Market Wrap: 14/09/2017 (17:00)

NSE-NF (Sep):10117 (+26; +0.25%)

(TTM PE: 26.27; Abv 2-SD of 25; TTM Q1FY18 EPS: 384; NS: 10087; Avg PE: 20; Proj FY-18 EPS: 418; Proj Fair Value: 8360)

NSE-BNF (Sep):24942 (+120; +0.48%)

(TTM PE: 28.09; Abv 2-SD of 25; TTM Q1FY18 EPS: 887; BNS: 24912; Avg PE: 20; Proj FY-18 EPS: 961; Proj Fair Value: 19220)

For 15/09/2017:

Key support for NF: 10075-9975

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 10075-10030 & 9975-9915 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 -24300 area in the near term (under bear case scenario).

Indian market (Nifty Fut) today closed around 10117, marginally higher by almost 25 points (+0.25%) in a choppy day of trading, in which it made an opening session high of 10143 and mid-day low of 10087 tracking mixed/muted global cues coupled with strength in Pharma index & selected bank shares.

But a higher WPI has caused some brisk selling which was flashed as 3.24% for Aug vs 3% estimate; prior 1.88% recorded in July; a higher WPI may be negative for GDP/GVA deflator. The unfavorable base effect of the WPI (from negative last year to positive this year) may be one of the primary reasons behind the dramatic fall in India’s recent GDP apart from adverse effect of DeMo & GST.

Core WPI for Aug came as 2.5% vs 2.1% in July, while vegetable inflation soared by almost 44.91% vs 21.95% recorded in July., may be due to widespread flood in various part of the country; but it may be also politically sensitive. Higher core WPI may be also indicating adverse effect of GST on India’s price stability, although it may be also termed as a function of pricing power by the manufacturers.

FIIs are in the selling mode for the last few months; there may be some attractions of China stock market now for revival in earnings & growth story coupled with relatively cheap valuations. So far domestic liquidity (DII/retails) is absorbing the FII selling pressure in India.

Indian market today opened almost flat and made another attempt another attempt to break the life time high (around 10150 in Nifty Fut & 10138 in Nifty Spot) on the day of India’s historic “Bullet Train” project inauguration jointly by India’s & Japan’s PM today; bullet train may be a symbol of India’s aspiration to grow bigger in line with the developed countries. This a JP sponsored (80% soft loan) high speed railway project in India with complete JP technology, which may also generate additional jobs for JP & India.

But Govt now should also focus on Indian Railway reform in line with airlines to make it a modern day railway with average speed above 100-150 km/hr from present 55 km/hr and that may be a true signal of India’s development. The average speed of Indian railway is almost the same under NDA Govt now as was under UPA and thus the GDP growth rate is also identical!!

Today Indian market may have also focused on Govt’s “commitment” to not interfere in oil pricing mechanism by the OMCS; but Govt is also non-committal about tax reform in oil products and also not ready to roll back the excess tax/ED imposed during times of exigencies & urgent need for revenue as overall fiscal math is still constrained. Thus, OMCS has not recovered significantly after initial optimism.

Today Nifty was supported by Tata Motors, Axis Bank, Adani Ports, Sun Pharma, IOC, Infy, ICICI Bank & Cipla, which collectively contributed around +30 points.

Nifty was dragged by VEDL, RIL, Wipro, Kotak Bank, L&T, HDFC, Indusind Bank, M&M, Maruti & ONGC contributing around -21 points.

Overall, Pharma (Sun Pharma) & selected banks (Axis) has helped the market, while metals, RIL and HDFC twins has dragged it today; metals were under pressure due to subdued China economic data released in the early Asian session. Sun Pharma & Axis banks were in limelight for analysts upgrade as bargain hunting and also on renewed optimism.

Bhel was running like a real “bullet train” today after reports that it may get order for rolling stocks from the project along with the JP partner (Kawasaki) under “Make in India” initiative.

Global rating agency Fitch today has expressed negative stance for the Indian banks (PSBS) for weak capital base and lack of adequate recapitalization coupled with weak financial performance. Indian banks may need $65 bln additional capital to meet BASEL-III norms by 2019.

Wipro plunged over 4% ahead of record date for share buy backs. Tata Motors surged by over 3.5% on upbeat global wholesale figures.

Today in equity cash segment FIIs sold around Rs.1334 cr, while DIIs bought almost Rs.793 cr as par SE provisional figure.

Globally, Asia-Pacific markets were negative today tracking muted Global cues amid subdued China economic data & optimism about US tax reform coupled with renewed NK missile concern.

Overnight US market edged up in another trio of record close (DJ/S&P/NQ) on gains by consumer discretionary & energies coupled with losses in techs/chip makers on Apple i-Phone disappointment and healthcare & property developers/real estate stocks. DJ-30 closed around 0.18% higher, while S&P-500 & NASDAQ edged up by around 0.08%. US stock Fut (SPX-500) is now trading around 2493, down by almost 0.15%.

