Technical & Macro Analysis Of Indian & Global Market----: Nifty edged down on last hour short covering in private banks and helped by exporters amid stronger USDINR

Market Wrap: 22/02/2018 (17:00)

NSE-NF (March):10384 (-31; -0.30%)

(NS: 10383; Q2FY18 EPS: 391; Q2FY18 PE: 26.55; Abv 2-SD of 25; Avg FWD PE: 20; Proj FY-18 EPS: 418; Proj Fair Value: 8360)

NSE-BNF (Jan):24971 (-30; -0.12%)

(BNS: 24955; Q2FY18 EPS: 867; Q2FY18 PE: 28.78; Abv 3-SD of 30; Avg FWD PE: 20; Proj FY-18 EPS: 961; Proj Fair Value: 19220)

For 23/02/2018: March-Fut (Key Technical Levels)

Updated: 07:55

SGX-NF: 10395; (+11 points)

(Almost flat on muted global cues)

Expected BNF opening: 24800

March-Fut (Key Technical Levels)

Support for NF: 10340/10290-10245*/10195

Resistance for NF: 10435/10495*-10560/10605

Support for BNF: 24800/24650*-24450/24200

Resistance for BNF: 25000/25200-25350/25500

Trading Idea (Positional):

Technically, Nifty Fut-Jan (NF) has to sustain over 10455 area for a further rally towards 10495-10560 and 10605-10650 zone in the short term (under bullish case scenario).

On the flip side, sustaining below 10435-10395 area, NF may fall towards 10340-10290 and 10245-10195 zone in the short term (under bear case scenario).

Technically, Bank Nifty-Fut (BNF) has to sustain over 25200 area for a further rally towards 25350-25500 and 25700-25800 zone in the near term (under bullish case scenario).

On the flip side, sustaining below 25150-25000 area, BNF may fall towards 24800-24650 and 24450-24200 area in the near term (under bear case scenario).

The Indian market (Nifty Fut-March/India-50) closed around 10384 on Thursday (22^nd Feb), edged down by almost 0.30%, but off the low on FNO expiry related short covering/roll over in the bitten down banks & financials after some rebound in US stock future on lower USD and some fall in US bond yields. Nifty Fut made an opening session high of 10415 and a day low of 10360 in a day of range-bound trading.

Banks were upbeat on encouraging recovery from the stressed steel assets to the tune of almost 77% against the earlier estimate of less than 50%. But Bhushan steel bid by the Tata steel and some other good steel assets may be an exceptional issue. Also, the market may be worried about various bidding conditions by the NCLT under IBC process on “related” party issues to prevent backdoor entry of the existing defaulter promoter group.

Hopes of PSBS merger and management rejig to prevent such future loan fraud may have also boosted the sentiment of the banks on Thursday.

Indian bond yield also soared to 7.78% on hawkish RBI minutes, gradually changing its policy guidance for a hike, if the present trajectory of higher inflation and higher oil continues in the months ahead. USDINR also surged above 65 levels on the concern of outflow as US bond yield is now eyeing the 3% psychological mark.

Overall, Indian market tumbled by almost 6% for the February FNO expiry series on higher bond yields and PNB “loot” (theft) coupled with the imposition of LTCGT (long-term capital gain tax), breach of fiscal discipline and a politically populist budget. Bank Nifty lost around 9% and PSBS plunged by almost 16%, while Nifty Midcap corrected by a good 10% as valuations are also frothy amid mixed report card.

The market may be concerned over ballooning banking NPA under different forms, which may be far from over despite repeated assurances by the banks. The resultant impact of fiscal deficit amid repeated bailouts of the PSBS (public sector banks) by the government may be a great headwind for the market. Apart from corporate NPA, conditions for stressed MSME assets are also very worrying.

The PNB fiasco and the subsequent fear-mongering among Indian borrowers & lenders and witch hunting may be also negative for the Indian business & industry, which may have also an adverse effect on the employment scenario of the country.

The market may be also worried that the present PNB loan fraud case is not an isolated and exceptional issue; there might be many more such cases, considering the link between bankers, borrowers and politicians and the overall corruption angle.

The present PNB fraud may be just a tip of the ice bug. The market is also concerned that the PNB saga came into the limelight only after the accused were allowed to leave the country just like previous KFA fiasco.

On Thursday, Indian market was helped by private banks, selected PSBS, exporters/Techs/Pharma (higher USD), reality (no RERA on existing projects and renewed optimism over affordable housing), while dragged by automakers, FMCG, media, metals (some controversy about NCLT bids for stressed steel assets), consumption, energy/OMC and infra stocks. Apart from higher USDINR, renewed optimism about prospects of techs has also helped.