Friday, 29 December 2017

Nifty May Consolidate On The Last Trading Day Of 2017 Amid Mixed Global Cues & Fiscal Worries, But Set For Around 28% Gain For The Eventful Year With Lots Of Volatility

Market Mantra: 29/12/2017 (09:00)

SGX-NF: 10500 (-12)

For the Day: updated: 14:20

For 29/12/2017: Jan-Fut

Key support for NF: 10470/10430-10400/10350

Key resistance for NF: 10555/10575-10610/10650

Key support for BNF: 25400/25200-24950/24800

Key resistance for BNF: 25600/25775-25875/26050

Trading Idea (Positional):

Technically, Nifty Fut-Dec (NF)/NS has to sustain over 10575 area for further rally towards 10610/10650-10695 & 10745-10795 zone in the short term (under bullish case scenario). 

On the flip side, sustaining below 10555 area, NF may fall towards 10470/10430-10400/10350 & 10285-10190 zone in the short term (under bear case scenario).

Technically, Bank Nifty-Fut (BNF) has to sustain over 25775 area for further rally towards 25875- 26050 & 26200-26325 zone in the near term (under bullish case scenario).

On the flip side, sustaining below 25725-25600 area, BNF may fall towards 25400/25200-24950 & 24800-24575 area in the near term (under bear case scenario).

Indian market (Nifty Fut-Jan/India-50) is now trading around 10535, edged up by almost 0.18% on mixed Global/Asian cues & domestic fiscal worries amid year-end portfolio rejig; so far it made an opening session low of 10469 & day high of 10555 after opening almost flat around 10502. Overall, Indian market is set to gain by almost 28% vs MSCI-APC (EX-JP) of 30% and US’s 20% for 2017 amid huge volatility; both bulls & bears should be happy, if timing was perfect.

But worries about fiscal slippages may continue to haunt the market as it may touch as high as 3.7% in FY-19, being an election year; Govt may spend heavily on rural capex after DeMo & GST blues coupled with un/under employment problem. As par some analyst, Fiscal deficit may even touch 3.5% this year (FY-18) amid subdued GST & non-tax revenues due to DeMo & GST disruptions.

Meanwhile, India’s fiscal deficit for Apr-Nov’17 period flashed at Rs.6.1 tln vs Rs.4.58 tln (YOY); revenue gap is at Rs.4.9 tln vs 3.48 tln (YOY). Thus Govt has already breached the target of 3.2% fiscal deficit in Nov’17 and total fiscal deficit was 112% of the FY-18 estimate amount of Rs.5.5 tln.

Subsequently, 10GSEC bond yields surged to almost 7.42%, but later retraced slightly and now trading around 7.34% after an upbeat Nov revenue receipts figure providing some relief to the market, especially PSBS.

Total revenue figure may be also mixed as Govt says April-Nov receipts at Rs 8.67 tln Vs Rs 8.29 tln; spending at Rs 14.79 tln Vs Rs 12.87 tln (YoY); capital spend at Rs 1.84 tln Vs Rs 1.42 tln (YoY).

Market also got some boost today after Govt amended some clause of the IBC act: debtors (defaulters) who haven't operationalised their accounts by paying full interest are ineligible; undischarged insolvents are not eligible to bid for assets under IBC Act (effectively prohibited back door entry for the willful as well as genuine defaulters). But overall recoveries/resolution of NPA/NPL may be also hampered on practical ground with no hair cuts for interest as well as principle amount of loan.

Overall reaction for R-JIO/R-COM deal may be also mixed: 

Fitch says R-COM assets acquisition, especially fibre outlay, good move for the long-term; Deal will bring in better fibre network for R-JIO, which will gradually increase tariff; Recent plans indicated higher tariffs; Expect R-COM/R-Jio deal to be valued at Rs.0.20-0.25 tln (total debt of R-COM is around Rs.0.44 tln); might take a bit longer to monetize the land parcel; Had negative outlook on Indian telecom industry for 2017.

As par MS: EPS dilutive by 1-3% on FY19-20 estimates for RIL; Assume deal EV closer to the debt reduction announced by R-Com; will raise RIL net debt by ~10-12%.

Although, bailing out of ADAG by his elder brother MDAG may be an exception, stressed corporate BS may continue to haunt the Indian market in 2018 amid higher borrowing & roll over cost (higher bond yields).


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