Market Wrap: 07/09/2017 (17:00)

NSE-NF (Sep):9953 (+18; +0.18%)

(TTM PE: 25.86; Nr. 2-SD of 25; TTM Q1FY18 EPS: 384; NS: 9930; Avg PE: 20; Proj FY-18 EPS: 418; Proj Fair Value: 8360)

NSE-BNF (Sep):24365 (+58; +0.24%)

(TTM PE: 27.40; Abv 2-SD of 25; TTM Q1FY18 EPS: 887; BNS: 24305; Avg PE: 20; Proj FY-18 EPS: 961; Proj Fair Value: 19220)

For 08/09/2017:

Key support for NF: 9940-9900

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 9940-9900 & 9850-9800 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 9953, edged up by almost 18 points after consolidating in a narrow range of 9982-9947 on mixed global cues amid NK missile-mongering, US policy optimism, concern of a less dovish Draghi & strong EUR coupled with stretched valuations. Market nosedived in the last half an hour of trade seeing a rising EUR ahead of ECB today.

Indian market today opened in positive tone around 9958, but was under selling pressure to some extent taking similar cues from HK market. Apart from global cues, Indian market may have also focused on Govt’s intensifying war on black money/stress cos, stretched valuation amid muted Q1FY18 earnings, subdued NPA resolutions despite Govt/RBI/Banks’ best effort.

Also, warmongering stance by Indian Army Chief with reference to China & Pak may be affecting the overall Indian market sentiment; it seems that despite diplomatic success, Ind-China border disputes may take more time to resolve.

As par some reports, in addition of consistent selling in the spot/cash segment of the Indian equity market to the tune of $2 bln last month (Aug’17), FIIs has also created huge short position in the FNO for Sep series. Although, this may be also for an hedge against their cash portfolio against any worst geo-political scenario like US-NK war or impeachment of Trump for his alleged Russian link, this development may be also affecting the market sentiment.

As par some market buzz, FIIS, who are not allowed to short in FNO without corresponding long in cash may be now planning to gradually shift to other related stock exchange dealing in Indian equities, such as Dubai and thus they are gradually selling their portfolios.

So far Indian market may be supported by huge domestic retail/MF liquidity despite concern of stretched valuation and investors are utilizing every black swan deep on long term optimism about India & political stability; but recent rise of China market may be also attracting lots of FII money on reasonable valuations & better/solid economic growth. After DeMo & GST, Indian GDP & earnings growth has slumped and thus market may keenly watch the Q2FY18 macro & corporate earnings numbers.

Nifty was today supported by VEDL, IBULLS HSG, Eicher Motors, IOC, L&T, HDFC Bank, Bosch, M&M, & HDFC (total +20 points approx).

Nifty was dragged by ITC, ICICI Bank, RIL, Tata Motors, BPCL, Bharti Airtel, Ultratech Cem, Asian Paints & Auro Pharma (total -15 points approx).

Basically, market today was dragged by ITC (concern of low cigarette volumes), RIL (ex-bonus & acquisition of a petchem related co) & ICICI Bank. Tata Motors was in pressure for some reports of labour unrest. But metals were in demand today on buzz of supply tightening in China due to EV & deleveraging issues coupled with improving domestic demands.

M&M was upbeat on Govt’s thrust on electric cars in the coming days despite transport minister’s signal not to roll back extra cess on GST on SUV/luxury cars. Bharti Airtel was slummed for gradual scrapping/reduction of SUC recommendation by the IMG/TRAI. IBULLS HSG today again surged by around 3% on optimism about India’s affordable housing segment and recent surge in affordable housing loan from HFCS as Banks/PSBS are burdened with NPA.

BOC (Canada) yesterday hiked quite unexpectedly by 0.25% to bring its rate at 1%; BOC now seems to be in a normalization path and in that scenario, huge fund flow form Canadian sovereign fund into India’s stressed assets may be also under some distress in the coming days as ultra low interest in Canada (0.50%) for decades despite a solid G-7 economy might be a major reason for Canadian investment in India.; but a strong CADINR may also help in this regard.

Similarly, if ECB & Fed will go for their normalization & quantitative tightening (QT) path, then it may also affect the overall EM fund inflow including India.

Globally, major Asia-Pacific markets were mixed amid dilemma of temporary US debt limit extension & renewed fear on another NK ICBM launch by this week. Trump yesterday made a US debt limit extension up to mid-Dec’17 by ditching some of his own RNC members and colluding with DNC, keeping in mind emergency funding for the Harvey affected area.

Although, this temporary US debt limit extension may have provided some respite in the global risk-on trade marred by ongoing NK geo-political tensions, Trump may also face various political challenges in the days ahead to pass this debt deal in the US congress. But, for the time being, market may be relieved that the unexpected US debt deal with DNC may pave the way for more such passage of legislative agenda in future and may remove the ongoing US policy & politics paralysis.

Overnight US market closed in positive, but off the high on fresh missile-mongering by SK PM, who seems to be almost certain of another NK ICBM test by 9^th Sep (Sat), the foundation day of NK. Incidentally, SK is now also deploying US anti-missile defence system (THAAD) in various locations for any NK attack.

