Market Wrap: 06/09/2017 (17:00)
NSE-NF (Sep):9944 (-28; -0.28%)
(TTM PE: 25.82; Nr.
2-SD of 25; TTM Q1FY18 EPS: 384; NS: 9916; Avg PE: 20; Proj FY-18 EPS: 418;
Proj Fair Value: 8360)
NSE-BNF (Sep):24316 (-72; -0.30%)
(TTM PE: 27.88;
Abv 2-SD of 25; TTM Q1FY18 EPS: 887; BNS: 24729; Avg PE: 20; Proj FY-18 EPS:
961; Proj Fair Value: 19220)
For 07/09/2017:
Key support for NF: 9875-9820
Key resistance for NF: 10000-10050
Key support for BNF: 24200-24000
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 9940-9875 & 9820-9745 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 24475-24400 area, BNF may
fall towards 24300/24200-24000 & 23850-23700 area in the near term (under
bear case scenario).
Indian market (Nifty Fut/India-50) today closed around 9944, dragged by
almost 28 points (-0.28%) after making an opening session low of 9910 and late
day high of 9955. Indian market today opened in deep red around 9926, almost 49
points down following muted global/Asian cues amid simmering NK tensions; but
recovered to some extent tracking similar movement
in DAX-30 future (EU opening) ahead of ECB meet tomorrow and made the day high.
But market again came into pressure in the last 15 mins of
trade amid some erroneous buzz of fresh nuke “earth quake” in NK and lost
around 20 odd points from the day high. Also, fresh concern of Govt’s war on
black money/shell cos and reported direction by the PMO to the IT dept to
investigate into the DeMo money slashed in various bank accounts may have
affected the overall market sentiment today.
Apart from this, yesterday’s adverse SC verdict on the Jaypee
Infratech NCLT/IBC issues may be also a jolt on the overall NPA resolution process
and may have affected the market today; in any way, even if a stressed co goes
to the NCLT way, there are two options; i.e. actual resolution
(repayment/change in management/ownership) or liquidation.
Both the Govt & banks are now preferring the resolution
process rather than liquidation. But viability issues of most of the stressed
assets may be a huge challenge for the banks for a meaningful resolution, even
with a large hair cut. Market regulator, SEBI is also very concerned about
India’s legacy issues of twin BS and called for a meaningful resolution at the
earliest; this may be one of the black spots in India story of “bright spots”
amongst the major economies.
As par some reports, RBI may also ask the banks to deduct
provision short fall from capital. So far, standard provisions for NPA as
prescribed by the RBI may be around 70-75%, whereas most of the banks are
showing 50-60% provisions in their P/L A/C; thus this new RBI direction may be
also bad for the banks, especially for the ailing PSBS and the overall NPA
issues may be also dragging the market despite intense resolution effort by the
Govt/RBI/Banks.
Nifty was today supported by RIL, HDFC, IBULLSHSGFIN, HDFC Bank,
Kotak Bank, Yes Bank, Ultratech Cem & Hindalco (total positive contribution
by around 18 points).
Nifty was dragged by ITC, TCS, Axis Bank, Bosch, IOC, Sun Pharma,
ICICI Bank, Tata Motors, Infy & LT (total negative contribution by around
45 points).
Nifty was most dragged by ITC (-2.53%) after news of drastic
fall cigarette sales volume post GST coupled with spate of downgrade by some analysts.
Sun Pharma was also dragged by 3.63% after similar downgrade due to its US
based business skepticism, skepticism over Ranbaxy synergy and lack of
blockbuster products pipeline.
Infy was under renewed pressure (-0.7%) after reports of
delaying Q2 report card to 24th Oct, the first time in its history;
apart from this there was also report of heavy participation by its promoter in
the buyback offer by the co.
