reacted to some extent and urged US to rectify its
mistake and also imposed some retaliatory additional import tax on some US
products like fiber cable etc. Thus, we may also see some trade wars between US
& China, the two financial superpowers of the world in the coming days.
Overnight US market also closed upbeat; DJ-30 at +0.90%; SPX-500 at +0.99% and
NASDAQ also closed up by 1.36% on hopes of US tax reform and policy optimism;
tech shares also helped the US market yesterday.
But, slump in metal prices in China coupled with Trump’s
political rhetoric (Mexican border wall funding & US debt ceiling issues)
may have dampened the Asian/Global market sentiment to some extent and US stock future (SPX-500) is now
trading around 2450, down by almost 0.22%.
Looking
ahead, SPX-500 today needs to stay above 2455-2465 area for further strength;
otherwise expect some consolidation.
Elsewhere,
Australia (ASX-200) closed around
5737, down by almost 0.20% dragged by metals & miners over sudden plunge in
metals for China regulatory concern after the recent epic rally.
But
AU market may be also being supported by a weak AUDUSD today (-0.29%) apparently on NZ/regional political concern
after release of the NZ pre-election economic & fiscal update (on lower GDP
estimate & budget surplus, although expectation of a robust economy). AU
market is also being dragged by some investor lawsuit on CBA after the recent
money laundering fiasco.
Japan (Nikkei-225)
closed at 19435, up by almost 0.26%, but well off the high of 19561 after some
fall in USDJPY this morning amid Trump’s political comments. Today’s JP Mfg PMI
for Aug also flashed upbeat at 52.8 against estimate of 52.3 (prior: 52.1); a
strong Yen is not good for JP economy & market, being a export heavy index.
But tech stocks optimism may have helped the JP market today by some extent.
China (SSE)
is closed almost flat at around 3288 (-0.10%) on stress in metals over
regulatory concerns. PBOC today fixed the USDCNY at 6.6633 vs 6.6597, a little
higher tracking overnight rally in US dollars and drained out net 40 bln Yuan.
Hong-Kong
stock exchange is closed today for a severe typhoon warning.
Crude Oil (WTI)
is now trading around 47.58, down by almost 0.52% after mixed API report, where
crude stocks has declined as par estimates, but gasoline stocks surged
unexpectedly. Oil is also under pressure after resumption of supply from a
large Libyan oil field.
Elsewhere,
EU market is now trading around
0.40% lower in Stroxx-50 on higher EUR/EUR bund yields amid upbeat EZ PMI &
business surveys coupled with Trump’s political drama and some hawkish hints
from Draghi’s prepared text today in Germany; although he later defended his controversial
QE/NIRP policy. A strong EUR may be bad
for EZ’s export oriented economy & the export heavy index.
EU
market is being dragged by Oil & Gas, media stocks but helped by tech &
utilities shares. DAX-30 is down by 0.22%, while FTSE-100 is almost flat
(-0.04%) on slump in GBPUSD, while CAC-40 is also in red (-0.15%). Overall UK
market sentiment was also affected by guidance warning from WPP, the world’s
largest advertising co, citing major slowdowns in key UK industries such as
consumer goods & retail on Brexit uncertainty, currency devaluation and subsequent
surge in UK inflation & subdued consumer spending; WPP is down by over 10%
today in UK.
Asian market update (23/08/2017):
FX market update: NY session
SGX-NF
BNF
GBPUSD
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