Market Wrap: 24/11/2017 (17:00)
NSE-NF (Nov):10418 (+12; +0.12%)
(TTM PE: 26.51; Abv 2-SD of 25; TTM Q1FY18 EPS: 392;
NS: 10390; Avg PE: 20; Proj FY-18 EPS: 418; Proj Fair Value: 8360)
NSE-BNF (Nov):25844 (-5; -0.02%)
(TTM PE: 29.36; Near 3-SD of 30; TTM Q1FY18 EPS:
878; BNS: 25780; Avg PE: 20; Proj FY-18 EPS: 961; Proj Fair Value: 19220)
For 24/11/2017:
Key support for NF: 10425-10360/10305
Key resistance for NF: 10460-10500/10540
Key support for BNF:
25700/25600-25450
Key resistance for BNF: 25875/26000-26100
Trading Idea (Positional):
Technically, Nifty
Fut-Nov (NF) has to sustain over
10460 area for further rally towards 10500-10540 & 10585-10675 zone in the
short term (under bullish case scenario).
On the flip side, sustaining below 10440-10425 area, NF may fall towards 10360-10305
& 10270-10190 zone in the short term (under bear case scenario).
Technically, Bank Nifty-Fut (BNF) has to sustain over 26000 area for further rally towards
26100-26325 & 26400-26675 zone in the near term (under bullish case
scenario).
On the flip side,
sustaining below 25950-25875 area, BNF may fall towards 25700/25600-25450 &
25200-24950 area in the near term (under bear case scenario).
Indian market (Nifty Fut/India-50)
today closed around 10418, soared by almost 51 points (+0.49%) after making an
opening tick low of 10366 and closing session high of 10424 on hopes of S&P
rating upgrade coupled with late stability of global/Asian market after calm inChina bond market and an blockbuster German IFO & optimism about German
coalition Govt formation.
Indian market today opened around 10366, almost flat amid mixed global/Asian cues and China concern; but soon after opening it caught a bid
& never looked back on hopes of an imminent S&P rating upgrade after
Moody’s recent rating action.
But significant doubt was also there about S&P rating
upgrade hype & hopes, considering their recent stance regarding India’s
fiscal position & poor per capita income and that doubt eventually came
true after the market hours, when S&P officially kept their present rating
(BBB- with stable outlook), just above junk for India, refusing an upgrade.
S&P cited huge combined fiscal deficit (centre + states>6.5%)
& very poor per capita income of around $2000/pa and high Govt Debt/GDP
ratio (around 70%) as major constraints for any rating upgrade for India
despite recent reform like GST, PSBS recaps plan of around $32 bln and their optimism
about Indian “robust growth” in 2018-20.
S&P also said that India’s general Govt revenue was “low”,
at an estimated 22% of 2017 GDP, while noting that the “large general
government debt load and India’s overall weak public finances continue to
constrain the ratings.”
S&P added it would need to see more “evidence” that Govt
reforms would “markedly improve” the Govt finances and reduce its net general Govt
debt to justify an upgrade; reiterating the language it had used in affirming
India’s rating late last year.
Thus, S&P will clearly move only by “evidence” of data &
not “hopes” like Moody’s and now all eyes may be on Fitch for their stance,
which have similar rating like S&P for India (BBB- with stable outlook).
For the Indian market, Monday may be little disappointing
considering today’s stellar rally on hopes of a rating upgrade from S&P,
but it may not be a big deal as rating agencies are always lagging behind in
their rating action because they work on real data (evidence) rather than
assumption (projection), while market is driven by opposite (hopes &
estimates) as a forward looking machine.
Indian cos will continue to raise funds from overseas at lower
rates on strength of their individual B/S, like RIL raised funds @3.66% few
days ago. Going forward, market will be driven by earnings rather than ratings
and Nifty need to justify its stretched valuations as TTM PE is hovering around
27 against China/HK/JP’s 15 or EU/US’s 20.
For the last few years, India is getting huge FDI & FPI
flows on the appeal of 4-D (demand/demography/development/deregulation) &
Modinomics, irrespective of any rating actions; but the “demand” factor now
looks in stress after DeMo & GST (war on black money/formalization of the
economy) and lack of adequate real wage growth for the general public.
Thus, divergent position of S&P & Moody’s may keep the
Indian bond yield around 7%; all focus will be now on oil & fiscal deficit,
GDP, RBI stance next month and outcome of GJ election; any below expected
result for NAMO in GJ this time because of GST blues & DeMo spillovers and
the real question of un/under employment will be bad for the market on concern
of political instability & populism.
To increase per capita income for the country, Indian Govt need
to do more structural reform drastically aiming at inclusive growth, income
equality, price stability, maximum employment & proper skill development
and over & above all, keeping population growth in control like China to
improve GDP per capita and also convert the high cost economy to low cost one
(lower real inflation & interest rate); these are certainly a tall task for
any Govt/democracy.
Present form of GST is too complex having multiple rates & returns
filling process; overall cost of compliances may be too high for MSMES &
general traders and that makes the viability of their business model into
question.
Thus, most of them are still GST unregistered and also doing
business “as usual” as they are not
interested to formalize themselves for fear of legacy issues like lack of
previous history of books of accounts and thus neither public is getting lower
rates because of GST or Govt is collecting higher revenues.
Today Nifty was helped by Infy, ITC, HDFC Bank, Indusind Bank,
Bajaj Fin, RIL (sale of US shale assets), Auro Pharma, Bharti Infratel, HDFC
& HPCL by around 36 points cumulatively.
Nifty was helped by ICICI Bank, VEDL, SBI, Hindalco, Adani
Ports, Hero Motor, Tata Steel, UPL, Tata Motors & ONGC by almost 14 points
altogether.
Overall, Indian market today was helped by mixed private banks
& financials, FMCG, techs, media, healthcare, property developers/reality,
consumption, energies & infra, while dragged by metals & PSBS; PSBS may
come under renewed pressure on S&P rating action as they need to raise
funds from the market at lower rates for their recaps amid various confusions
about IBC rules & NPA resolution.
SGX-NF
BNF
EURUSD
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