RIL today supported the Nifty most (+0.78%) ahead of bonus
closing record date tomorrow and favourable IUC charge recommendation by the
IMG coupled with R-Jio & GRM optimism. Kotak bank was also in the limelight
after analysts upgrade on hopes of strong growth across the verticals.
RIL has also acquired a Gujarat based co (Kemrock Ind), which
was put up for sale by its lenders for default on loans; this acquisition may
help RIL to foray into a new business of composites & carbon fibre, used in
various applications & industries, such as RE, mass transportation, infra
etc; positive for RIL’s petchem business portfolio.
Overall, Oil & gas (energies), Cements (price increase),
NBFC, metals has supported the market, while FMCG, IT, health care and PSBS
dragged the same.
Globally, almost all the Asia-Pacific markets except China
were in deep to moderate red tracking muted global
cues on simmering NK tensions & overnight plunge in USD/USTSY yields;
10YUSTSY yields plummeted to almost 2% yesterday NY session, causing similar
risk-off sentiment in USD & Equities; USDJPY also slumped to almost 108.47,
resulting in another fresh wave of risk aversion movement across the asset
classes. A weak USD is bad for Asian export heavy stock market.
The reasons for such USD risk aversion movement may be various
ranging from NK jitters to dovish Fed talks & US policy paralysis. There
was renewed talk of NK ICBM/Nuke tensions as NK is supposed to test another
nuke enabled ICBM with higher payloads later this week around its foundation
day (9th Sep) amid fresh round of “war of words” between NK &
US.
Yesterday NK ambassador at UN commented that the recent
self-defence measures (tests) are a “gift package” for the US and US will
receive more such gift packages from NK as long as US relies on reckless
provocation and futile attempts to put pressure on NK.
In response, Trump approved selling of highly sophisticated US
military equipments to both SK & JP to “counter growing threat” from NK,
thus contributing more on the escalated geo-political tensions. As par US
defence analysts, NK may have now 60 Nukes!!
But US defence industry may be the most beneficiary out of this
legacy tension of NK, which is running now for almost 25 years!! It seems that
NK tension is also good for SK & JP fiscal stimulus narrative apart from
US, as both the countries has increased their defence spending significantly to
“counter NK”.
Although, the new SK Prez is trying his best to resolve this NK
tensions through diplomatic negotiations and is taking the help of Russia
(Putin), it seems that Trump is unhappy about this aspect too!! As par Putin,
NK will not abandon its right of self-defence (Nuke), unless it get guarantee
of a no US attack in its soil.
USD also got some jolt from dovish scripts by two known Fed
doves yesterday & Kaplan today and market may be also concerned about long
list of US legislative agenda in Sep-Oct; considering the present state of US
political jitters & policy paralysis, market may be concerned that timely
extension of US debt limit may be an issue and there may be even some types of
US shut down drama, which may strip the coveted US sovereign ratings. Trump’s
approval rating graph (popularity) may be also proportional to the graph of
USTSY yields!!
Another factor may be that the Norwegian sovereign fund, which
has recently expressed its desire to abandon the EM bond market due to lack of
appropriate (sufficient) liquidity & some other risks and has also
expressed more interest in DM bond market like US & EU, which has not such
type of risk. Thus, talk of Norwegian sovereign fund buying or plan to buy more
10YUSTSY, resulting in steep falls of yields.
Overnight US market also closed in deep red; DJ-30 was down by almost 1.07%, while
S&P-500 was dragged by around 0.76% to close at 2458 and NASDAQ was in
0.93% red; fresh concern of another strong Cyclone IRMA may have also affected
the overall US market sentiment yesterday after recent huge damage caused by
Harvey. US market was dragged by banks & financials most yesterday on
falling US bond yields, negative for the NIM of banks.
US stock future (SPX-500) is now trading around 2459, almost flat (-0.07%) ahead of ECB
meet & Draghi presser tomorrow; if Draghi sounds less dovish than market is
expecting, then expect some rally in EUR, which may not be good for the
EU/global stocks.
