Market Wrap: 08/09/2017 (17:00)
NSE-NF (Sep):9946 (-8; -0.09%)
(TTM PE: 25.87; Nr. 2-SD of 25; TTM Q1FY18 EPS: 384;
NS: 9935; Avg PE: 20; Proj FY-18 EPS: 418; Proj Fair Value: 8360)
NSE-BNF (Sep):24370 (+16; +0.06%)
(TTM PE: 27.48; Abv 2-SD of 25; TTM Q1FY18 EPS:
887; BNS: 24371; Avg PE: 20; Proj FY-18 EPS: 961; Proj Fair Value: 19220)
For 08/09/2017:
Key support for NF: 9900-9830
Key resistance for NF: 10000-10050
Key support for BNF: 24300-24200
Key resistance for BNF: 24525-24675
Hints for positional trading:
Time
& Price action suggests that, NF has to sustain over 10000 area for further
rally towards 10050-10090 & 10160-10205 area in the short term (under
bullish case scenario).
On the flip side, sustaining below 9980 area, NF may fall
towards 9940-9900 & 9830-9750 area in the short term (under bear case
scenario).
Similarly, BNF has to sustain over 24525 area for further rally
towards 24575-24675 & 24775-24875 area in the near term (under bullish case
scenario).
On the flip side, sustaining below 24475 area, BNF may fall
towards 24300/24200-24000 & 23850-23700 area in the near term (under bear
case scenario).
Indian market (Nifty Fut) today closed around 9946, almost flat (-0.09%)
after a moderate day of volatility, in which it made an opening high of 9978
& mid-session low of 9921 ahead of NK celebration day tomorrow with an ICBM
launch; Nifty recovered to some extent in the last hour of trade tracking
similar movements in the global market after another ECB trail balloon of a
very gradual QE tapering proposal in 2018 and reports that looming IRMA
hurricane in US has lost some strength.
Indian market today opened in positive tone by almost 38 points,
but soon after opening, it came into selling spree and by mid-session plunges
to day low tracking tumble of USD after a massive earthquake in Mexico. Apart
from adverse global cues & higher EUR, concern of stretched valuation &
Govt’s war on black money/shell cos, subdued private investments may have
continued to haunt the Indian market sentiment today.
Metals were upbeat today amid concern of China supply tightening
coupled with Harvey related damage issues in US (rebuilding demand) coupled
with domestic optimism; but Pharma was in pressure following renewed concern
about GMP issues of the Indian generic drug manufacturers.
Nifty was supported today by L&T, HDFC Bank, ITC, Kotak
Bank, VEDL, Bharti Airtel, Maruti, TCS, Ultratech Cem & TECHM, while it was
dragged by Infy, M&M, IOC, BPCL, SBI, Sun Pharma, DRL, Tata Motors, Bajaj
Auto & Eicher Motors.
Overall, Nifty fell by 0.4% for the week and banks, FMCG &
metal stocks has helped the market today, while Pharma, PSBS and select auto
stocks dragged it.
L&T surged by almost 3.77% after on news of big defence
contracts worth Rs.40000 cr coupled with renewed optimism by analysts. M&M
plunged by around 3.30% over renewed concern of GST cess on SUV models; DRL
tumbled by 2.87% on adverse audit report by German drug regulator.
Globally, Asian-Pacific
Stocks were trading mixed today amid slump in USD & US policy squabbling
coupled with a good China trade (solid import) data. USD is being hammered down after Trump proposed to repel the US
debt ceiling regulations itself; i.e. as par Trump’s proposal, WH may not need
senate approval (voting) for extension of US debt limit in future. Without any
legislative approval of US debt limit may be equivalent to unlimited Federal
debt, which is negative for US fiscal math and USD/US bond yields.
