Market Wrap: 01/09/2017 (17:00)
NSE-NF (Sep):10004 (+67; +0.67%) (TTM PE: 25.44;
Nr. 2 SD of 25; Avg PE: 20; TTM/FY-17 EPS: 392; NS: 9974)
NSE-BNF (Sep):24483 (+12; +0.05%) (TTM PE: 30.73;
Abv 3 SD of 30; Avg PE: 20 TTM/FY-17 EPS: 795; BNS: 24434)
For 04/09/2017:
Key support for NF: 9975/9940-9895/9875
Key resistance for NF: 10050-10090/10120
Key support for BNF: 24300-24200
Key resistance for BNF: 24575-24675
Hints for positional trading:
Time & Price action
suggests that, NF has to sustain over 10050 area for further rally towards 10090/10120-10160
& 10205-10275 area in the short term (under bullish case scenario).
On the flip side, sustaining below 10030 area, NF may fall
towards 9975/9940-9895/9875 & 9815- 9750 area in the short term (under bear
case scenario).
Similarly, BNF has to sustain over 24575 area for further rally
towards 24675-24775 & 24875-25075 area in the near term (under bullish case
scenario).
On the flip side, sustaining below 24525 area, BNF may fall
towards 24300-24200 & 23950- 23850-23700 area in the near term (under bear
case scenario).
Indian Market Today Also Helped By Buzz Of An Imminent Cabinet Reshuffle
With A New FM (Piyush Goyal?) And Rebound In Mfg PMI & Auto Sales For Aug:
Indian market (Nifty Fut-Sep) today closed around 10004, surged by almost 67
points (+0.67%) after making an opening minutes low of 9938 and closing session
high of 10018, primarily boosted by hopes of another RBI rate cut in Oct after
terrible Q1FY18 GDP coupled with reports that in the imminent cabinet
reshuffle, FM portfolio may be changed to Piyush Goyal, an eminent technocrat
& a performer minister and may be also a favourite of the market circle.
As India now need a full time defence minister, considering
present complex geo-political situation with China & Pak, present FM, who
is also holding the defence portfolio as an ad-hoc measure, may be relieved
from the fiancé portfolio with an added responsibility of Gujarat state
election management for BJP (already given). Notably, GDP under NAMO/AJ is consistently
falling every quarters for various reasons from DeMo to GST & NPA and thus
a change in FM may be required by the Govt (NAMO).
Also, Nitin Gadkari, another the high performer road & port
minister, will be given the charge of railways under one “Transport” ministry,
may be also good for the market. Presently, railways are plaguing under several
accidents and may be turning into “killer tracks”, lacking adequate funding.
Thus, NAMO will reshuffle his cabinet by giving priority to the
performers and showing doors to the bench sitters in his preparation for the
2018-19 state & general elections.
Although, there may be now no political opposition for NAMO/BJP,
considering various economic issues like low GDP growth since 2014, un/under employment,
low private capex, messy railways prone to frequent accidents, issues of NPA,
black money, farmer’s distress coupled with some political issues like intolerance,
cow vigilances etc, NAMO/BJP may not take any chance and thus preparing itself
for the next term with a “perfect team”.
Indian market may have also closely watched the big cabinet
rejig by the Govt in the weekend to do more on policy & reform front; but
lack of credible names (heavyweights) may be another headwind for the NDA Govt
since it took office in 2014 and thus, maximum workloads may be limited to few
big names within the Govt, hampering the overall pace of reform, which may be
now on the slower track; it need to be on the fast track.
Indian market today opened almost flat around 9945 tracking
positive global cues and shocking GDP released yesterday after market hours.
But soon after that, it rallied quite smartly on upbeat auto sales figure and
fresh positioning at the start of the new Sep exp series in FNO, coupled with
some rate cut hopes after yesterday’s terrible Q1 GDP figure.
Indian market today may have also focused on the Mfg PMI for Aug
after terrible GDP released yesterday to gauze the extent of recovery in the
Post-GST & DeMo period. Mfg PMI was expected to come around 49.3, still
below the boom/bust line of 50 against prior figure of 47.9,which was affected
by Pre-GST disruptions & destocking, one of the primary factors behind
yesterday’s shocking GDP numbers at 5.7%, almost at 3 years low and stripped
the tag of fastest growing global economy to China.