Elsewhere, Australia
(ASX-200) closed around 5690, down by almost 0.30% dragged by big four AU banks
& financials on declining US bond yields & metals, IT while being
supported to some extent by a lower AUDUSD,
gold miners & energies; metals are largely lower today. AUDUSD dropped
today after subdued AU GDP data for Q2, which flashed as 1.8% (YOY) against
estimate of 1.9%; prior: 1.7%; on MOM basis it came as 0.8% vs 0.9% (EST) &
0.3% (Q1).
Japan (Nikkei-225) was closed around 19358, edged down by 0.14% on Korean
tensions, but well off the day low of 19255 on some early Asian session
recovery in USD; but overall strong Yen is hurting the JP market sentiment
along with mixed M&A news & index rejig. Recently, FIIS are selling JP
stocks quite heavily on NK geo-political risks and even BOJ ETF purchase is not
able to counter that FII selling.
USDJPY was hovering around 108.55 and dangerously looking to the 108
support zone. JP market is also being dragged by banks & financials as probabilities
of a rise in US rates are now virtually nil in Dec’17 and Fed BS tapering may
be also an extremely gradual “auto-pilot” process, spanning over 10 years or
so. Thus USTSY yields are also lower affecting the banks. JP wage data also
came subdued today on tepid summer bonus payment.
China (SSE) was closed around 3385, almost flat (+0.03%), so far unfazed by
NK tensions; a strong Chinese Yuan against USD because of PBOC tightening may
be also good for China banks on better margin/NIM perception. Yuan is also now
regarding as a safe haven currency in times of geo-political crisis (like Yen,
CHF or even EUR).
Today China market was dragged by real estate, financials,
metals, while gold miners helped it to some extent. PBOC today fixed USDCNY
slightly lower at 6.5311 vs 6.5370 yesterday with net drain of 120 bln Yuan by
OMO. As par some reports, close to China policy makers, PBOC may continue to
strengthen Yuan against USD because of relatively strong resilience of Chinese
economy coupled with country’s neutral & prudent monetary policy.
Hong-Kong (HKG-33) was also trading in deep red around 27505, down by almost
0.50%, after recovering to some extent from the day low of 27400 made so far;
HK market today is also being dragged by general NK tensions (unlike China) and
banks & financials on lower US bond yields; if US bank rates are low, then
their global counterparts’ rate may be in pressure, thus affecting the overall
operating margin/NIM.
Meanwhile, Crude Oil
(WTI) was trading around 48.77, slightly edged up (+0.16%) on fresh
concerns of IRMA cyclone in US and optimism over resumption of refineries in
the Harvey affected area; sentiment of oil bulls may be also boosted by the
Russian oil minister jawboning that they may consider oil production cut
agreement extension, if oil continues to fall and the overall demand/supply is
in imbalance; technically the next resistance may be around 49.25 for WTI.
Elsewhere, EU market
is trading mixed; while DAX-30 is up by almost 1%, FTSE-100 is in negative by
0.40% and CAC-40 is in green by almost 0.30%; overall Stoxx-50 is up by around
0.45%.
EU market today was being dragged by the ongoing “games of
chickens between NK & US” and also the looming US hurricane Irma as
insurance cos are in heavy loss besides banks & financials and industrials.
Banks are under pressure for fall in USTSY yields, which is negative for their
NIM/EBITDA. But techs are helping the EU market by some extent today apart from
some drops in EUR after subdued German factory data, although German FMO is
quite optimistic about level of total orders.
Also, lack of consensus between US, China & Russia over the
NK issue may have dampened the overall global & also EU market sentiment. A
positive GBPUSD coupled with weakness in banks & financials, insurers, home
builders and ongoing Brexit uncertainties may have caused the FTSE to trade in
moderate red today. DAX-30 is boosted by news of Merck deleveraging.
You may be also interested in:
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SGX-NF
BNF
USDCAD
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