Thursday, 4 January 2018

Nifty Slips On Fiscal Dilemma, LTCGT Worries & Mumbai Violence Despite Positive Global Cues

Market Wrap: 03/01/2018 (17:00)

NSE-NF (Jan):10472 (-0.20; -0.00%) 

(TTM PE: 26.71; Abv 2-SD of 25; TTM Q1FY18 EPS: 391; NS: 10443; Avg PE: 20; Proj FY-18 EPS: 418; Proj Fair Value: 8360)

NSE-BNF (Jan):25386 (-8; -0.03%) 

(TTM PE: 29.20; Near 3-SD of 30; TTM Q1FY18 EPS: 867; BNS: 25318; Avg PE: 20; Proj FY-18 EPS: 961; Proj Fair Value: 19220)

For 04/01/2018: Jan-Fut

Key support for NF: 10470/10430-10390/10350

Key resistance for NF: 10555/10575-10610/10650

Key support for BNF: 25300/25200-25000/24800

Key resistance for BNF: 25550/25600-25800/25900

Trading Idea (Positional):

Technically, Nifty Fut-Jan (NF) has to sustain over 10575 area for further rally towards 10610/10650-10695 & 10745-10795 zone in the short term (under bullish case scenario). 

On the flip side, sustaining below 10555-10515 area, NF may fall towards 10470/10430-10390/10350 & 10300/10265-10200/10180 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 25300/25200-25000 & 24800-24525 area in the near term (under bear case scenario).

Indian market (Nifty Fut-Jan/India-50) today (3rd Jan) closed around 10472, almost unchanged but skids well off the opening session high of 10543 on domestic worries about fiscal slippages, higher oil & LTCGT (long term capital gain tax) and some violence in Mumbai area on caste politics; it made a late session low of 10457. Parliament proceeding is also being disrupted over this caste issue apart from normal life & business activities in Mumbai. 

Indian market today opened around 10490, edged up on positive global cues and better MFG PMI data released on Tuesday; EU market opening session was also supportive as EUR inched lower after some days of relentless rally, but Indian market was unfazed amid domestic issues ahead of Q3FY18 earning season from next week. Market may be also concerned about Q3FY18 earnings trajectory amid poor GST numbers in Nov and an overall economic slowdown for several reasons.

At TTM PE of almost 27, Q3FY18 earnings need to justify such lofty valuations irrespective of any excuses; otherwise market bound to correct in the coming days towards its mean valuation of around 20-18.

In early EU trading, retailers rally on upbeat holiday sales and techs follow overnight gains in US peers while automakers rebounded from Tuesday’s slump and energy stocks also advanced, however trading volumes were about 25% lower than the 30-day average as a result of the rollout of new MiFID-II regulations.

Asian stocks pushed deeper into record territory driven by renewed EM growth & earnings optimism despite lower USD as Japan markets remained closed. The MSCI index of APC (EX-Japan) rose 0.4%; miners supported Australia's ASX 200 (+0.2%), which comes amid Australia’s metals and mining index hovered at its best level in 5 years following the rise in metal prices with gold firmly above $1300, alongside the recent rally in zinc (zinc hit a 10-year high on Tuesday). 

Chinese markets initially conformed to the upbeat tone before Hong Kong shares ebbed lower (Shanghai Comp +0.6%, Hang Seng +0.1%); China was supported by consumers & transport shares and overall optimism about an upbeat MFG PMI released on Monday.

Nifty was supported mostly by ICICI Bank, L&T, Adani Ports, VEDL, RIL (commissioning of new gas cracker), Yes Bank, HUL, HPCL, Hindalco & Ultratech Cement by around 7 points altogether, while it was dragged by HDFC Bank, Maruti (disappointing Dec sales), Tata Motors, Infy, Wipro, ONGC, DRL (fresh EIR from US FDA), Bajaj Auto, Indusind Bank & Bajaj Fin by almost 8 points cumulatively.

Overall, Indian market was yesterday helped by metals (China & domestic optimism/infra spending and higher metal prices), selected private banks, media, reality, infra and consumer staples, while it was dragged by financials, PSBS, automakers (mixed Dec sales), techs (strong INR), pharma (renewed US FDA concern & lower USD) and mixed energies/OMC (higher crude oil & inability to hike prices due to political populism & higher cess on petro products).




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