US bond yields again plummeted to almost 2% on this US debt limit fiasco, poor
economic data yesterday (surge in initial jobless claims for Harvey), dovish
Fed talks, renewed NK tensions after Trump indicated “war is not out of options”
despite intense effort of diplomacy and an ongoing Russian probe against Trump
& co coupled with an uncertain Fed.
Although Trump administration is trying its best to rejuvenate
the tax reform proposal, there are too many political & economical
headwinds against USD and a lower USD may not be good for export heavy Asian
markets; similarly a higher EUR may not be good for EU economy & the
market, considering their export & tourism.
Yesterday, Draghi was
in “pain” to explain that ECB has not discussed any QE tapering programme; but
he also emphasized that ECB should be able to present its QE plan in its next
meet on 26th Oct. Draghi also not tried to talk down the currency
and did not say either that ECB will continue its QE through 2018. ECB actually
upgraded GDP & lowered slightly (0.1%) the inflation forecast for 2017;
i.e. ECB is very much optimistic about EZ growth, employment, consumer spending
and slightly disappointed with subdued inflation (nothing new).
Draghi has also acknowledged about the structural issues like
automation, globalization which are affecting employment to some extent and the
overall wage growth/inflation. Overall, Draghi did not try to derail the EUR
express as ECB may not have any option to continue the QE at the same pace in
2018, simply because of acute scarcity of eligible QE bonds.
Thus, it’s now a question of “when” rather than “what” (if) for
the inevitable ECB QE tapering; most probably ECB will taper at a monthly pace
of around 10 bln EUR/pm for H1CY17 and after that it may gradually began to
hike/normalize their ultra low interest (NRIP/ZRIP). DAX may be in pressure
today as EURUSD is already hovering
around the five year average mark of 1.21 even before the EU market opens.
So far, EUR is almost 15% up against USD (YTD) and this may be
now affecting overall EZ macro, imported inflation and export competitiveness.
Elsewhere, Australia
(ASX-200) closed around 5673, down by almsot0.30% on higher AUDUSD (+0.55%), now around 0.8101. A
strong AUD is not good for AU economy & the market, being a commodity
exporter country. AUDUSD is today supported by plummeting US bond yields, an
upbeat AU home loan data coupled with surge in China imports figure released today.
ASX-200 today was dragged by telecoms, energy & financials/banks
after renewed concerned about CBA related money laundering probe.
Japan (Nikkei-225) closed around 19275, down by almost 0.63% amid higher Yen,
negative for export oriented JP economy & market; USDJPY slumped by almost
6% since mid-July and now trading around Pre-Trump rally level on poor
visibility of Trumponomics & US policy paralysis, coupled with NK
geo-political tensions.
Today JP economic data was subdued and more over Q2 GDP data was
revised from the preliminary 4% to 2.5% (YOY); on QOQ basis, it came as 0.6%
against estimate of 0.7%; prior: 1%. JP market was dragged by exporters,
automakers, financials, energies, while Pharma has supported it by some extent.
China (SSE) closed around 3365, almost unchanged on renewed worries about
Korean tensions ahead of NK’s foundation day celebration with ICBM (?) tomorrow
& mixed China trade data for Aug; export was down by 5.5% against estimate
of 6% (prior: 7.2%), while import was up by 13.3% against estimate of 10%
(prior: 11%) in USD terms.
Although, today’s China trade data may be looked robust as par
market expectation, it’s also came on the back of a depreciated USDCNY,
resulting in higher import & lower export values. Also, export was down by
2.2% YOY and may be an indication of adverse effect of a strong Yuan policy of
PBOC.
Some influential China policy makers today also have expressed
their concern about a strong Yuan policy by PBOC/Govt, which could hurt the
export oriented China economy. Although, PBOC may be fixing USDCNY lower for
the last few months for various reasons including deleveraging, outflow concern
and also to avoid a Trump jawboning for being a currency manipulator, Yuan is
basically stable against EUR, which may be now China’s preferred export zone as
US economy (consumer spending) is also slowing.
