Wednesday, 10 January 2018

Nifty Edged Up On Global Equity Euphoria And PSBS Merger Optimism & Upbeat Direct Tax Collection

Market Wrap: 09/01/2018 (17:00)

NSE-NF (Jan):10641 (+10; +0.09%) 

(NS: 10637; TTM Q2FY18 EPS: 391 TTM PE: 27.20; Abv 2-SD of 25; Avg FWD PE: 20; Proj FY-18 EPS: 418; Proj Fair Value: 8360)

NSE-BNF (Jan):25710 (-15; -0.06%) 

(BNS: 25676; TTM Q2FY18 EPS: 867; TTM PE: 29.61; Near 3-SD of 30; Avg FWD PE: 20; Proj FY-18 EPS: 961; Proj Fair Value: 19220)

For 10/01/2018: Jan-Fut

Key support for NF: 10600/10550-10490/10415

Key resistance for NF: 10675/10700-10775/10815

Key support for BNF: 25600/25450-25300/25200

Key resistance for BNF: 25875/26000-26100/26250

Trading Idea (Positional):

Technically, Nifty Fut-Jan (NF) has to sustain over 10700 area for further rally towards 10750/10775- 10815/10860 & 10955-11095 zone in the short term (under bullish case scenario). 

On the flip side, sustaining below 10675-10655 area, NF may fall towards 10600/10550-10490/10415 & 10350-10200 zone in the short term (under bear case scenario).

Technically, Bank Nifty-Fut (BNF) has to sustain over 25875 area for further rally towards 26000/26100-262000/26250 & 26325-26615 zone in the near term (under bullish case scenario).

On the flip side, sustaining below 25825 area, BNF may fall towards 25600/25450-25300/25200 & 25000-24800 area in the near term (under bear case scenario).

Indian market (Nifty Fut-Jan/India-50) today (9th Jan) closed around 10641, edged up by almost 10 points (+0.09%) on positive global cues, optimism about earnings & upbeat direct tax collection coupled with concern for a populist budget ahead of elections and fiscal slippages thereof. Also strong opening cues from EU on lower EUR may have also helped the domestic market sentiment.

Nifty-Fut made am opening session low of 10612 & late hours high of 10657 and Nifty-50 (spot) made another record high of 10659, before closing around 10637, at another milestone high. But midcaps (broader market) snapped 4 days winning streaks ahead of earnings season.

Towards the closing hours, market got some boost on reports that Govt is considering next major merger between PSU banks early next fiscal (FY-19); Govt likely to announce new bank merger proposal in the Budget.

Meanwhile, India’s direct tax collection for Apr-Dec’17 (Q3FY18) came at Rs.6.56 tln vs 5.53 tln (YOY); a growth of around 18.2%; this is almost 67% of total BE (FY-18) at Rs.9.8 tln vs 65% (YOY); Corp income tax collection was at Rs.3.72 tln, while personal income tax came around Rs.2.65 tln, including Rs.0.11 tln for various IDS (income disclosure scheme) provided by the Govt after DeMo. 

Overall direct tax figure still may be muted and thus market may be also concerned about fiscal math, although this figure may be above market estimates and thus may have also helped the market sentiment to some extent today.

But some adverse report about growing NPA/NPL in affordable housing sector loan books from self-employed & SME borrowers may have also affected the overall market sentiment; although corporate/Govt employees housing loan repayments are fine.

After market hours, Govt signaled about FDI reforms with 100% FI stake approval in Airlines (to save Air-India which is stressed with huge debt of Rs.0.55 tln), power exchanges, real estate broking, single brand retail (automatic approval) and ease of FDI in construction sector. Govt may also look into the issues of ease of doing business related TO foreign direct investment (FDI) in tomorrow’s cabinet meet (10th Jan).

Elsewhere, World Bank (WB) has forecasted Indian GDP growth for 2017-2018 at 6.7%-7.3%, citing “huge potential” for the Indian economy, although in the short term, it’s being affected due to spillover effect of DeMo & GST blues. WB has also projected China growth for 2017-18 at 6.8-6.4%. The latest WB projection for 2017 is less than 0.5% & 0.2% for 2018 from earlier projections.

But WB has also urged India to take necessary steps to boost private investments, NPA resolution, labour market & healthcare reform despite having a favourable young demography, a rare phenomenon in other DM/EM. 

But proper implementation of GST in simple format (one nation one tax concept) & adequate recaps for PSBS is also required. Indian private/corporate capex is being affected due to stressed B/S & huge NPA in bank loans; i.e. the legacy issue of “twin balance sheet” problem.

Nifty was today helped mostly by RIL, ITC, IOC, Yes Bank, Tata Motors, Infy, Coal India (increase of thermal coal prices), Wipro, HDFC Bank & Asian paints by around 103 points, while it was dragged by Eicher Motors (subdued sales of costly models-2W, may be a victim of DeMo), ZEEL, Bharti Infratel (ongoing uncertainty about its tower asset sales), Bajaj Fin, ICICI Bank, VEDL, HDFC (affordable housing loan woes), Maruti, Bharti Airtel and L&T by almost 60 points cumulatively.

Overall, today Indian market was helped by energies, mixed private banks, FMCG, techs, reality while dragged by automakers, PSBS, financials, media, pharma, consumption & infra.

For Indian market, Brent Oil now hovering around $70 may be a big risk for its fiscal consolidation in the coming days.




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