Market Mantra: 26/12/2017 (09:00)
SGX-NF: 10500 (-5)
For the Day: updated:13;50
For 26/12/2017: Dec-Fut
Key support for NF: 10490/10465-10425/10375
Key resistance for NF:
10525/10550-10600/10640
Key support for BNF:
25600/25400-25200/24950
Key resistance for BNF:
25775/25875-26050/26200
Trading Idea (Positional):
Technically, Nifty Fut-Dec (NF) has to sustain over 10550 area for further
rally towards 10600/10640- 10695 & 10745-10795 zone in the short term
(under bullish case scenario).
On the flip side, sustaining below 10525 area, NF may fall towards 10490/10465-10425/10375
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 25725-25675 area, BNF may fall towards
25600/25400-25200/24950 & 24850-24700 area in the near term (under bear
case scenario).
As par early SGX indication, Indian market (Nifty Fut-Dec/India-50) may open around 10500,
almost flat on mixed Global/Asian cues amid holiday thinned trading. US market
slips on Friday weekend as the passage of US tax reform bill & a temporary
extension of the debt limit may have been already discounted by the market.
DJ-30 edged down by around 0.10%, S&P-500
closed almost unchanged around 2683, while NQ-100 edged down by almost 0.07% ahead
of long X-mas holidays. US bond yields edged up to 2.486% from 2.483% on
concern of higher tax/fiscal deficits after implementation of corp &
personal tax cuts and as bond yield rose, utilities getting weaker, dragging the
index on the perception of “bond proxies”.
US index future (SPX-500) is now trading around
2686, almost unchanged on mixed Asian/Global cues. Technically SPX-500 now has
to sustain above 2710-2720 area for any further “Santa Rally”; otherwise it
will come down and sustaining below 2670, will fall more.
Overall, as 2017 bull year is ending, as par
latest data, investors have withdrawn almost $14.5 bln from equity market
(MF/ETF) last week, the biggest weekly outflow since Brexit. At around 2697
(recent lifetime high), TTM PE for S&P-500 is around 25.38 on reported Q3
EPS at 106.27, which may be extremely stretched, considering the average
historical valuation of around 18. The higher PE may be a reflection of US corp
tax cut optimism on corp earnings in 2018-19.
On Friday weekend, EU market edged down 0.01% on
Stoxx-600, primarily driven by plunge in Spain (IBEX-35) by around 1.2% on
renewed Catalan tensions after the pro-independence coalition parties won the regional
election cumulatively, but overall situation is calm as despite win,
pro-independence coalition parties may not be able to form a Govt in reality as
several separatists leaders are on exile and can’t attend the Parliament to
stake claim.
DAX-30 fell 0.30%, CAC-40 slipped 0.40% despite an
upbeat French GDP (+0.6%) & consumer spending (+2.2%).
But, overall political situation in Catalonia is
now fluid as the debate of independence will heats up again after comfortable
win by pro-independence coalition parties (70 out of 135) in a huge setback for
Madrid. Rajoy’s party (Spanish PM) got only 3 seats in a major debacle; Barcelona
(Catalonia) based banks dragged the Spanish market most on Friday.
But overall, EUR was resilient despite these
Catalan tensions & only edged down and helped to contain any meaningful
damages to the market. Despite EU political jitters (Catalonia/German coalition
Govt delays/Italy election), EUR is acting as a “Teflon coated” currency as EU
policy makers are now debating about rate hikes/normalization in 2019 after QE
will end fully by Dec’18.
Although, ECB is slated to purchase QE bond (AP)
of 60 bln EUR/pm to 30 bln EUR/pm from Jan’18 to Sep’18, market is expecting
that ECB will eventually do a short taper from Oct-Dec’18 @20/10/5 bln EUR and
close the AP completely by Dec’18 and thereafter will gradually hike
rate/normalize its extraordinary accommodative/loose monetary policy from
H2CY19, depending upon the actual Fed stance & EZ economic conditions/core
inflation.
