Monday, 19 February 2018

Nifty crumbled despite positive global cues as PNB “loot” (theft) gets murkier amid fear of widespread fallout on loan frauds by “celebrity” big corporate borrowers

Market Wrap: 16/02/2018 (17:00)

NSE-NF (Feb):10442 (-108; -1.03%)

(NS: 10452; Q2FY18 EPS: 391; Q2FY18 PE: 26.73; Abv 2-SD of 25; Avg FWD PE: 20; Proj FY-18 EPS: 418; Proj Fair Value: 8360)

NSE-BNF (Jan):25200 (-219; -0.86%)

(BNS: 25164; Q2FY18 EPS: 867; Q2FY18 PE: 29.02; Abv 3-SD of 30; Avg FWD PE: 20; Proj FY-18 EPS: 961; Proj Fair Value: 19220)

For 19/02/2018: Feb-Fut (Key Technical Levels)

Updated: 08:50

SGX-NF: 10485; +43 points

(Gap up on positive US/global cues)

Expected BNF opening: 25300

Feb-Fut (Key Technical Levels)

Support for NF: 10430/10400*-10370/10330 and 10300-10240

Resistance for NF: 10555/10595-10655*/10675 and 10735-10785

Support for BNF: 25100/25000-24800 and 24625-24425

Resistance for BNF: 25500/25650-25800 and 25925-26075

Trading Idea (Positional):

Technically, Nifty Fut-Jan (NF) has to sustain over 10595 area for a further rally towards 10655/10675-10735/10785 & 10860-10925 zone in the short term (under bullish case scenario). 

On the flip side, sustaining below 10575-10555 area, NF may fall towards 10575/10430-10400/10370 & 10330/10300-10240-10100 zone in the short term (under bear case scenario).

Technically, Bank Nifty-Fut (BNF) has to sustain over 25500 area for a further rally towards 25650/25800-25925/26075 & 26250-26550 zone in the near term (under bullish case scenario).

On the flip side, sustaining below 25450 area, BNF may fall towards 25200/25100-25000/24800 & 24625-24425 area in the near term (under bear case scenario).

Indian market (Nifty Fut-Feb/India-50) today (16th Feb) closed around 10442, crumbled by almost 108 points (-1.03%) despite positive global cues as PNB “loot” (theft) gets murkier amid fear of widespread fallout on loan frauds & defaults by “celebrity” big corporate borrowers. 

Nifty-Fut made an opening session high of 19615 and late day low of 10430 as the market was worried about “trust deficit” on the overall lending culture in the Indian banking system.

The market is also concerned about fiscal impact out of ballooning banking NPA:

Indian market is also concerned about ballooning banking NPA/NPL, especially in the public sector banks (PSBS) and subsequently repeated bailouts by the government, which may ultimately hurt fiscal deficit coupled with worsening macro, such as higher trade deficits & higher oil and a politically populist budget.

The PNB fiasco may also hurt the image of the overall banking sector in India & the corporate loan culture and the deep-rooted corruption everywhere, especially in agriculture income & political donations norms.

Apart from wider economic fallout, the current PNB fiasco may have also a vast political impact. General public may feel that despite DeMo saga, there is practically no let up in the deep-rooted corruption in India, while public have an issue to withdraw even 10k from the bank out of his legitimate money during days of DeMo pain, big celebrity borrowers are easily “looting” (cheating) the country with trillions of rupees.

The PNB fiasco and the loan rollover like a standard “Ponzi scheme” may also affect the banking credit (LOC/LOU) to the importers and overall lending practice in India. There may be also a fear mongering among both lenders & borrowers, which may hurt the normal lending & borrowing mechanism of the country, especially import financing mechanism. The market is worried that more PSBS and some private banks may be directly affected by this PNB saga.

Today market sinks further after reports that SBI & BOB have also some exposure in the PNB fraud case, which has raised the concern of overall risk management in the Indian banking space. Overall, the PNB saga may also affect Indian Banks’ ability to raise fresh equity capitals from the market, especially from FPIS despite government guarantee.

On Friday, global cues were positive on renewed global “risk-on” sentiment and optimism about “Goldilocks rally” as Fed may go slow on its rate hikes after terrible US retail sales despite an upbeat CPI. In fact, earlier inflation skepticism may have turned into reflation optimism on the narrative that a weaker dollar is positive for loose financial conditions.

Nifty was helped mostly by Infy, Kotak Bank, TCS, Asian Paints and Ambuja Cements by around 11 points altogether, while it was dragged by RIL (family relation to PNB fraudster), ICICI Bank, L&T, Eicher Motors, SBI (significant exposure to PNB fraud), Maruti, HDFC, Yes Bank, VEDL and IBULLS HSG by almost 62 points cumulatively.

Overall, today Indian market was dragged by almost all the sectors like banks & financials, auto, FMCG, media, metals, realty, pharma, energies, consumption, and infra, while helped by selected techs to some extent. Selling was quite broad-based in the mid/small caps segment as they are more suspected for frauds.

Apart from PNB, the market is concerned that several other PSBS and also some private banks may be involved in such loan frauds.

The market is also concerned about earnings impact of the banks, especially corporate savvy on new NPA restructuring rules as they will be not able to hide the NPA under the disguise of various restructuring schemes available earlier. Thus, Indian market tumbled today despite lower oil & supportive global cues as bond yield surged to almost 7.60% on the concern of fiscal discipline.




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