Market Wrap: 04/01/2018 (17:00)
NSE-NF (Jan):10535 (+66; +0.63%)
(TTM PE: 26.87; Abv 2-SD of 25; TTM Q1FY18 EPS: 391;
NS: 10505; Avg PE: 20; Proj FY-18 EPS: 418; Proj Fair Value: 8360)
NSE-BNF (Jan):25523 (+136; +0.54%)
(TTM PE: 29.37; Near 3-SD of 30; TTM Q1FY18 EPS:
867; BNS: 25463; Avg PE: 20; Proj FY-18 EPS: 961; Proj Fair Value: 19220)
For 05/01/2018: Jan-Fut
Key support for NF: 10525/10490-10460/10395
Key resistance for NF:
10585/10610-10650/10695
Key support for BNF: 25400/25200-25000/24800
Key resistance for BNF:
25550/25600-25800/25900
Trading Idea (Positional):
Technically, Nifty Fut-Jan (NF) has to sustain over 10610 area for further
rally towards 10650-10695 & 10745-10795 zone in the short term (under
bullish case scenario).
On the flip side, sustaining below 10585 area, NF may fall towards
10525/10490-10460/10395 & 10325-10275 zone in the short term (under bear
case scenario).
Technically, Bank Nifty-Fut (BNF) has to sustain over 25600 area for further
rally towards 25800/25900- 26100/26200 & 26325-26615 zone in the near term
(under bullish case scenario).
On the flip side, sustaining below 25550 area, BNF may fall towards 25400/25200-25000
& 24800-24525 area in the near term (under bear case scenario).
Indian market (Nifty Fut-Jan/India-50) today (4th Jan) closed around 10535, surged by almost 66 points (+0.63%)
on positive global cues, some rebound in USD and narrative of synchronized
global growth after blockbuster PMI & PSBS recaps optimism after Govt seeks
Parliament nod for Rs.0.80 tln additional capex (recap bonds); it made a
session high & low of around 10537-10463.
Apart from PSBS recaps narrative, Indian market
sentiment was also boosted by recovery in service PMI and metals optimism on
perception of synchronized global growth amid record high MFG PMI across the DM
& EM.
Although, the ultimate structure of PSBS recap
bonds may not alter the fiscal math significantly, it will affect fiscal
deficit by around 0.3% on account of interest & some other costs and thus
market is in dilemma of fiscal discipline & fiscal stimulus. Govt may also
give thrust on rural capex this year with 2019 general election in sight.
For the time being, Govt may infuse direct cash
for around Rs.0.08 tln to some selected mid cap PSBS, which are in dire need
for an immediate capital to stay afloat as almost 50% of PSBS is now under RBI
watch (Prompt Corrective Action-PCA), having GNPA for Rs.3 tln out of total reported
GNPA of Rs.8.4 tln.
Market may be also concerned about higher oil
(Brent over $68 on Iran tensions & Trump’s stance), ghost of LTCGT &
Q3FY18 earnings worries. But, market sentiment also improved today after
administration took tough stance against caste/political violence in Mumbai
(MH) yesterday.
Today, Indian Service PMI for Dec came upbeat at
50.9 vs prior 48.5; although it’s just above the boom/bust line of 50, still
it’s a huge improvement from Nov’17 (Post GST implementation disruption); Composite
PMI for Dec was at 53.0 vs prior 50.3 (MOM).
As par Markit: “The data endorses the standpoint
that the economy is recovering from the implementation of the twin shocks of
demonetization and GST; That said, services remain on a weak growth trajectory
amid reports that the GST was still hindering efforts to secure new clients”.
All eyes may be now on India’s official forecast
for Q4FY18 GDP tomorrow, which is set to come around 6.7%, the lowest since
2014 after recent DeMo & GST disruption.
Market will also closely watch earnings trajectory
for Q3FY18 to justify the lofty valuations being driven primarily by the power
of domestic liquidity, especially after DeMo.
Surging Brent oil eyeing $70 may be another
serious headwind for the Indian macro as the country imports almost 80% of its
requirement; although a strong INR may cushion some of the adverse impact,
still it’s not sufficient and Govt may compel to breach the fiscal deficit
target by more than 3.5-3.7% as political compulsion in a pre-election year may
constrain the Govt to cut public capex or rise domestic fuel prices.
In fact, Govt may now be forced to roll back some
of the additional cess imposed earlier (to meet revenue shortfall when oil was
at lower level around $45-35), so that OMCs could be saved from bleeding and
Indian consumers do not have to borne the adverse impact of rising oil more
than its current international price; also a surging domestic fuel prices will
push CPI beyond RBI’s tolerance level, forcing it to hike rates in the coming
days.
Today Nifty was supported mostly by L&T (fund
raising for subsidiary-L&T Foods), VEDL, Bajaj Fin, SBI, ONGC (higher oil),
RIL, Tata Steel, HDFC Bank, Asian Paints & HPCL by around 50 points
altogether.
Nifty was dragged mostly by Tata Motors, Infy,
Eicher Motors, Maruti, Power Grid, BPCL, HCL Tech, Tata Power, Hero Motors
& ICICI Bank (RBI asked to not peruse NCLT/IBC case against JPA).
Overall, Indian market was today helped by PSBS
(recaps optimism), financials, mixed private banks, metals, FMCG, media,
pharma, energies, infra & consumption stocks, while it was dragged by auto
(mixed Dec sales & rising RM cost), reality & selected private banks
(strong PSBS after recaps may affect their business).
SGX-NF
BNF
WTI
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