Tuesday, 16 January 2018

Nifty Jumped On Private Banks And Earnings Optimism & Mixed Macro Data

Market Wrap: 15/01/2018 (17:00)

NSE-NF (Jan):10745 (+59; +0.55%) 

(NS: 10742; TTM Q2FY18 EPS: 391 TTM PE: 27.47; Abv 2-SD of 25; Avg FWD PE: 20; Proj FY-18 EPS: 418; Proj Fair Value: 8360)

NSE-BNF (Jan):26045 (+302; +1.17%) 

(BNS: 26069; TTM Q2FY18 EPS: 867; TTM PE: 30.07; Abv 3-SD of 30; Avg FWD PE: 20; Proj FY-18 EPS: 961; Proj Fair Value: 19220)

For 16/01/2018: Jan-Fut

Key support for NF: 10730/10695-10640/10590

Key resistance for NF: 10785/10805-10860/10905

Key support for BNF: 25800/25600-25400/25200

Key resistance for BNF: 26100/26250-26325/26415

Trading Idea (Positional):

Technically, Nifty Fut-Jan (NF) has to sustain over 10805 area for further rally towards 10860-10905 & 10955-11095 zone in the short term (under bullish case scenario). 

On the flip side, sustaining below 10785 area, NF may fall towards 10730/10695-10640 & 10590-10540 zone in the short term (under bear case scenario).

Technically, Bank Nifty-Fut (BNF) has to sustain over 26250 area for further rally towards 26325-26415 & 26580-26615 zone in the near term (under bullish case scenario).

On the flip side, sustaining below 26200-26100 area, BNF may fall towards 25800-25600 & 25400-25200 area in the near term (under bear case scenario).

Indian market (Nifty Fut-Jan/India-50) today (15th Jan) closed around 10745, jumped by around 59 points (+0.55%) after making an opening session low of 10711 & mid-day high of 10774; but broader market has faced some selling pressure mirroring similartrend in China & HK and flat opening of EU market contrary to earlier solid gains.

Indian market sentiment was today boosted by renewed optimism about private banking space on hopes of corporate earnings revival (+21% in Q3FY18?) and B/S & NPA/NPL clean up despite mixed set of report cards so far and banking digitalization optimism. 

Also, fund raising and growth in affordable housing may have boosted HDFC today and along with that rally in other private banks (HDFC/ICICI/AXIS Bank) has supported the market today; both Nifty & Bank Nifty has scaled fresh life time high of 10782.65 & 26091.80 on portfolio buying & power of DII liquidity.

Meanwhile, Indian WPI for Dec came lower at 3.58% vs est 4% (prior: 3.93%; WPI is Indian version of PPI; although a lower WPI may result in lower inflation in the coming days, it’s may be also an indication of tepid pricing power by the manufacturers and subdued demand/economic activity; Dec Core WPI came at 3.1% vs 3% (MOM), almost at same level; fall in food/vegetable inflation may be seasonal (Winter).

Also, mixed macro data released on Friday, specially higher IIP may have boosted the market sentiment today despite higher core inflation, which may force RBI to take a hawkish hold stance in the days ahead, if not a hawkish hike.

But some reports that GST return process may be simplified only after March’18 may have also affected the overall market sentiment today as it was supposed to be done by Jan’18; GST software need to be upgraded for that. 

GST May Be Delayed:

Indian version of GST is very complicated with various types of GST (SGST/CGST/IGST etc) and multiple rates (six) and a cumbersome return filling & compliance process; for GST to be successful, it need to be much more simplified under one tax one nation idea as perceived originally. 

Overall Indian market sentiment was also being supported by ongoing global goldilocks rally and hopes for a market friendly budget, but boiling oil & central bank quantitative tightening (QT) and US corp tax cuts may be some of the spoilers in the coming days apart from mixed report cards & fiscal worries.

Indian market sentiment may be also affected due to ongoing “mini-war” at Pak LOC in Kashmir; yesterday Indian army chief signaled for a “tough action” against Pak army amid ongoing “war of bullets”.

Also, jitters at India’s top judiciary regarding various issues & some politically sensitive cases related to ruling party may be far from over and looking ahead that may dent the confidence of the market & investors.

Overall, current rally in the Indian market may be a combination of global euphoria & expectations of earnings recovery & a market friendly budget.

After market hours, Indian trade data came little subdued.

Nifty was today supported mostly by HDFC, ICICI Bank, HDFC Bank, ZEEL, Kotak Bank, Ultratech Cement, Axis Bank, Tata Steel, IOC & Ambuja Cements by around 117 points altogether.

Nifty was dragged mostly by Bajaj Fin, Eicher Motors, TCS, Tata Motors, Maruti, ONGC, Indusind Bank, Yes Bank, HCL Tech & Gail by almost 40 points cumulatively.

Overall, Indian market was today supported by banks & financials, media, metals to some extent, while dragged by selected private banks, automakers, exporters/techs/pharma (lower USD), infra, mixed energies (higher oil) & consumption stocks.




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