Tuesday 5 December 2017

Nifty Inched Higher After A Days Of Consolidation Amid Mixed Global Cues & Hopes Of RBI Rate Cut



Market Wrap: 04/12/2017 (17:00)

NSE-NF (Dec):10166 (+12; +0.12%) 

(TTM PE: 25.90; Abv 2-SD of 25; TTM Q1FY18 EPS: 391; NS: 10128; Avg PE: 20; Proj FY-18 EPS: 418; Proj Fair Value: 8360)

NSE-BNF (Nov):25242 (-18; -0.07%) 

(TTM PE: 28.92; Near 3-SD of 30; TTM Q1FY18 EPS: 867; BNS: 25075; Avg PE: 20; Proj FY-18 EPS: 961; Proj Fair Value: 19220)

For 05/12/2017: 

Key support for NF: 10110/10090-10050/10010

Key resistance for NF: 10205/10225-10310

Key support for BNF: 25200/25100-24950/24700

Key resistance for BNF: 25600/25750-25875/26050

Trading Idea (Positional):

Technically, Nifty Fut-Dec (NF) has to sustain over 10225 area for further rally towards 10310-10350 & 10425-10475 zone in the short term (under bullish case scenario). 

On the flip side, sustaining below 10205-10195 area, NF may fall towards 10110/10090-10070/10050 & 10010-9970 zone in the short term (under bear case scenario).

Technically, Bank Nifty-Fut (BNF/BNS) has to sustain over 25600 area for further rally towards 25750-25875 & 26050-26200 zone in the near term (under bullish case scenario).

On the flip side, sustaining below 25550 area, BNF may fall towards 25400-25200/25100 & 24950-24700/24600 area in the near term (under bear case scenario).

Indian market (Nifty Fut/India-50) today (4th Dec) today closed around 10166, edged up by almost 12 points (+0.12%) after initial bout of volatility on mixed global/Asian cues and concern of fiscal slippages & hopes of an imminent RBI cut day after tomorrow; it made a low of around 10127 and opening ticks high of around 10198.

Although there were no hopes of a rate cut this time, some analysts/economists polled by BBG are assuming a rate cut of 0.25% by RBI considering slower inflation & growth; Govt is also pressurizing RBI to cut rates immediately as it think the central bank is always behind the inflation curve.

As par SBI, country’s largest lender, overall corporate loan growth is still muted around 6-8% although retail credit growth is quite strong. Looking ahead, Banks will focus on quality of lending to corporates rather than quantity; but it may be very tough to find eligible & quality corporate borrowers willing to take loan from Indian banks at high rates rather than from oversees market for a much lower rate with a viable project in hand. 

Banks & financials today dragged the market, while techs led by Infy supported it after new CEO and overall renewed tech optimism about growth. Metal stocks gain on Govt’s plan to auction up to 70 mineral blocks; RIL dragged the index most. Biocon gains 15% after US FDA nod for Trastuzumab, an anti-cancer biosimilar. PSBS got some late support today on plan of fund raising by BOB, PNB.

Also overall stretched valuation, higher USD & higher oil coupled with higher Indian bond yields may have affected the sentiment today. Indian 10YGSEC bond yields soared to almost 7.10% today after upbeat Q2 GDP & MFG PMI as bond market is not expecting any RBI rate cut this time or in the near future despite Govt pressure & some hopes from stock market. USDINR-I was trading around 64.55, edged down by almost 0.10%.

Meanwhile another global rating agency Fitch today cuts India's FY18 & FY19 GDP growth forecast, says India's growth has repeatedly disappointed in recent quarters but expects a pick up in the next two years; for FY-18 they have projected 6.7% vs 6.9% earlier; for FY-19, projection is 7.3% vs 7.4% earlier.

As par Fitch (on India):”Growth has repeatedly disappointed in recent quarters, although this has partly reflected one-off factors including the demonetization programme and disruptions related to GST implementation; The Indian economy picked up in 3Q17, with GDP growing by 6.3% YoY, up from 5.7% in 2Q17. However, the rebound was weaker than we expected”.

Thus market may be little disappointed as Fitch may not upgrade India in line with S&P and India’s GSEC bond yields may continue hover above 7%, causing more pressure on the stressed corporate B/S (higher interest costs).

After RBI, all focus will shift for GJ election and as par some early opinion poll projections; BJP may get 95, while INC may win in 82 seats this time with almost equal share of votes (43%). Although, more such projection will come and BJP/NAMO is supposed to win convincingly by securing at least 100-120 seats, overall result may come below expectations amid DeMo, GST and un/underemployment blues (political risk for the market).

Today Nifty was supported by Infy, HDFC, Tata Motors, HUL, IOC, IBULLS HSG FIN, VEDL, HCL TECH, ZEEL and L&T by almost 26 points altogether.

Nifty was dragged by RIL, HDFC Bank, Bajaj Fin, Bharti Infratel, Maruti, UPL, Yes Bank, Ultratech Cem, Kotak Bank & ICICI Bank by around 21 points cumulatively.

Overall, today Indian market was helped by FMCG, techs, media, metals, PSBS while dragged by selected private banks & financials, auto, pharma, reality & energies.






SGX-NF


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