Market Wrap: 06/12/2017 (17:00)
NSE-NF (Dec):1074 (-73; -0.72%)
(TTM PE: 25.69; Abv 2-SD of 25; TTM Q1FY18 EPS: 391;
NS: 10044; Avg PE: 20; Proj FY-18 EPS: 418; Proj Fair Value: 8360)
NSE-BNF (Nov):24942 (-283; -1.12%)
(TTM PE: 28.77; Near 3-SD of 30; TTM Q1FY18 EPS:
867; BNS: 25125; Avg PE: 20; Proj FY-18 EPS: 961; Proj Fair Value: 19220)
For 07/12/2017: Dec-Fut
Key support for NF:
10050-10010/9970
Key resistance for NF:
10135/10155-10210/10245
Key support for BNF:
24750/24600-24400
Key resistance for BNF:
25300-25450/25700
Trading Idea (Positional):
Technically, Nifty Fut-Dec (NF) has to sustain over 10155 area for further
rally towards 10210-10245 & 10285-10345 zone in the short term (under
bullish case scenario).
On the flip side, sustaining below 10135-10090 area, NF may fall towards
10050-10010 & 9970-9910 zone in the short term (under bear case scenario).
Technically, Bank Nifty-Fut (BNF) has to sustain over 25300 area for further
rally towards 25450-25700 & 25875-26050 zone in the near term (under
bullish case scenario).
On the flip side, sustaining below 25250-25100 area, BNF may fall towards
24750-24600 & 24400-24100 area in the near term (under bear case scenario).
Indian market (Nifty-Fut/India-50) today (6th Dec) closed around
10074, plunged by almost 73 points (-0.72%) on subdued Global cues &
“Hawkish Hold” by RBI today (as highly expected); it attempted some recovery
soon after RBI policy decision and made the day high of around 10127, but
subsequently plunged to the session low of 10053 as RBI upgraded Q3/Q4
inflation, while kept the GVA growth at the previous level.
Market was also under immense pressure as various opinion polls
including unofficial betting sources indicate that this time BJP may get 90-105
seats against INC’s 70-85 with around 43% voting share each.
Thus BJP may win
far less than the 150 seats required for 2/3rd majority in GJ and may not get earlier expected 120-130
seats and this may be a huge setback for NAMO/Modinomics amid DeMo & GST
blues coupled with surging un/under-employment issues.
Govt may also go slow in its future course of structural reforms
amid political risks in 2019 general election and thus market may be highly
disappointed.
RBI: Leaves repo rate unchanged at 6.0%; reverse repo unchanged at
5.75%; cash reserve ratio unchanged at 4.0%; retains neutral policy stance; 5
from 6 MPC members voted to keep rates on hold; MPC remains committed to
keeping headline inflation close to 4% on durable basis; sees H2FY18 inflation
4.3-4.7% vs 4.2-4.6% earlier; upside risk to core/headline inflation continues;
recent rise in oil prices may have negative impact on profit margins and GVA; Real
GVA For FY18 Retained at 6.7%; Expect GVA growth of 7-7.8% for Q3-Q4FY18.
RBI Is Hawkish On
Inflation & Optimistic On Growth:
Overall RBI stance is quite hawkish on inflation, but also
optimistic on growth (GVA/GDP). RBI is also concerned of QT by DM (Fed/ECB) and
its effect on USD/EUR & subsequent adverse effect on India’s imported
inflation.
Thus, when a central bank is hawkish on both inflation &
growth, market can’t expect any rate cut in the foreseeable future and if Fed
goes on hiking as par its 2018 dot-plots (3-4 hikes), then RBI has no other
option but to hike & catch the Fed for the sake of higher USDINR real bond
yield differentials, everything being equal.
Banks were also under pressure after RBI comments that there are
serious deficiencies in NPA recognition process in some cases. After hawkish
hold stance of RBI, Indian GSEC bond yields surged to almost 7.07%, while
USDINR-I edged up by around 0.15% and made a session high of 64.70 so far.
Normally for a hawkish central bank, currency should appreciate,
but here in India overall FX fund flow is more important than macro. An
unexpected rate cut would stimulate the stock market and more FPI funds will
flow to Indian equity market; but a hawkish RBI will also help the Indian bond
yields & FPIS flow in the bond market.
Thus today’s RBI policy is neutral/negative for stock market,
but may be positive for bond market on better Indian yields. But higher bond
yields/borrowing costs will also be not good for the Indian cos, which are already
stressed.
RBI is also quite optimistic about US/EU/JP economic outlook and
growth and thus expecting normalization of extraordinary loose monetary policies
by them in 2018-19. RBI is also concern about higher trajectory of USD & Oil
prices on Indian economy and inflationary impact of the same apart from 7-CPC/HRA
(up to 0.35% till Dec’17) & surging food prices.
RBI expects that Govt plan to recaps selected PSBS based on
various criteria will eventually help in revival of corporate lending &
private capex; but also sees great opportunities for the Indian cos to raise
further capital from the booming Indian capital market. RBI also want better transmission
of previous rate cuts by the banks on current O/S loan amount.
Thus, rising inflationary pressure, concern of fiscal slippages
and global chorus of QT may keep RBI not only in “hawkish hold” mode in the
coming months, but RBI may also signal rate hikes in late 2018 depending upon
the actual Fed stance.
Today Nifty was supported by RIL, Maruti, Infy, HUL & HCL
Tech by around 17 points altogether, while it was dragged by HDFC, ICICI Bank,
HDFC Bank, SBI, VEDL, L&T, Bosch, Eicher Motors, Bajaj Fin & ITC by
almost 57 points cumulatively.
Overall, today Indian market was helped by techs (higher USD)
and energies (higher overnight oil & R-Jio optimism-RIL), while it was
dragged by almost all the remaining sectors, specially banks & financials,
auto, FMCG, media, metals (global plunge over China slowdown concern), pharma, reality
& infra.
SGX-NF
BNF
GBPUSD
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