Tuesday, 20 February 2018

Nifty skids on PNB loan fraud saga & concern about MSCI warning to dump India

Market Wrap: 19/02/2018 (17:00)

NSE-NF (Feb):10375 (-78; -0.74%)

(NS: 10378; Q2FY18 EPS: 391; Q2FY18 PE: 26.54; Abv 2-SD of 25; Avg FWD PE: 20; Proj FY-18 EPS: 418; Proj Fair Value: 8360)

NSE-BNF (Jan):25072 (-120; -0.48%)

(BNS: 25059; Q2FY18 EPS: 867; Q2FY18 PE: 28.90; Abv 3-SD of 30; Avg FWD PE: 20; Proj FY-18 EPS: 961; Proj Fair Value: 19220)

For 20/02/2018: Feb-Fut (Key Technical Levels)

Updated: 07:30

SGX-NF: 10330; -45 points

(Gap down on muted global cues)

Expected BNF opening: 24975

Feb-Fut (Key Technical Levels)

Support for NF: 10300/10245*-10160/10070

Resistance for NF: 10395/10450*-10495/10535

Support for BNF: 25000/24800* & 24625/24425

Resistance for BNF: 25350/25500-25625*/25875

Trading Idea (Positional):

Technically, Nifty Fut-Jan (NF) has to sustain over 10450 area for a further rally towards 10495-10535 & 10585-10650 zone in the short term (under bullish case scenario). 

On the flip side, sustaining below 10425-10395 area, NF may fall towards 10300-10245 & 10160-10070 zone in the short term (under bear case scenario).

Technically, Bank Nifty-Fut (BNF) has to sustain over 25350 area for a further rally towards 25500-25625 & 25875-26075 zone in the near term (under bullish case scenario).

On the flip side, sustaining below 25300 area, BNF may fall towards 25000-24800 & 24625-24425 area in the near term (under bear case scenario).

Indian market (Nifty Fut-Feb/India-50) closed around 10375 on Monday (19th Feb), slips by almost 67 points (-0.65%) amid ongoing PNB loan saga coupled with concern about MSCI warning to dump India, if it goes ahead with its plan to desist foreign exchange (SGX) from accessing market data and does not allow trading of Indian shares in foreign exchanges such as Singapore (SGX) & Dubai.

Nifty-Fut made a session low of around 10290, but it recovered to almost 100 points in the last hour of trade quite smartly on short covering ahead of FNO/derivative expiry after government promises appropriate steps against such PNB fiasco from recurring in future.

Also some upbeat comments about Indian market by renowned “Market Guru” Mark Mobius ignoring the current PNB jitters as “short-term noises” may have boosted the market sentiment in the last hour of trade on Monday.

Indian market opened around 10473 on Monday, gap up following positive global cues and made an opening high of 10485, but it soon succumbed to intense selling pressure on another news of big corporate loan fraud to the tune of Rs.3.5 bln by Rotomac. Another PSB (UCO Bank) also disclosed loan exposure to the tune of Rs.2.65 bln in the PNB fraud case.

The PNB saga has turned political:

The market is concerned about the overall impact of the borrowing & lending mechanism and fear mongering among borrowers & lenders, which may ultimately hamper normal economic activity amid intense media frenzy & trial. The overall situation has also turned into a political game of football among various political parties including BJP (ruling party) and the INC (main opposition party).

The Indian government is also trying to pass the buck to the central bank (RBI) and has virtually show caused the banking regulator. Despite slogan of “digital banking”, most of the public sector banks (PSBS) are not digitalized to the full extent of their internal operations and risk management. In the present case of PNB, their SWIFT operations were not linked digitally with their core banking system (CBS), which paved the way for this alleged “undetected” fraud.

Government (Govt) Asks RBI Why PNB Fraud Went Undetected Via Central Bank's System; Govt Asks RBI To Identify Suspect In PNB Fraud; Govt Asks RBI To Check Efficiency Of Process, Systems To Detect Fraud.

The whole modus-operendi and the extent of alleged fraud are not possible unless some higher management people have direct knowledge of it and gave verbal permission without going into record. The markets, especially FPIS are concerned about such deep-rooted & politically connected corruption in Indian financial sector.

As par reports: Govt May Ask RBI to Direct Banks to Tighten Credit Rules for Overseas Loans; May Ask RBI To Direct Banks To Cut Credit Exposure To Select Companies; May Ask PSBS To Conduct Special Audits On Large Loans Given At Foreign Branches; Govt May Ask PSU Banks To Name Risky Foreign Accounts Post-Audit.

As par reports: Several Banks Conducting Prelim Internal Probes on Exposure to All LOUs/LOCs; Indian Banks Also Verifying LOUs/LOCs With Issuing Branches To Check Fraud; Many Indian Banks May Consider Wider Forensic Audits Of Riskier Accounts.

PSBS, such as SBI recovered to some extent on Monday late hours on news that for Bhushan steel stressed asset (NPL/NPA/NCLT), banks may undergo for only 27% haircut of the outstanding/write off amount against the earlier estimate of above 50%. This could be positive for the banks if such trend continues for the resolution of stressed assets.

Overall on Monday, Indian market was helped by selected private banks, energies (RIL, Coal India) and telecoms (Bharti Infratel), while dragged by PSBS, financials, automakers, FMCG, techs, media, metals (Tata steel on Bhushan steel bid), pharma, reality, consumption, OMC and infra stocks; selling was quite broad-based in the broader market.

The Indian market may be also concerned about FII participatory notes (P-Notes) bubble as most of the high profile Indian black money may be routed through this process.




No comments:

Post a Comment