Thursday, 28 December 2017

Nifty Skids On Concern For Fiscal Slippages

Market Wrap: 27/12/2017 (17:00)

NSE-NF (Dec):10492 (-34; -0.33%) 

(TTM PE: 26.83; Abv 2-SD of 25; TTM Q1FY18 EPS: 391; NS: 10491; Avg PE: 20; Proj FY-18 EPS: 418; Proj Fair Value: 8360)

NSE-BNF (Nov):25443 (-230; -0.90%) 

(TTM PE: 29.41; Near 3-SD of 30; TTM Q1FY18 EPS: 867; BNS: 25496; Avg PE: 20; Proj FY-18 EPS: 961; Proj Fair Value: 19220)

For 28/12/2017: Dec-Fut/SPOT

Key support for NF: 10455-10400/10340

Key resistance for NF: 10525/10575-10610/10650

Key support for BNF: 25400-25200/24950

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 10555-10525 area, NF may fall towards 10455-10400/10340 & 10270-10180 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-Dec/India-50) today (27th Dec) closed around 10492, skids by almost 34 points (-0.33%) and well off the day high of 10566 on concern for fiscal slippages after Govt signalled that it could borrow more than the FY-18 estimate.

Govt has already borrowed Rs.3.72 tln in H1FY18 and was supposed to borrow another Rs.2.08 tln in H2FY18. Govt will soon issue official statement on fiscal situation and any additional borrowing in Q4FY18; subsequently, it made a session low of 10476; EU market also came into pressure on tech/Apple woes, dragging the Indian market further.

Indian market today opened around 10525, almost flat on subdued Global/Asian cues and concern about fiscal slippages amid higher Oil & muted GST revenue, but soon surged to another record high for Nifty Fut-I (10566) & Nifty-50 (Spot @10552) on telecom debt resolution optimism (R-COM) & an extended “Santa Rally” and year end (CY) fund flows/portfolios adjustments.

But ongoing rally in Oil and muted GST revenue may have spoiled the “Santa Party” as market is worried about fiscal slippages; today Indian 10YGSEC bond yield hits another milestone high at 7.310% and is closed around 7.26%; USDINR-I closed around 64.32 (+0.05%).

India Is Set To Breach Fiscal Deficit Target For FY-18:

After market hours, Govt confirmed that it will borrow an additional Rs.0.50 tln for remaining Q3FY18 vs market estimates of Rs.0.25 tln; as par various estimates, now the fiscal deficit may have already breached the targeted 3.2% of estimated GDP and by FY-18, it may touch as high as 3.5%.

Although there is some confusions amid contradictory statements by Govt officials about exact amount of estimated additional borrowings, as par some other estimates fiscal deficit may reach as high as 3.7% of FY-18 GDP if actual GDP does not grow as expected amid DeMo & GST blues (economic slowdown) and higher Oil & Govt capex to dig out the economy from its deepest slumps since 2014.

Govt is expecting recent hikes in custom duties on several items and an average monthly GST collection of Rs.0.85-0.90 tln may cushion the fiscal slippages impact; Govt is looking for the Dec’17 QTR GST and higher corporate advance tax collection figure along with incremental disinvestment proceeds for its revenue shortfall makeup. Govt has also slashed interest on several small savings instrument by 0.20% yesterday in an effort to minimize the fiscal impact with modest political risk.

Overall, rating agencies may not be “too happy” with this fiscal deficit breach and this may be a negative factor for India’s rating action in the days ahead.

Meanwhile, Indian market regulator, SEBI is also tightened the screws on stressed cos & rating agencies after R-COM debt fiasco & formation of huge stressed assets in the banking system, affecting the overall market sentiment. All eyes may be also now on the Budget preparations for FY-19, which will be the last full fledged budget by the Govt before going into 2019 poll.

Today Nifty was helped mostly by Sun Pharma (US FDA approval), VEDL (higher metals/copper), TECHM, Wipro, ZEEL, DRL, M&M, Auro Pharma, HUL & UPL by around 17 points altogether, while it was dragged by IOC (higher Oil negative for OMC), ICICI Bank (mis-selling of investment products & higher Govt borrowing, negative for banks), HDFC Bank, RIL, ITC, TCS, L&T, Bajaj Fin, Bharti Airtel & SBI by almost 39 points cumulatively.

Overall, today Indian market was helped by media, pharma & mixed techs while dragged by Banks & Financials (higher Govt borrowing & higher bond yields and R-COM NPA provisions), FMCG, metals, reality, energies/OMC & consumer staples.





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