Market Wrap: 16/01/2018 (17:00)
NSE-NF (Jan):10723 (-20; -0.19%)
(NS: 10700; TTM Q2FY18 EPS: 391 TTM Q2FY18 PE:
27.37; Abv 2-SD of 25; Avg FWD PE: 20; Proj FY-18 EPS: 418; Proj Fair Value:
8360)
NSE-BNF (Jan):25990 (-55; -0.21%)
(BNS: 25975; TTM Q2FY18 EPS: 867; TTM Q2FY18 PE:
29.96; Ard 3-SD of 30; Avg FWD PE: 20; Proj FY-18 EPS: 961; Proj Fair Value:
19220)
For 17/01/2018: Jan-Fut
Key support for NF: 10690/10635-10575/10500
Key resistance for NF: 10755/10785-10805/10860
Key support for BNF: 25775/25575-25400/25200
Key resistance for BNF:
26200/26250-26325/26415
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 10785-10755 area, NF may fall towards
10690-10635 & 10575-10500 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 26200-26150 area, BNF may fall towards 25775-25575
& 25400-25200 area in the near term (under bear case scenario).
Indian market (Nifty Fut-Jan/India-50) today (16th Jan) closed around 10723, slips by almost 20 points
(-0.19%) on mixed global cues and concern of fiscal slippages & higher oil
after surging trade deficit data released yesterday; Asian cues was largely upbeat.
10YGSEC bond yields soared
to 7.557% and INR slumped to almost 3 months low; USDINR-I surged to around
64.21, almost 1% higher. Nifty-Fut made an opening session high of 10759 and
late day low of 10691 after Dec’17 trade deficits soared by almost 41% on YOY
basis.
Indian bond yields also surged after RBI Dy Gov
rapped Indian banks for poor management of interest rate risks, which cannot be
managed by the regulator (RBI) over & over again.
RBI Dy Gov had observed late on Monday that large
holdings of GSECS and state development loans by banks exposes them to
“re-pricing of governments’ borrowing costs which could rise due to
inflationary, fiscal or other domestic as well as global macroeconomic developments”.
RBI Dy Gov asserted that “the trend of regular use
of ex-post regulatory dispensation to ease the interest rate risk of banks was
not desirable from the point of view of efficient price discovery in the GSEC
market and effective market discipline on the GSEC issuer; it also does not
augur well for developing a sound risk management culture at banks”.
RBI Dy Gov also stressed that Banks must
understand the risks of bond market and does not expect that RBI will bail out
the Banks from adverse interest rate (bond prices) movements. Thus it’s clear
that RBI may not allow the Banks to report its bond loses provisions (MTM) over
next few quarters; Banks has to report it on concurrent basis; subsequently
banks (PSBS) plunged today.
Indian Banks are expected to report bond portfolio
MTM loses of around Rs.0.15-0.20 tln in Q3FY18 alone as bond yields surged 67 basis
points in this quarter.
A higher bond yield & higher borrowing costs
are not good for Indian economy and business. But Indian Banks (PSBS) has also
limited options as they have to finance Govt’s fiscal deficit & maintain
the SLR by buying GSECS, but they have to “manage” that bond portfolio
efficiently & in a professional manner in this era of globalization &
market economy.
Bond-inflows from FII may have also slowed due to increasing
tune of global QT and hardening of bond yields (rates) in developed market
(DM).
As par RBI Dy Gov:"Market liberalization does
not just involve the regulator easing business processes, introducing new
products and creating new markets; it also requires participants to take
initiative to re-skill themselves for constantly evolving market conditions and
products”.
Market may be also concerned that rising twin
deficits and possible inflationary impact of rising oil & commodity prices
may prompt RBI to hike rates in the coming months.
As Govt has already applied substantial additional
duties & cess on petro products taking advantage of lower oil around $40 to
finance its fiscal deficits, it can’t put additional duties now to do the same
for huge inflationary impact and any cut in previous duties will also result in
additional fiscal strain; thus a dual combination of rising oil & USD may
be a “double whammy” for the Govt and the Indian economy.
Indian
Trade Deficit Surges In Dec:
Indian trade deficits for Dec’17 came as -14.88B
vs est -13.00B; prior: -13.83B; (-10.55B-YOY); Dec exports at 27.03B vs 26.20B,
although grew at 12.4% on YOY basis, it slowed down from 30.6% increase
compared to Nov’17. On the other side Dec imports grew at 41.91B vs 40.02B,
almost 21.1% on account of oil ($10.3B) & gold (+71.5% YOY).
Subsequently Dec’17 trade deficits jumped by
almost 41% (YOY) to $14.88 bln at 3 year high and CAD (current account deficit)
is also heading towards its worst since 2013, not a very positive sign for the
Indian macros & fiscal math, if core flows remain subdued due to teething
problem of GST & DeMo; labour intensive industries like textiles, gems
& jewellery are also not doing well.
For long, Indian exports is losing competitiveness
despite a substantial devalued currency compared to its peers like China. High
imported inflation, higher imported raw material cost due to significantly
devalued currency and substantially higher cost of funds may be some of the
reasons behind widening CAD & trade deficit; (1 USD=64 INR vs 6.50 CNY; at
1975, 1 USD=7.5 INR).
Indian market was today dragged by banks &
financials, especially PSBS (Public Sector Banks) as higher bond yields will be
negative for their bottom line; almost 50% of EBITDA came from their bond
portfolio and a lower bond prices is negative for their MTM profit. Exporters
(Techs-IT & pharma) today supported the market on higher USD and analyst
upgrade (IT).
Today Nifty was supported mostly by Infy, TCS,
ICICI Bank (analyst upgrade), Wipro, HCL Tech, HUL, Tech-M, ZEEL, Adani Ports
& HDFC Bank by almost 42 points altogether.
Nifty was dragged mostly by RIL (fall in SGX GRM
& subdued R-Jio subscriber additions in Dec and analyst downgrade/higher
capex), ITC, HDFC, Tata Motors, VEDL, IOC, Bajaj Fin, SBI, HPCL & Tata
Steel by around 56 points cumulatively.
Overall, today Indian market was helped by techs,
selected private banks & media while dragged by banks &
financials/PSBS, automakers (interest rate sensitive), mixed FMCG, metals (fall
in iron ore prices after surge in stockpiles at China port), mixed pharma, reality
(to be bought under full GST), energies, infra & consumption stocks.
SGX-NF
BNF
USDJPY
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