But, Indian Mfg PMI for Aug flashed at 51.2, much above the 50
mark and the market estimate of 49.3; this is definitely a good news after the
shocking GDP yesterday, but may be bad news for the stimulus addicted market as
rate cut hopes may have diminished as economy is limping back to the new normal
after overcoming the Pre-GST confusions & disruptions.
Apart from the GST blues, adverse effect of DeMo, stressed
corporates & Indian households BS and huge banking NPA, lack of private
investments may be also responsible for the consistent lower trajectory of
Indian GDP for the last few quarters; thus this may be a structural issue
rather than transient.
Although, unfavorable WPI deflator may be also one of the
reasons behind the tepid trend of GDP, it may be also notable that when
inflation of an economy is hovering around 2% over the last few quarters, the
GDP can’t grow by over 6-7% consistently; thus there may be serious discord
between the Indian CPI & GDP calculation methodology and either one of them
may be wrong.
Also, Indian corporate profit is not growing as par
assumed/projected GDP growth of over 7%; in that scenario, Nifty EPS should
grow above 15-20%, which is not the case. In any way, a combination of lower
inflation & lower GDP growth may be ideal for another rate cut by RBI to
stimulate the economy.
But considering the overall situation of stressed twin BS, it
may be very doubtful that RBI will listen to the Govt/domestic audience this
time; irrespective of any rate cut, banks has to pass the full benefit of
previous RBI repo cuts and start fresh lending; but the problem may be that
there is lack of eligible & quality borrowers in the system.
Another worrying factor is that, for the last few years Indian
GDP may be heavily dependent on Govt capex as private capex is still very
subdued for various reasons. But this trend may be also affecting the fiscal
math of the Govt, which is committed for 3.2% fiscal deficit in FY-18. As the
Govt already exhausted almost 92% of its budgeted fiscal deficit by July’17,
its fiscal math may be in strain now.
Some upbeat auto sales data for Aug may be also supporting the
overall market sentiment today coupled with renewed optimism about Pharma space
after favourable verdict for Lupin in a US product infringement case.
Today Nifty was most supported by Tata Motors (upbeat Aug sale
& buzz of E-car contract by the Govt), RIL, DRL, Asian Paints, VEDL, Auro
Pharma, Indusind Bank, Kotak Mahindra Bank, Maruti & Bajaj Auto; together they
have contributed almost 52 points in Nifty.
Nifty was today dragged by IOC, HDFC, TCS (buzz of NIIT buying),
HDFC Bank, Power Grid, Bharti Airtel, Wipro, TECHM & HUL by around 30
points altogether in Nifty. Overall, Nifty finished the week almost 1.2%
higher.
Globally, almost all the
major Asia-Pacific markets were trading in positive zone tracking positive
global cues & an upbeat China Mfg PMI
released today, despite a lower USD & higher EUR.
Overnight US market closed also in positive zone helped by techs, healthcare/biotechs,
basic materials coupled with some fall in USD/US bond yields, which may be
positive for US economy & market to some extent; DJ-30 closed almost 0.30%
higher, while S&P-500 gained around 0.57% to close at 2472 and NASDAQ
rallied almost 0.95% higher at another life time high.
Month end portfolio/fund flow rejig may have also helped the US market,
while telecom has dragged it to some extent yesterday; overall earnings optimism
is supporting the US stock market to a great extent, coupled with hopes of
Trumponomics despite visible US policy paralysis & geo-political risks.
Overall US economic data released yesterday may be termed as
mixed; but lower levels of initial jobless claims is also suggesting that US
labour market is tight (strong) and coupled with that a real positive wage
inflation may be also supporting the overall consumer spending & growth; a
combination of decent wage growth without a runaway inflation may be equivalent
to a “goldilocks” types of situation for the US economy and thus investors are
buying every dips for the US stocks.
Overall, USD was under pressure on concern of a subdued Aug US
NFP job data to be released later in the NY session today coupled with mixed US
economic data and some dovish comments from US TSY Sec, advocating for a weaker
USD for benefit of US exports (trade) and month end fund flow adjustments; USDJPY is still hovering around 110
level.
