Market Wrap: 18/01/2018 (17:00)
NSE-NF (Jan):10814 (+22; +0.21%)
(NS: 10817; TTM Q2FY18 EPS: 391 TTM Q2FY18 PE:
27.66; Abv 2-SD of 25; Avg FWD PE: 20; Proj FY-18 EPS: 418; Proj Fair Value:
8360)
NSE-BNF (Jan):26518 (+228; +0.87%)
(BNS: 26537; TTM Q2FY18 EPS: 867; TTM Q2FY18 PE:
30.61; Abv 3-SD of 30; Avg FWD PE: 20; Proj FY-18 EPS: 961; Proj Fair Value:
19220)
For 18/01/2018: Jan-Fut
Key support for NF:
10820/10770-10700/10640
Key resistance for NF:
10885/10905-10955/11095
Key support for BNF: 26350/26200-26000/25750
Key resistance for BNF: 26850/27000-27250/27500
Trading Idea (Positional):
Technically, Nifty Fut-Jan (NF) has to sustain over 10905 area for further
rally towards 10955-11050 & 11095-11315 zone in the short term (under
bullish case scenario).
On the flip side, sustaining below 10885-10865 area, NF may fall towards
10820-10770 & 10700-10640 zone in the short term (under bear case
scenario).
Technically, Bank Nifty-Fut (BNF) has to sustain over 26850 area for further
rally towards 27000-27150 & 27250-27500 zone in the near term (under bullish case
scenario).
On the flip side, sustaining below 26800-26750 area, BNF may fall towards 26500/26350-26200
& 26000-25750 area in the near term (under bear case scenario).
Indian market (Nifty Fut-Jan/India-50) today (18th Jan) closed around 10814, edged up by almost 22 points
(+0.21%), but well off the opening session high of 10873 made on reports of FDA
boost for the banks; it made a session low of 10774 amid visible selling
pressure in the broader market; CNX Nifty Midcap index tumbled by over 2.50% as
overall valuations may be very stretched and Q3 earnings trend is not great
either to justify such lofty valuation, everything being equal.
Another reason behind muted market reaction today
after gap-up opening may be that Indian 10YGSEC bond yields again jumped
towards 7.45% after yesterday’s plunge to 7.35% on news of reduced additional
borrowing by the Govt and an extra dividend by the RBI. In any way, dual
combination of higher revenue/fiscal deficit & lower GDP (nominal) may not
be good for the fiscal deficit/GDP ratio and thus bond market may be assuming
that fiscal deficit for FY-18 will be reported much above 3.2% projected, most
probably it will be around 3.5-3.7%.
At 49% FDI, management control will be on the Govt
and as such no foreign investor may show interest in fragile PSBS and no Govt
will sell SBI to any foreign entity either. This, coupled with huge NPA/NPL
burden of the PSBS & stressed B/S, it’s very doubtful about adequate
response of the foreign investors to bail out PSBS, but Indian private banks
may be quite attractive to them.
Thus, we have seen muted price action of the PSBS
today, while private banks were roaring; Nifty & Bank Nifty spot made
another record high. But all these FDI optimism is subject to RBI/regulatory
approval and market may be also concerned about that.
Complex
Format Of GST May Be A Big Issue:
Another headwind for the market may be huge tax
shortfall on account of GST in various states and subsequent compensation by
central Govt, which will only accelerate fiscal deficit slippages. The primary
reasons behind muted GST collections may be high compliances costs, very
complex format for return filling etc. Even after six months of GST implementation,
it’s quite visible that most of the small traders/retailers are not complying
with the same and selling goods at MRP without benefit of passage of ITC (input
tax credit) to the consumers.
After market hours, Govt has again slashed GST
rates for 29 items, but left the process of simplification open for another
meeting; also issues of bringing petro products, real estate into GST ambit was
unresolved.
The present complex format of GST with multiple
rates and frequent modifications of the same may be the prime issue behind such
post implementation chaos and tepid compliances & collections. For decades,
GST was a political game of “ping-pong” between two main political parties of
India (BJP & INC) and thus it was politically compromised too much &
delayed unnecessarily.
The present format of GST is far from the original
ideal concept of “one tax one nation” and the ongoing process of regular “trial
& error” & frequent changes/reduction in taxes may be also hampering
the confidence of the traders/manufacturers to stock goods adequately. Thus
post GST implementation chaos is still going on.
The tech savvy (complete online) nature of the GST
may be another reason behind subdued compliances as vast part of the country’s
network infra & broadband bandwidth is still poor; Govt should have
considered all these issues before hurriedly launching it and thus it will take
more time for the GST to be fully effective for the business & Govt’s
indirect tax collection boost up and some benefits to the consumers at the same
time.
Today Nifty was mainly supported by HDFC twins, ITC,
UPL & IBULLS HSG while dragged by Bharti Infratel, Adani Ports, Hindalco,
Ultratech Cement (muted report card) & Tata Steel
Overall, today Indian market was helped by private
banks, financials, FMCG (earnings & GST recalibrations optimism), techs,
while dragged by PSBS, automakers, media, metals (concern of US anti-dumping
duty and fall in iron ore prices), pharma, reality (concern for GST inclusion
& subprime NPA), energies, telecom & infra.
All eyes today will be on deluge of earnings as almost
26% of Nifty weightage will report today. Global cues will be also important on
US shut down drama & German coalition Govt (SPD election); on Monday we may
see some volatility.
SGX-NF
BNF
USDJPY
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