Market Wrap: 31/01/2018 (17:00)
NSE-NF (Feb):11059 (-13; -0.12%)
(NS: 11028; Q2FY18 EPS: 391; Q2FY18 PE: 28.20; Abv
2-SD of 25; Avg FWD PE: 20; Proj FY-18 EPS: 418; Proj Fair Value: 8360)
NSE-BNF (Jan):27468 (+109; +0.40%)
(BNS: 27379; Q2FY18 EPS: 867; Q2FY18 PE: 31.58; Abv
3-SD of 30; Avg FWD PE: 20; Proj FY-18 EPS: 961; Proj Fair Value: 19220)
For 01/02/2018: Feb-Fut (Key Technical Levels)
Support for NF: 11020/10980*-10940/10890
Resistance for NF: 11125/11155-11195*/11255
Support for BNF:
27300/27100-26900/26600
Resistance for BNF:
27500/27650-27850/28075
Trading Idea (Positional):
Technically, Nifty
Fut-Jan (NF) has to sustain over 11125 area for further rally towards 11155/11195-11255
& 11285/11305-11350/11415 zone in the short term (under bullish case
scenario).
On the flip
side, sustaining below 11105 area, NF may fall towards 11020/10980-10940/10890
& 10840-10795 zone in the short term (under bear case scenario).
Technically, Bank
Nifty-Fut (BNF) has to sustain over 27650 area for further rally towards
27750-27850 & 28075-28405 zone in the near term (under bullish case scenario).
On the flip side, sustaining
below 27600 area, BNF may fall towards 27450/27300-27100 & 26900-26600 area
in the near term (under bear case scenario).
Indian market (Nifty Fut-Feb/India-50) today (31st
Jan) closed around 11059, edged down by almost 13
points (-0.12%) on concern of fiscal balance & stretched valuation
following CEA’s economic survey; but well off the day’s low on hopes of a
market friendly budget tomorrow; late recovery in regional market (HK) has also
helped.
Indian market today opened gap down around 11039
on subdued global cues amid overnight plunge in US market on surging bond
yields & concern about Trump’s SOTU speech for any trade protectionism
rhetoric; but Asian market soon recovered as Trump refrained from any commentsthat would have unnerved the market; Indian market also followed suit and made
a mid-day low of 11007 after an opening session high of 11088; private banks
led the recovery today.
Indian 10YGSEC bond yield edged down by 0.07% to
7.431% ahead of the union budget, which may be the last full fledged budget
before government (Govt) goes on general election in early 2019. Market
sentiment is also being boosted by disinvestment spree by Govt, even for
unlisted PSUS.
Market is expecting that Govt will only change the
definition of LTCGT (long term capital gain tax) from present 1 year to 2 year
with zero rate; if Govt tinkered it with 3 year or impose a tax of 10-15% on
the present tenure, then it may be negative for the market to some extent. In
all the advance economies, there are LTCGT unlike in India.
Market will also keenly watch the fiscal deficit
figure for FY-18 & 19; if FY-18 fiscal deficit came much above the
estimated 3.2%, say at 3.5-3.7%, then it will be negative for the market.
Overall, market is not expecting a “big-bang”
budget from the Govt this year amid dilemma of fiscal discipline & growth
(Govt capex funded); but thrust may be on rural capex & infra, personal
income tax rate tinkering on low-middle income group in an effort to provide
some relief after DeMo & GST pain.
Overall, market expectations of the budget:
Taxation:
■ FM could well relook the MAT rate or consider
abolishing it altogether
■ Reduce/deregulate corporate tax rate (already committed
in previous budget to simplify it with fewer exemptions).
■ Enhance tax deductions, exemptions for
individuals
■ Tax benefits for salaried class through standard
deduction and revision of allowances
■ May tax long-term capital gains in listed
securities or change the definition (LTCGT)
■ Disallowance of expenses on which GST not paid.
Agriculture:
■ Establish fund to guarantee credit to encourage
investment in agriculture sector
■ Allocate more funds for crop insurance schemes
■ Increase spending for dams and canals, micro
irrigation systems
■ Provide subsidies for building cold storage to avoid wastage of perishable crops
■ Reduce fertilizer subsidies
Banks:
■ Allow full tax deduction for provisioning of
non-performing assets (NPAs) at banks
■ Raise the threshold for tax deduction on
interest paid on bank deposits from current Rs 10,000/-
■ Reduce the tenure of tax-exempted retail term
deposits to minimum of 3 years from current 5
■ Carve out tax provisions to streamline
proceedings under Insolvency and Bankruptcy Code
Infrastructure:
■ Increase investment by 10-15% in roads from Budget 2017
■ Provide support for key road projects, including
Bharatmala project, which will connect western and eastern India
■ Increase railways investments by 10% from
2017/18 budget
Technology and IT sector:
■ Provide greater incentives for digital
transactions
■ Support digital payments infrastructure
Auto sector:
■ Announce policy on scrapping commercial vehicles
that do not comply with emission norms if operational for over 15 years
Real estate sector:
■ Set single-window clearance for all real estate
projects, especially housing to avoid execution and project delays
■ Give infrastructure status to real estate to
help bring down finance, project costs, make homes more affordable
■ Reduce GST rate for under-construction real estate projects from
current 12%
■ Spend more on affordable housing
Energy sector:
■ Reduce “cess” duty to 8-10% from 20% for oil and
gas exploration and production
■ Reduce or exempt city gas distribution companies
from excise duty
■ Provide subsidy aid to downstream companies
selling LPG, kerosene below market prices
Metals and mining sector:
■ Decrease in basic customs duty on coking coal
across grades
■ Decrease in export duty on iron ore above
certain grade levels
■ Hike basic
customs duty on aluminium scrap to protect domestic industry
Gold:
■ Cut import tax on gold to 2-4% from 10% to
prevent smuggling.
Finally, an interestingly timed Oxfam survey,
suggests that, “the richest 1% of India cornered 73% of wealth generated last
year,” has added to the apprehensions of wealthy people. It would be
interesting to see whether the FM would want to toy with any thoughts on the
introduction of inheritance tax, especially after two of the biggest
initiatives of DeMo and GST.
But, Govt may not take any undue risk like LTCGT
& inheritance tax to destabilize the capital market, as it need a vibrant
market for its own interest like disinvestment, which is now most crucial for
its deleveraging & fiscal discipline.
Overall, Indian market has gained almost 30% since
last year’s budget on global goldilocks rally & power of domestic liquidity
(especially after DeMo, which led to so called financialisation of idle
household savings; i.e. transition of erstwhile black money to white money in the
banking channel). But unlike US, this rally was not supported by growth in the
economy or earnings and that may be the biggest headwind for the market as of
now.
Today Nifty was supported mostly by RIL, HDFC,
HDFC Bank, Kotak Bank, Bharti Infratel, Tata Motors, Indusind Bank, HPCL, IOC
(earnings optimism) & Eicher Motors (e-Bike launch) by around 39 points
altogether.
Nifty was dragged mostly by Infy, ITC (concern of
tax rate tinkering on cigarettes in the budget), Tata Steel, HUL, TCS, L&T,
Sun Pharma, IBULLS HSG, DRL & UPL by almost 51 points cumulatively.
Overall, today Indian market was supported by private
banks & financials, energies while dragged by FMCG, techs, metals, pharma
(US woes & Trump’s comments about lower prices of prescription drugs), PSBS,
automakers, media, infra and consumption stocks; selling was quite visible in
broader market (mid/small caps).
SGX-NF
BNF
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