Although, US economic data (PPI) was subdued yesterday, USD/US bond yields got some boost from an imminent US tax reform hopes & official publication of the tax proposal (draft) on 25^th Sep coupled with Trump’s bipartisan approach to get the legislation passed by US congress. This may be a significant legislative win by Trump after his recent strategy to team up with DNC for the extension of temporary US debt limit & Harvey relief, even for the risk of bypassing his own RNC members.

But, it may be too early to be over optimistic about Trump’s political maturity & his ability to pass key US economic reform legislative agenda despite his intense effort of “Dinner Diplomacy” as US political drama may be far from over. Despite US tax reform optimism, USD is not able to break the 111 level because of ongoing NK missile tensions & Trump’s alleged Russian link investigations by Muller.

But again, NK hangover may be a perfect instrument for Trump to keep the USD lower, while perusing for his tax reform agenda. USD came under some pressure again after news that NK is moving its mobile missile launcher and may be preparing for another Nuke enabled ICBM test, which is able to strike US mainland.

USDJPY was trading around 110.45, almost unchanged after making an early Asian session high of 110.73 on “fruitful” discussions & negotiations about tax reform proposal, DCDA with no border wall etc by Trump with some key DNC GOP in a WH dinner meeting. All eyes may be now on BOE & Carney and their stance (hawkish or dovish hold) coupled with US CPI later in the day today.

Elsewhere, Australia (ASX-200) closed almost flat around 5739 (-0.10%) amid higher AUDUSD (0.7999; +0.15%), negative for AU export heavy markets. Also subdued China economic data has affected the overall AU market sentiment, including AUD despite an upbeat AU jobs data today.

Overall, AU market was today supported by energies on higher oil, while dragged by basic materials & miners on lower metal prices; healthcare was also under pressure today.

Japan (Nikkei-225) closed around 19807, down by almost 0.29% on slight strength in Yen as USDJPY stalled before 111 coupled with general subdued regional sentiment after disappointed China economic data today.

Also another NK threat to ”sink Japan by a Nuke” may have impacted the overall JP market sentiment to some extent, although market is now slowly being accustomed with regular “war of words” between NK & US and thus until & unless another ICBM OR Nuke test by NK, the market may remain calm. Today JP market was affected by mixed electronics, automobiles, exporters and banks & financials, while helped by energies.

China (SSE) was closed around 3371, down by almost 0.38% tracking subdued economic data released today. China fixed asset investment, IIP and retail sales were all came tepid and way below market estimates, which has raised the question of its growth sustainability amid tighter financial conditions, environmental concern, regulations & deleveraging coupled with significant appreciation of Yuan against USD; negative for China exports.

Also construction activities in China are slowing moderately, affecting the overall sentiment of the global growth engine; but overall today’s barrage of China data miss may not be alarming and it’s in line with China’s overall policy of sustainable growth & prudent policy measures. Market is just getting an excuse to sell as the overall valuation may be quite stretched now.

PBOC today fixed mid-point of USDCNY a little higher at 6.5465 vs 6.5382 with a net 100 bln Yuan injection by OMO. A weaker CNY may be good for China’s export after recent drops tracking higher Yuan. Banks & property developers have dragged the China market today.

Hong-Kong (HKG-33) was trading around 27800, down by almost 0.30% on China data & Apple i-Phone disappointment. HK market was dragged by property developers, banks, some airlines & Apple/i-Phone related techs. Overall, HK market is also a proxy of China’s economy and thus any soft economic data from China will affect it along with overall regional market sentiment.

Meanwhile, Crude Oil (WTI) was trading around 49.25, almost flat (-0.05%) after overnight rally to 49.38 amid mixed DOE inventory data (higher gasoline consumption due to Harvey disruptions) and an optimistic IEA forecast for better rebalancing in 2018; global surplus of Crude may start to shrink soon!!

Technically, whatever be the narrative, WTI has to break above 49.50 for more rallies; otherwise sustaining below 49, it may have some correction in the days ahead.

EU Market Is In Pressure Amid Hawkish Hold By BOE Coupled With Subdued China Economic Data & Renewed NK Missile Tensions:

Elsewhere, EU market is under pressure after hawkish minutes by BOE with warning of an imminent rate hike in UK to combat higher inflation coupled with subdued China economic data and renewed NK missile tensions; but a lower EUR may be also supporting it to some extent.

EU market is being dragged by metals & miners (China slowdown), healthcare (poor earnings), some re-insurers on guidance miss (Munich Re AG) and some home/property developers; but automakers are helping a bit for upbeat Aug sales figures coupled with mixed retails/consumers stocks.

Stoxx-600 is almost flat at +0.06%, while DAX-30 is down by 0.22%, CAC-40 is up by 0.08% and FTSE-100 is plunged by almost 1%. A higher GBPUSD (+1.12%) after hawkish hold by BOE today is dragging the FTSE, being an export heavy index; but award of 2024 summer Olympic games to France may be boosting CAC-40 as it may be fiscal/infra stimulus positive.