Wednesday, 28 February 2018

Nifty slips as PNB “loot” gets murkier and begun hitting the “Real Street” after “Dalal Street”

Market Wrap: 27/02/2018 (17:00)

NSE-NF (March):10564 (-36; -0.34%)

(NS: 10554; Q2FY18 EPS: 407; Q2FY18 PE: 25.93; Avg FWD PE: 20; Proj FY-18 EPS: 418; Proj Fair Value: 8360)

NSE-BNF (Jan):25412 (-328; -1.27%)

(BNS: 25384; Q3FY18 EPS: 821; Q2FY18 PE: 30.92; Avg FWD PE: 20; Proj FY-18 EPS: 961; Proj Fair Value: 19220)

For 28/02/2018:

Updated: 08:55

SGX-NF: 10475; (-89 points)

(Gap down on negative global/US cues amid surge in bond yields after Powell testimony)

Expected BNF opening: 25200

March-Fut (Key Technical Levels)

Support for NF: 10470/10415-10330/10290

Resistance for NF: 10525/10585-10640/10675

Support for BNF: 25200/25000-24800/24550

Resistance for BNF: 25550/25650-25800/26000

Trading Idea (Positional):

Technically, Nifty Fut-Jan (NF) has to sustain over 10525 areas for a further rally towards 10585-10640 and 10675-10715 zones in the short term (under bullish case scenario). 

On the flip side, sustaining below 10500-10470 areas, NF may fall towards 10415-10330 and 10290-10240 zones in the short term (under bear case scenario).

Technically, Bank Nifty-Fut (BNF) has to sustain over 25550 areas for a further rally towards 25650-25800 and 26000-26250 zones in the near term (under bullish case scenario).

On the flip side, sustaining below 25500-25350 areas, BNF may fall towards 25200-25000 and 24800-24550 zones in the near term (under bear case scenario).

The Indian market (Nifty Fut-March/India-50) closed around 10564 on Tuesday (27th Feb), slipped by almost 0.34% as PNB “loot” (theft) gets murkier and began affecting the real street. Nifty Fut made an opening high of 10640 and late day low of 10541 amid mixed global and positive US cues on Tuesday.

PNB has disclosed additional loan fraud of more than Rs.13 bln and government took some strict action across the banking (PSBS) NPA of over Rs.0.5 bln (50 cr) to reassess the same for any similar fraud, willful defaults etc. and market  is concerned that it may affect normal banking activities (lending & borrowing).

The street is now abuzz with fear-mongering from corruption charges for the banking staff and also for the defaulters, even for genuine business failure.

As par Indian banking secretary: PSU Banks told to detect frauds on time and told to examine above Rs.50 cr NPAs for fraud. Subsequently, PSBS (public sector banks) tumbled and dragged the overall market sentiment on Tuesday. Broad-based selling was quite visible in the mid-caps.

There was another instance of a big corporate NPA of above Rs.16 bln (ABG Shipyard) which is not finding any buyer even after significant haircut by the banks and this has cast another shadow of big corporate NPA recovery even at throw away price. As a reminder, ICICI, SBI, IDBI, PNB has huge exposure in the ABG NPA.

Also, the PNB fiasco is now affecting the real street (trade finance). As par reports, foreign lenders (Banks) become more reluctant to accept the guarantees from their local counterparts (Indian Banks) that underpin (guarantee) the loans.

Citigroup, Deutsche Bank, Standard Chartered, and HSBC are among Banks reducing exposure to these transactions, used by smaller companies to access short-term dollar funding as questions are raised about the creditworthiness of guarantees from Indian state-run banks (PSBS); rates have risen by as much as 0.5 percentage point for some types of financing.

Thus, the whole Indian banking system and lending & borrowing practices are under scanner now as this PNB fraud getting murkier day by day; it may be a just tip of the ice-burg as PSBS officials are always prone to hide the NPA for the sake of their careers and a safe retirement life.

All eyes may be now on the Mfg PMI and Q3 GDP along with auto sales data after an upbeat GST collection for the month of January at around Rs.86 bln.




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