Market Wrap: 15/09/2017 (17:00)
NSE-NF (Sep):10096 (-19; -0.19%)
(TTM PE: 26.26; Abv 2-SD of 25; TTM Q1FY18 EPS: 384;
NS: 10085; Avg PE: 20; Proj FY-18 EPS: 418; Proj Fair Value: 8360)
NSE-BNF (Sep):24845 (-84; -0.34%)
(TTM PE: 28.01; Abv 2-SD of 25; TTM Q1FY18 EPS:
887; BNS: 24844; Avg PE: 20; Proj FY-18 EPS: 961; Proj Fair Value: 19220)
For 18/09/2017:
Key support for NF: 10040-9975
Key resistance for NF: 10160-10205
Key support for BNF: 24700-24500
Key resistance for BNF: 25050-25150
Hints for positional trading:
Technicals
indicate that, NF has to sustain over 10160 area for further rally towards
10205-10250 & 10325-10385 area in the short term (under bullish case
scenario).
On the flip side, sustaining below 10140 area, NF may fall
towards 10100-10040 & 9975-9925 area in the short term (under bear case
scenario).
Similarly, BNF has to sustain over 25050 area for further rally
towards 25150-25250 & 25350-25500 area in the near term (under bullish case
scenario).
On the flip side, sustaining below 25000-24975 area, BNF may
fall towards 24700-24500 & 24400 -24250 area in the near term (under bear
case scenario).
Indian market (Nifty Fut) today closed around 10096, edged down by almost 19
points (-0.19%) after making an opening session low of 10065 and late day high
of 10132 in a day of moderate volatility. Indian market today opened around
10080, gap down by almost 37 points tracking mixed global cues after NK “tested”
another ICBM today early in the morning over Japan, which is capable to hit US
pacific military base Guam as par its earlier commitments.
But, overall global risk aversion flows were quite muted as this
missile launch by NK was in expected line and coupled with that some real
estate linked sudden rebound in HK market, Indian market also tried for a
similar rebound, but it failed in the 1st half of trade.
Indian market again tried to recover (short covering) in the
post noon session amid some reports that EPFO is planning to increase its
equity investments from present 15% to 25% of the investable corpus and is
seeking FMO approval. But it dropped again in the closing session, when EU
reacts with the news that today’s London metro blast is an act of terrorism.
Apart from NK saber rattling, stretched valuations may be the
primary concern for the market and thus it’s not being able to break the life
time high of Nifty around 10138, despite repeated attempts; there may be some
lack of conviction.
Overall for the Indian market, it now seems that FIIS are in
selling mode for rising Korean geo-political tensions, global QT bandwagons and
coupled with that stretched valuations, muted Q1 earnings, falling GDP &
rising inflation and widespread farm loan waivers across the states, NPA &
concern of fiscal imbalance may be some of the headwinds.
Thus FIIS are consistently selling for the last few weeks
despite some green shoots and attraction of 4-D (Modinomics-demand, demography,
democracy & de-regulations); NK tensions may be just an excuse.
As par latest IMD update, overall monsoon may be slightly below
normal (-6%?) this year in India and this may not be good for the overall rural
economy considering widespread floods across the nation, which has also
affected the food inflation quite dramatically in the recent times; coupled
with that, petro inflation and overall price instability in India may be also
affecting the consumer spending & growth.
Also, as par some reports, cheaper imports are substituting
local manufacturing after DeMo coupled with drastic fall in export; all these
are GDP negative. So far, incrementally higher Govt capex may be helping the
Indian GDP to a great extent amid subdued private capex; but going forward Govt
may also feel stretched & imbalance in the fiscal math.
For the Indian middle class salary earners, discretionary
consumer spending may be also looking tough day by day as their salaries now
barely covers the basic needs & loan EMIs; Indian household BS may be also
stretched.
Another UN report also forecasted slower GDP growth for India in
the coming days coupled with higher unemployment rate for adverse effect of
DeMo & GST on informal sector.
Nifty was today supported by Infy, ONGC. HDFC Bank, Bajaj Auto,
TCS with collective contribution by around +7 points.