FTSE-100 edged down by almost 0.20% from the
record high, dragged by commodity, banks & financials (Spanish/Catalan
tensions) and industrials, while helped by techs, consumers/retails (Christmas
shopping) & utility related shares; GBP closed almost flat amid ongoing UK
political & Brexit squabbling after a brief small intra rally on an upbeat
Q3 UK GDP (+1.7%). IMF has downgraded UK’s 2017-18 GDP to 1.6-1.5% on Brexit
uncertainty and any hard Brexit notion.
Asian stocks are also trading mixed today amid
holiday thinned trading week, with Australia & Hong-Kong closed today for “Boxing
Day” holiday along with almost all the other EU markets & Canada; only US
will open today.
Japan (Nikkei-225) edged down by 0.20% from its 26
yrs high dragged by techs, auto & retailers; USDJPY is almost flat after an
encouraging JP core CPI (Nov) at 0.9% vs est/prior 0.8% (YOY). Although BOJ Gov
(Kuroda) was very optimistic today about JP economic prospect & current
conditions, he sees wage growth more sluggish than previously as JP cos are
against price rising for concern of losing business. Thus overall comments from
Kuroda today may be on the dovish side as usual.
China (SSE) jumped by almost 0.78% and well off
the earlier day loses/low, but both the blue-chip index and China Next (start
up) dipped today amid tight market liquidity on HK holiday; notably 1-M SIBOR
rate soared to 4.9277% today, the highest level since April’15.
As par recently concluded Govt policy discussion
forums, China may set its 2018 money growth at all time low around 9% to
contain excessive leveraging in the economy.
Back to home, Indian market (Nifty
Fut-Dec/India-50) is now trading around 10505, almost flat after making a day
high & low of 10515-10497 so far in an extremely range bound day till now
as most of the institutions & HNI desks are in holiday mood today/this
week. Nifty-50 (Spot) made another life time high today (10515).
As 2017 is ending in an upbeat note after
providing good trading/investing opportunities for both bears & bulls, all
focus will be now on upcoming union budget and any extraordinary rural economy facie
fiscal stimulus & fiscal deficit thereof, Q3/Q4 earnings, higher core inflation
trajectory/oil prices/Indian bond yields, speed of NPA/NPL resolution, PSBS
recaps and resumption of meaningful private capex & GDP.
Also, earnings recovery, series of state elections
in 2018 and an early general election on 2019 and any RBI rate hikes apart from
various geo-political jitters & global QT will be in focus. At present run
rate & various economic conditions, Nifty EPS for FY-18 may finally come around
418 and market is expecting a 20% growth in FY-19 for a Nifty EPS of around
500, which may be a tall order, considering higher Indian bond yields (funding
costs), higher oil (RM cost), higher INR (negative for export savvy Nifty
index).
Also, DeMo & GST blues & spillovers may
affect the overall earnings trajectory and thus considering the actual current
trend, a Nifty EPS of around 450 looks reasonable for FY-19, provided the FY-18
EPS indeed come around 418; present Nifty EPS for Q2FY18 (TTM) is reported at
around 391, consistently below the 400 mark for the last few years/QTRS.
At an average FWD PE of 20 & FY-19 projected
EPS at 450, the wholesale price sticker for Nifty should be around 9000
(450*20) against MRP of 10500 as of now. Severe criticism by CAG over India’s
fiscal accounting policies and inconsistencies may be an early red flag
considering overall combined fiscal deficit & higher Govt debt; thus Indian
10YGSEC bond yields at 7.30% are not so much optimistic about prospect of
Indian economy in 2018, quite divergently from the EQ market.
But, bond market may be an early & true
reflection of the state of the economy rather than stock market; Indian bond
yield may soar to 7.50% by next few months as par current trend & economic conditions.
SGX-NF
SPX-500
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