Market Wrap: 24/10/2017 (17:00)
NSE-NF (Oct):10220 (+30; +0.30%)
(TTM PE: 26.45; Abv 2-SD of 25; TTM Q1FY18 EPS: 386;
NS: 10208; Avg PE: 20; Proj FY-18 EPS: 418; Proj Fair Value: 8360)
NSE-BNF (Sep):24236 (+113; +0.47%)
(TTM PE: 27.49; Abv 2-SD of 25; TTM Q1FY18 EPS: 881;
BNS: 24222; Avg PE: 20; Proj FY-18 EPS: 961; Proj Fair Value: 19220)
For 25/10/2017:
Key support for NF: 10180-10150/10100
Key resistance for NF: 10275-10325/10380
Key support for BNF: 24000-23850
Key resistance for BNF: 24400-24600
Hints for positional trading:
Technicals indicate that, NF has to sustain over 10275 area for
further rally towards 10325- 10380 & 10455-10495 area in the short term
(under bullish case scenario).
On the flip side, sustaining below 10255 area, NF may fall
towards 10180-10150/10100 & 10040-9965 area in the short term (under bear
case scenario).
Similarly, BNF has to sustain over 24400 area for further rally
towards 24600-24900 & 25100-25250 area in the near term (under bullish case
scenario).
On the flip side, sustaining below 24350 area, BNF may fall
towards 24225-24000 & 23850 -23600 area in the near term (under bear case
scenario).
Indian market (Nifty Fut/India-50)
today closed around 10220, edged up by almost 30 points (+0.30%) after making
an opening session high of 10244 and mid-day low of 10187. Indian market today
opened around 10203, almost flat tracking muted global cues amid mixed
US/global corporate earnings and ongoing suspense about next Fed leadership and
basically consolidated ahead of domestic earnings deluge.
But, buzz PSBS recap & some fiscal stimulus by the Govt to
dig out the Indian economy from its deepest slumps in the last three years may
have boosted the market sentiment towards the closing session and it closed the
day with modest gains; FMO was supposed to hold a presser for details of PSBS
recap & other fiscal stimulus measures after the market hours. Thus PSBS
(public sector banks) were upbeat on hopes of early recapitalization.
But some concern for fiscal discipline may remains and thus
overall market sentiment was cautious coupled with pessimism over Q2FY18
earnings trajectory. So far Q2FY18 earnings are mixed & stable, although it
may be not so much upbeat to justify the stretched valuations. Thus market may
be cautious amid slowing GDP growth and subdued guidance, while expectations
& valuations are very high.
Infy report card after market hours may be termed as mixed with
muted guidance. HDFC Bank’s result & NPA situation may be also termed as
subdued as valuations are already stretched.
Today Nifty was supported
by SBI, ZEEL, ICICI Bank, Asian Paints, VEDL, IOC, HUL, ONGC, UPL
& HPCL by around 37 points cumulatively, while it was dragged by Infy, Tata Motors, RIL, Indusind Bank, Yes Bank, HCL
Tech, M&M, Sun Pharma, TCS & Tech-M by around 25 points altogether.
Overall, Indian market was today helped by PSBS (earlier recap
hopes), telecoms (renewed optimism after R-Jio tariff hikes and permission by
the Govt to share telecom infra), utilities, power, property developers/real
estate (affordable housing push & plan of GST inclusion and big spending in
roads) FMCG, while it was dragged by healthcare, consumer durables, techs/IT
(concerns for muted report card).
After market hours today, FMO has unveiled plan for an “unprecedented infusion of Rs.2.11
tln in PSBS to boost lending” and road infra building for around 84000 km in
the next five years by around Rs.7 tln.
So far at a glance, this is a Rs.10 tln fiscal stimulus package
and Govt will support Rs.0.76 tln for the Bank Recap directly by budgetary
provision, while the rest of Rs.1.35 tln will come from issuing some types of
recap bonds (not GSEC) to the banks, which may be converted into equity shares
in future and may be equity dilutive also.
Govt is expecting that such issuance of recap bonds will not
affect the fiscal deficit in any manner (?). But Indian bond market may also
react to this PSBS recap bond issuance proposal, which is simply a financial
engineering as Govt is unable to recapitalize the banks by direct fund
infusion. All eyes may be now on RBI for their comments regarding this PSBS
recap bonds financial engineering. For road building in PPP mode, Govt is
expecting significant private participation/funding.
Overall, market may be keen to know the fine prints of today’s
Rs.10 tln fiscal stimulus package announcement by the Govt and mode of funding
& subsequent effect on the whole fiscal discipline narrative. Govt may take
a final call for fiscal deficit target and any breach thereof in Dec’17. Govt
will also announce various other reforms for PSBS in the next few months.
Clearly, Govt has an eye on the forthcoming election in Gujarat,
where it’s facing tough political questions over GST & DeMo blues and
subsequent economic slowdown and unemployment. State like Gujarat is heavily
affected due to unfavorable GST on man-made textile yarn, snacks and MSMES are
worst affected all over the country.
As par Indian FM: Government will appropriately respond to economic challenges; India
ready to deal with challenges as they develop; Aim is to retain India's high
growth economy status; Effort is to sustain high economic growth rate; Structural
reforms bring long-term benefit; India's macroeconomic fundamentals remain
sound; Govt has chalked out roadmap to boost economy.
As par Economic affairs
secretary: inflation will not cross 4% this year;
inflation consistently down in last 3 years; current account deficit very low; slower
growth in GDP has bottomed out; GDP
growth will soon be over 8%.
It seems that Govt has decided to push growth by big capex, even
if breaches fiscal deficit by some points. Govt is also signaling PSBS/Banks to
resume lending in a big way to push private capex, but the problem may be that there is significant lack of eligible &
quality corporate borrowers as of now amid stressed corporate B/S;
liquidity was not an issue for big bang corporate lending even before DeMo.
Govt is also expecting a GDP growth of over 8% (?) “soon”; i.e.
in FY-19. An economy, which is poised to grow by over 8%, should not expect
more central bank monetary stimulus/rate cuts and thus RBI’s rate cut hopes
further diminished today!!
Global Cues Are Muted Amid Mixed Earnings & Ongoing Fed Leadership Suspense:
Asian Stocks Edged Higher On Muted Global Cues Amid Fed Chair & China Policy Uncertainty
European Stocks Inched Up On Higher EUR Ahead Of ECB & Mixed Earnings
USD Surged To Almost 114 On Upbeat US PMI & Corporate Earnings/Stocks
SGX-NF
BNF
10YUSTSY BONDS
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