A higher Yuan against USD may be also helping China in
deleveraging and also greater stock market inflow, although it may affect the
US export to some extent. Today PBOC fixed USDCNY lower at 6.5032 vs 6.5269
without any OMO; for the week, PBOC has drained out 330 bln Yuan against 280
bln Yuan last week. Today China market was dragged by consumer stocks, while it
was supported by metals to some extent.
Hong-Kong (HKG-33) is trading around 27660, up by almost 0.50%, bucking the
regional trend and being supported by property developers & broad based
optimism about some China based cos & banks over solid earnings &
guidance. But today HK market was also affected by a Apple related supplier for
possible shortfall in supplies of components of the latest i-Phone.
Overall, all eyes may be now on Kim tomorrow to see his
celebration style on NK’s foundation day; if it come with another ICBM or Nuke,
then expect some risk aversion move; otherwise, if its limited only to
rhetoric, then expect some risk appetite relief rally on Monday.
Meanwhile, Crude Oil
(WTI) is trading in red around 48.90, down by almost 0.25% on concern of a
looming trio of Hurricanes (Irma, Katia & Jose) running almost
sequentially, which may affect oil refining operations & shipments across
the region; it seems that market has today ignored some Russian FM jawboning
about extension of oil production cut agreement.
Gold has soared to almost 1353, up by 0.30% and so far made a high
of around 1358 on USD risk aversion ahead of NK’s most watched foundation day
tomorrow.
Interestingly, today Fed’s Dudley has also indicated that Fed
may trim its QE bond holding by around $1 tln over the next 10 years; i.e. it
may be also a QE/BS tapering at around $10 bln/pm, so overall effect on US bond
yields may be negligible.
Now, it’s almost certain from various Fed speaks that they will
be on hold in Dec’17 for various excuses like soft US economic data, subdued US
inflation, US political jitters, NK geo-p0olitical risks and also Harvey &
other series of hurricanes (Irma, Katia, Jose) !!
But the real reason may be that Fed will not take any risk for dual QT (both QE tapering &
interest hike at the same time) and thus will watch the actual effect of QE/BS
tapering on the US economy, bond yields and financial market as this is a new
experiment, never tried before; if there is no such adverse effect, then Fed
may also consider further rate hikes in March’18 & onwards and by then,
FOMC rejig may be over; most probably Yellen may get another extension for
policy continuity with some new FOMC members as selected by Trump.
Overnight, US market closed almost unchanged on slump in media stocks &
insurance cos and some gains in health care despite a lower USD, which may be
good for US exporters & the economy (imported inflation). Banks &
financials were also in pressure as US bond yields tumbled, which is negative
for their interest rate hike capability (NIM).
US stock future (SPX-500) is now trading around 2462; down by almost 0.14% on tepid
global cues after another slump in USDJPY,
which has just broken the 108 level to almost 107.75, the lowest since Nov’16,
Trump’s election win day.
The sudden crash in USDJPY may be for the tragic & massive
Mexican earthquake of M-8, triggering a Tsunami off Mexican coast and hopefully
not for a new NK earthquake (Nuke) or any ICBM test!!
Elsewhere, EU market
was also under pressure waiting for Kim’s way of celebration tomorrow coupled with
concern of Hurricanes in US and a massive earthquake in Mexico; insurance cos
are under stress. EU market was under pressure as EUR extends gains after less
dovish script from Draghi yesterday; a strong EUR is negative for EZ exporters.
But a slew of negative EU economic data today may have weakened
EUR slightly and that may have supported the overall EU market sentiment to
some extent in late trade. Miners are also dragging the market after mixed
trade data from China.
Overall, EU Stoxx-50, DAX-30 & cac-40 is now trading almost unchanged,
while FTSE-100 is down by 0.42%. UK market is under pressure as GBPUSD get
strength after upbeat economic data coupled with Brexit optimism (?). In addition
mining & consumer stocks are also dragging the UK market today.
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