Nifty was dragged by ITC, IOC, Indusind Bank, ICICI Bank, SBI,
RIL, Tata Motors, Axis Bank, DRL, Auro Pharma by combined -10 points (approx).
Overall, power generation & distribution cos are in severe
pressure for shortage in coal and low hydro power generation in drought
affected southern states; DRL was down as a UK drug firm has filed a patent
lawsuit against it; Lupin was in positive limelight after reports of favourable
plant inspection audit by US FDA. ONGC was up by over 4% on “upbeat” prospects
of oil as it is now hovering around $50.
Banks were also under pressure and dragged the overall market sentiment
for adverse Fitch report pointing to huge capital requirements by 2019 for
Basel-III norms & low credit growth. Although HDFC bank bucked the trend,
HDFC was in pressure for SEBI lens on its HDFC Life IPO, raising some
questions.
As par some reports, Aircel may invoke bankruptcy of his own
under IBC and in that scenario, its exposure of Rs.11900 cr Indian debt has to
be provided as provisions for 50% immediately and rest within next 180 days;
thus lenders of Aircel like SBI, BOB, PNB, Syndicate and J&K Banks were
under some pressure today.
Meanwhile, India’s current account deficit (CAD) for Q1FY18
increased sharply to $14.3 bln; (i.e. 2.4% of GDP vs 0.1% YOY; 0.6% QOQ) primarily
due to rise in trade deficit; not a good news for the policymakers as FPIS
outflow may increase in the days ahead in lines with global tunes of QT
(Fed/ECB/BOE/BOC).
But, for Aug, exports grew at a healthy pace at 10.3% YOY to
$23.82 bln, while imports were at $31.46 bln, up by almost 21% on YOY basis. In
July, exports grew at 3.9% and thus improving figure in Aug may also provide
policy makers some relief as the economy is struggling due to weak domestic
demand after DeMo & GST disruptions.
Globally, most of the Asia-Pacific markets were in red today
after NK launched another ICBM early in the morning today over
JP airspace towards and flew by around 3700 km, following its threat yesterday
to “sink JP & reduce US mainland into ashes & darkness by a Nuke”!!
NK has termed it as a part of normal process to boost its nuke
self defence and indicated that dialogue will only begin, when US scraps its hostile
policy & sanctions for NK; it’s not intended for JP being a symbolic
launch.
But overall risk aversion flows to the safety of heavens (Yen,
CHF, Gold, Bonds) may be quite muted till now as this launch was in expected
line. NK was reported for preparing another ICBM for the last few days after
US/UN sanctions. Market may be also gradually habituating for such frequent NK
provocations & ongoing “war of words” between Kim & Trump until some
serious miscalculations by both of the sides.
So far, today’s US reaction is very limited & measured
calling for China & Russia for more “pressure” on NK and Trump has not
tweeted till now his rhetoric about the latest NK ICBM launch. But, this whole
NK issue may also invite some trade protectionist & sanction measure
against China by US for not agreeing to an all out oil embargo on NK.
As par China, this is not possible as it may pose more risk from
NK at its border and due to porous border; an all out sanction may not be so
much effective. China also said that it does not hold the key to Korean crisis
and China has already made enormous sacrifices and paid a price to implement the
UN resolutions; thus various directly involved parties (US/SK/JP) should take
the responsibility on Korean peninsula issues.
Thus, until “war of bullets/nukes”, all such “regular” NK
provocations & subsequent market volatility may be an opportunity for both
traders & investors. Kim/NK provocations may be also positive for US
defence industry as JP & NK has
already increased their defence budget significantly to “combat” NK, which may
be also good for the economy of both the countries (fiscal stimulus). Frequent
NK missile & nuke games may be also helping the US economy & Trump to
keep USD lower for its export benefit & imported inflation.
Overnight US market closed
mixed over fear of another NK ICBM launch despite an upbeat US CPI data
yesterday; USDJPY was unable to
sustain over the 111 mark, equivalent to 10YUSTSY yields of 2.20%. Also, some
confusion about Trump’s tax deal with some of his opposition DNC members at a
WH dinner party may have affected the overall US market sentiment yesterday.