Historically, Aug US NFP data may be on the weaker side at least
for the preliminary release due to seasonal (summer holiday) factors; although
market is expecting a headline NFP of 180k on back of blockbuster ADP job data
day before yesterday, there may be high probability that it may miss the figure
by at least 54k as par some past historical trends; thus today even if NFP
flash at around 180k or above with average hourly earnings at 0.3% on MOM basis
against estimate of 0.2%, USD may rally.
Market is expecting an US unemployment rate at 4.3% for Aug; but
overall, market may not be concerned about absolute number of NFP figures, but
it’s concerned about the US wage growth, which is vital for discretionary
consumer spending and subsequent reflation of the economy. As of now, market
has already discounted no rate hike by Fed in Dec’17 as FFR is now below 30%.
US stock future (SPX-500) is now trading around 2472, up by almost 0.09%; the next
technical hurdle now lies around 2475 zone.
Elsewhere, Australia
(ASX-200) closed around 5725, up by almost 0.20% on some drops in AUDUSD (-0.08%) ahead of key GDP data
next week. Overall AU market sentiment may be supported by solid China Mfg PMI,
upbeat metals; energies (oil) health care, utilities but being dragged by big
banks today on concern of subdued earnings.
Japan (Nikkei-225) closed around 19691, up by almost 0.23% but well off the day
high of 19736 on strong Yen as USDJPY dropped from 110.67 to below 110
yesterday NY session; Nikkei is consistently under pressure for the last few
weeks due to fall in USDJPY, which is negative for the JP export. Today JP Mfg
PMI & capital spending data came subdued, which may be also affecting the
overall JP market sentiment.
JP market is today supported by techs & electronics
exporters, energies, metals, while telecoms are down by some extent.
China (SSE) was trading around 3367, up by almost 0.19% but well off the
high of 3382 on some news of renewed US-SK bombings war drill at NK border.
Today overall China & global market sentiment was supported by an upbeat
Markit/Caixin Mfg PMI data in line with yesterday’s official/Govt PMI data;
Markit Mfg PMI for Aug flashed as 51.6 against estimate of 50.9 (prior: 51.1).
But some cautious comments by PBOC advocating for a tighter
control over the property markets and Moody’s cautious stance about China credit
market & infrastructure tightening may have also dampened the mood of the
market coupled with some concern about China politics & party meeting
scheduled to be held on 18th Oct.
Today, PBOC fixed USDCNY at 6.5909 vs 6.6010 yesterday with a
net drain of 50 bln Yuan and weekly net drain at 280 bln Yuan. It seems that
PBOC is committed to bring USDCNY around 6.50 level before the China party
congress in its goal of stabilization of economy with a prudent & stable
monetary policy (tightening) & deleveraging.
Similarly, Hong-Kong
(HKG-33) is now trading around 27980, down by almost 0.10%, but also well
off the day high of 28115 on China optimism & some overnight strength in
oil (energies) coupled with basic materials.
Meanwhile, Crude Oil
(WTI) is now trading around 46.75, down by almost 1% after making a NY
session rally yesterday to 47.45 amid news of US SPR release of gasoline. This
may be a positive news of WTI in the sense that, at some point of time US will
again refill its SPR by gasoline and thus Crude oil may be also responding to
demand from US SPR in the days ahead.
Elsewhere, EU market
is trading around 0.90% higher in Stoxx-50 tracking an upbeat China Mfg PMI
& solid new order/export-import sub-indexes, boosting metals.
Also a lower
EUR marked by ECB jawboning effort and some optimistic comments by an ECB
member about robust EZ economic recovery coupled with slightly below expected
German Mfg PMI may be helping the overall market sentiment today. Overall EU
Mfg PMI today flashed in line as 57.4 may have also boosted the EU market sentiment
today as it is indicating a solid & consistent recovery.
Today EU market is also being supported by media cos &
airlines, while dragged by some techs/digital security names.
DAX-30 is up by around 0.80%, while CAC-40 has gained by almost
0.90%, but FTSE-100 is almost unchanged (+0.01%) on higher GBPUSD after a
surprised strong UK Mfg PMI data for Aug at 56.9.
Asia-Pacific Market Starts Sep In Green Amid Positive Global Cues Helped By An Upbeat China Mfg PMI:
USD Recovered After Dovish Jawboning By ECB Despite A "Shocking" US NFP Report:
SGX-NF
GBPUSD
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