Technical & Macro Analysis Of Indian & Global Market----: Nifty slips as RBI goes for tightening on overseas borrowing rules after PNB saga

Market Wrap: 20/02/2018 (17:00)

NSE-NF (Feb):10340 (-39; -0.37%)

(NS: 10360; Q2FY18 EPS: 391; Q2FY18 PE: 26.50; Abv 2-SD of 25; Avg FWD PE: 20; Proj FY-18 EPS: 418; Proj Fair Value: 8360)

NSE-BNF (Jan):24838 (-219; -0.88%)

(BNS: 24874; Q2FY18 EPS: 867; Q2FY18 PE: 28.69; Abv 2-SD of 25; Avg FWD PE: 20; Proj FY-18 EPS: 961; Proj Fair Value: 19220)

For 21/02/2018: Feb-Fut (Key Technical Levels)

Updated: 07:35

SGX-NF: 10368; +28 points

(Gap up on positive Asian cues)

Expected BNF opening: 24900

Feb-Fut (Key Technical Levels)

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

Resistance for NF: 10435/10495*-10535/10585

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

Resistance for BNF: 25000/25200-25500/25650

Trading Idea (Positional):

Technically, Nifty Fut-Jan (NF) has to sustain over 10455 area for a further rally towards 10495-10535 & 10585-10625 zone in the short term (under bullish case scenario).

On the flip side, sustaining below 10435-10395 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 25200 area for a further rally towards 25500-25650 & 25875-26075 zone in the near term (under bullish case scenario).

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

Indian market (Nifty Fut-Feb/India-50) closed around 10340 on Tuesday (20^th Feb), slips by almost 39 points (-0.37%) after RBI & the Government took some deleveraging steps for corporate India in the wake of PNB loan fraud saga.

As par reports, RBI may tighten overseas borrowing approvals. RBI is in advance talks to set up debt management office and may introduce a bill on debt management office by FY-19; RBI, Fin Min met last week on debt management office roadmap.

Subsequently, Indian 10Y bond yield soared to almost 7.68%, highest since Feb’16 on the concern of shrinking liquidity in the system and Indian market also slips to the day low of 10332; earlier it made an opening session high of 10425 on muted global cues amid higher bond yields. Indian rupee also tumbled to 3 months low and USDINR soared to around 64.90.

The Indian government is now blaming auditors for the PNB fiasco in addition to the RBI. On the other side, RBI is now shifting the onus on the banks.

RBI has formed a special committee to look into these types of loan fraud and NPA divergence/classification as observed by its own audit and that of the banks. RBI may also curb overseas borrowing spree of Indian corporates on currency volatility and higher US interest/bond rates.

Apart from deep repercussions from PNB saga, the market may be also concerned about any potential MSCI action such as reduction of Indian weightage in its global index after SEBI barred any foreign exchange (SGX) to trade Indian securities. As par the Indian government, MSCI is being perturbed as their business interest is getting affected.

Overall, imposition of LTCGT (long-term capital gain tax), breach of fiscal deficit and also “trust deficit” on Indian banking system after repeated incidents of high profile corporate loan frauds and the deep-rooted corruption in the system have impacted the market sentiment and FIIS are now on selling mode on every rise; valuations are also stretched amid mixed Q3 report card.

Also, the general public mood is not good after DeMo, GST and repeated banking frauds as PNB “loot” (theft) are now getting murkier & political day-by-day. People are lining up in front of PNB to withdraw their hard earned money as they have lost confidence in the functioning of the PNB, the 2^nd largest public sector bank in India.

On Tuesday, Indian market was helped by exporters/techs/MNC (higher USD), media (M&A boost), metals, PSBS (short covering after steep correction and government guarantee despite repeated frauds), cement (upbeat report card from Ambuja cement), consumption and mixed energies while dragged by private banks, financials, automakers, FMCG, mixed pharma, reality; RIL also dragged on buzz of NPA laden and controversial Eros media take over for Rs.1 bln.