Apart from NK ICBM, USD also suffered some blow in the early Asian session
today after US TSY Sec has expressed some reservations of Fed QT for the sake
of US growth.
DJ-30 closed around 0.20% higher, while S&P-500 lost 0.11%
& closed around 2496 and NASDAQ dragged by almost 0.48%; Boeing has helped
DJ yesterday after analyst (DB) upgrade for this aerospace & defence
stock/sector. But techs, consumer discretionary were under pressure, while
energies has helped the market by some extent. US Stocks Fut (SPX-500) is now trading almost flat around 2494
(-0.07%) after some initial drops tracking the NK ICBM flight path, which
ultimate has no risk over the JP soil and blasted deep into the pacific!!
Overall, apart from NK rhetoric, market may be quite cautious
after hawkish hold by BOE yesterday, indicating an imminent rate hike move by
next 3-6 months to combat the higher trajectory of UK inflation, now around 3%,
if overall economic data looks good (i.e. data dependent).
Fed & ECB are also poised to announce their QE tapering soon
and BOC has already hiked twice in the last two meets. A global QT may not be
good for the risk assets in 2018 and yesterday’s sudden improvement in US core
CPI may also help Fed to keep its hawkish tilt in the coming months.
Even if Fed does not hike rate in Dec’17, its BS tapering may
also help US bond yields to rise as Fed will sell its QE bond holdings in the
market (although it may be very gradual @10 bln/month for next 10 years).
Elsewhere, Australia
(ASX-200) closed around 5695, down by almost 0.80% on NK missile risk
aversion moves, negative for the metals & commodity currencies; AUDUSD is almost flat now around 0.7997
(-0.06%). Today AU market was dragged by metals, miners, basic materials &
resources and also by banks & financials, while helped to some extent by
energies.
Japan (Nikkei-225) closed around 19909, up by almost 0.50% bucking the regional
trend as NK risk aversion move for Yen was basically limited today; USDJPY is now trading around 110.65,
moved higher after NK panic low of 109.87 earlier. JP market was today
supported by Toshiba’s ongoing deleveraging news with Western Digital, some
exporters, auto manufacturers, electronics, banks, energies & Pharma cos,
while dragged by some retailers & consumer stocks. Overall optimistic JP
economic prospect may be also helping the market today and it’s able to close
around 3.2% higher for the week on recent rebound in USDJPY.
China (SSE) closed around 3354, down by almost 0.53% dragged by
metals/miners, banks & financials after yesterday’s subdued economic data
coupled with overall NK related risk aversion & trade sanction move. But
optimistic GDP projection (6.7%) by some analysts (Macquarie) may have also
contained the overall damage today.
PBOC today fixed the middle-point of USDCNY little lower at 6.5423 vs 6.5465 yesterday with a net
injection of 200 bln Yuan; this week PBOC has injected total 260 bln Yuan
through OMO against 330 bln net drain last week. Thus PBOC is now taking a more
soft approach after recent spate of tightening.
Hong-Kong (HKG-33) is now trading around 27785, almost unchanged, but well off the
NK panic day low of 27465 on smart recovery of some of the leading property
developers & banks, following upbeat Govt reports about housing sales &
investments. Also, some internet firms, resource co related to China story of
ethanol use in the auto fuel, steel manufacturer (M&A news) and energies
has helped the HK market today despite general NK jitters.
Meanwhile, Crude Oil
(WTI) was trading around 49.45, down by almost 0.85% after some overnight
rally to almost 50.48 on forecast of better demand & tighter supplies by
IEA/OPEC; today WTI may be down for NK tensions & oil embargo issues apart
from recent strength in US; also recent surge in gasoline use may be due to
Harvey/Irma factor (seasonal/one time) and forecast of colder weather in the coming
months may be also positive for NG & negative for WTI.
Technically, WTI now has to sustain above 50.50 zone for next
leg of rally towards 52.50; otherwise it may come down again.
USDJPY Is Upbeat On Hopes Of A Hawkish Hold By Fed Next Week In Line With BOE & US Tax Reform Despite Ongoing NK Saber Rattling
SGX-NF
BNF
USDJPY
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