USD was also under stress after Fed VC Fischer resigned suddenly yesterday (to be effective from mid-Oct); he was a known hawk and his resignation may pave the way for more dovish FOMC rejig as par Trump’s preference to keep USD lower; Yellen may also get an extension for continuity of present Fed policy and Cohn is unlikely to be nominated by Trump because of public criticism of the VA supremacist incident by Cohn.

USD/US market is also under pressure not only from Irma hurricane, but also from two other looming hurricanes; but some tax reform talks by Trump at his Dakota rally and also by his TSY Sec assuring that it will be ready by Sep may have helped to calm the nerves of the USD bulls yesterday.

USDJPY is now trading below 109, down by almost 0.15% amid renewed NK ICBM concern by SK and an Israeli attack on Syrian military base ahead of ECB today. Fed’s beige book yesterday may be also termed as dovish concerned for US wage inflation & subdued auto sales with overall modest-to-moderate US economic activity; although retail sales & tourism may be seeing some green shoots.

DJ-30 closed around 0.25% higher, while S&P-500 was also edged up around 2466 (+0.31%) and NASDAQ gained by almost 0.28%; US market was primarily supported by energy/oil related shares yesterday tracking bounce in WTI as Harvey affected oil refineries are resuming their operations gradually. Apart from energies, US stocks yesterday also got some boost from financials & banks bargain hunting,

US stock future (SPX-500) is now trading around 2462, almost flat (-0.10%) ahead of Draghi today; but there is little probability that ECB statement will mention any QE word or tapering plan; in that sense Q&A of Draghi will be very interesting today. A less dovish script from Draghi may help EUR to run towards 1.20, which may not be good for EU/global stocks, despite US policy optimism. Technically, 2454-2449 may be the immediate support zone of SPX-500 now and sustaining below it, expect some correction.

Although, overall earnings of the US market may be quite upbeat, market may be also concerned about so much US geo-political risks and poor visibility of Trumponomics, which may trigger significant correction at any point of time after this epic Trump rally.

Elsewhere, Australia (ASX-200) closed around 5690, almost unchanged amid a lower AUDUSD (-0.30%) at 0.7985 today after terrible AU retail sales data; a lower AUD is good for AU export heavy market. AU stocks were helped today by financials, especially the big AU banks & CBA and telecoms, but dragged by health care & gold miners after Gold dropped in the early Asian session amid US debt deal optimism.

Japan (Nikkei-225) closed around 19397, up by almost 0.20%, but well off the day high of 12483, tracking fall of USDJPY in the late Asian session amid renewed NK ICBM concern. Earlier it got support of overnight rebound in USDJPY tracking Trump’s surprised US debt deal; a weak Yen (JPY) is good for export heavy JP market.

Today JP market was dragged by mixed performance from techs after some confusion about Toshiba’s M&A deal with Western Digital, but automobiles has supported the market to some extent.

China (SSE) was closed around 3366, down by almost 0.60% bucking the regional trend after a smart rally for the last few weeks ahead of party congress in Oct; market may be concerned about new policy guidance by the party leadership amid ongoing PBOC deleveraging & tightening effort for a stable & prudent monetary/economic policy.

PBOC today fixed USDCNY at 6.5269 vs 6.5311 yesterday, a little lower in its bandwagon to make Yuan stronger against USD without any OMO today; but lend 298 bln Yuan via 1 yr MLF for roll over action of previous MLF loans of 169 bln Yuan; may be market is little concerned about underlying China debt bubble.

China market was helped by some property developers today, but rising Korean tensions and a China anti-missile war drill at NK border yesterday may have also affected the overall market sentiment today.

Similarly, Hong-Kong (HKG-33) was now trading around 27520, also down by 0.30% and well off the day high of 27815; HK market was today supported by automakers, techs & property developers but dragged by some retail stocks. Overall, market sentiment may be quite cautious ahead of ECB today.

Meanwhile, Crude Oil (WTI) is now trading around 49.25, up by almost 0.25% amid mixed API report and resumption of US refineries coupled with upbeat global/Singapore GRM; yesterday it rallied almost 1%. Now technically, sustaining above 49.60 area, the zone of 50.45 may be clearly visible for WTI despite concern of a triple cyclone US in the weekend.

EU market was also upbeat amid better EZ GDP data; but some rally in EUR ahead of Draghi may have also made the global as well as Indian market cautious today as a strong EUR may not be good for the global equity.

EU market is today being helped by techs, late recovery in banks & financials, automakers while dragged by telecoms. Stoxx-50 is up by around 0.50%, while DAX-30 has surged by almost 0.80%, CAC-40 is up by 0.35% and FTSE-100 is in deep green by around 0.60%.

FTSE is being supported by insurers after a compensation rule victory apart from gain in consumer goods/FMCG, energies , property developer/home builder & utilities, whereas dragged by some banks on neutral ECB and higher GBP on better UK economic data & favourable Brexit news headlines.

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