Market Wrap:
23/02/2018 (17:00)
NSE-NF (March):10507
(+118; +1.13%)
(NS:
10491; Q2FY18 EPS: 407; Q2FY18 PE: 25.78; Avg FWD PE: 20; Proj FY-18 EPS: 418;
Proj Fair Value: 8360)
NSE-BNF
(Jan):25410 (+424; +1.70%)
(BNS: 25302;
Q3FY18 EPS: 821; Q2FY18 PE: 30.82; Avg FWD PE: 20; Proj FY-18 EPS: 961; Proj
Fair Value: 19220)
For 26/02/2018: March-Fut (Key Technical Levels)
Updated: 07:25
SGX-NF: 10540; (+33 points)
(Gap up on positive global/US cues amid fall in
bond yields & lower USD)
Expected BNF opening: 25500
March-Fut (Key Technical Levels)
Support
for NF: 10510/10470-10415*/10340
Resistance
for NF: 10555/10595-10615/10655*
Support
for BNF: 25445/25375-25150/25000
Resistance for
BNF: 25500/25650-25775/25975
Trading Idea (Positional):
Technically, Nifty
Fut-Jan (NF) has to sustain over 10615 area for a further rally towards
10655-10725 and 10790-10825 zone in the short term (under bullish case
scenario).
On the
flip side, sustaining below 10595-10555 area, NF may fall towards 10510-10470
and 10415-10340 zone in the short term (under bear case scenario).
Technically, Bank
Nifty-Fut (BNF) has to sustain over 25650 area for a further rally towards 25775-25975
and 26100-26200 zone in the near term (under bullish case scenario).
On the
flip side, sustaining below 25600-25550 area, BNF may fall towards
25445-25375 and 25150-25000 area in the near term (under bear case scenario).
The Indian market (Nifty Fut-March/India-50) closed around 10507 on Friday (23rd
Feb), soared by almost 1.13% on fall in bond yields. Benchmark 10Y Indian bond
yield fell to around 7.68% from earlier panic high of 7.78% mapped on 22nd
Feb, Thursday. The fall in Indian bond yield was in line with similar global/US
trend after US treasury secretary downplayed the impact of wage growth on inflation.
The Indian government also
tried to talk down the bond (GSEC) yield by commenting that they are watching
the bond market closely and may take
appropriate action to keep bond yield lower. Government to take an appropriate policy decision on high bond yields
as the same is putting pressure on government finances.
There were also some reports that the government may hike
the FPIS limit on the Indian bond market, which is currently offering biggest
yield among its EM peers in Asia. As par Finance ministry sources, FII cap in
government bonds under review and a final decision may be taken at March
meeting with the RBI.
On Friday, Indian market made an opening session low of 10386
and late day high of 10516 and was also supported by positive global cues
coupled with reports that government is taking several steps to plug various
loopholes in the lending & borrowing mechanism of the banks, especially for
the PSBS (public sector banks). All PSBS has been asked to ensure linking of
SWIFT with their CBS (core banking system) without any manual intervention by
government/RBI after the great PNB saga.
But the market may be also worried about huge NPA hit with
the Nirav Modi & Choksi group of companies involving in the alleged PNB
fraud, which may be around Rs.25 bln for the PNB alone. There are also reports
of similar NPA/fraud related to Gems & Jewellery business with other big
companies as well.
FICCI (Federation of Indian Chamber of Commerce and
Industry) has also called for an immediate privatization of most of the PSBS as
only 3 big PSBS is sufficient for the Indian economy. There is an urgent need
for improvement of corporate governance in the PSBS.
Apart from banking worries, the market is also concerned
about US tightening of H1-B visa rules, which may affect tech/IT companies
adversely. There is also another report of a big fraud involving Fortis healthcare accounting and alleged siphoning of
funds by the promoter Singh brothers, akin to the infamous Satyam scam.
The Indian government is aiming to be among the top 50
positions in ease of doing business as it’s undertaking system of cleaning
political funding procedure in India. The improvement of IBC process and its
transparency may also help.
Government is also very aware that unethical practices are
significant in India and are growing quite well. Indian model of creating shell
cos, round-tripping has continued for
decades. The huge banking NPAs are due to business failures, diversion of
funds, willful defaults, and bank frauds.
As par the government, no employee raising a red flag is worrisome. Multiple auditors looked
the other way or were casual in approach. Inadequate supervision from
regulators was responsible for fraud. Regulators need to constantly watch banking
sector and unfortunately, regulators are
not held accountable in India. But the delinquent
person will have to face consequences, like the closure
of their company and law will be tightened to find the location of the delinquent
person.
Thus, the government
is trying to shift all the blame to the banking regulator (RBI) for this PNB “loot”
(theft), but at the same time, it’s also
true that unholy links between borrowers/corporates, banks, and politicians are also responsible for the
present saga of Indian NPA/NPL.
Most of the big corporate celebrity borrowers and likely
defaulters’ may have already relocated their base outside India. Their seized
assets in India or even abroad will help little in actual recovery because of
various legal hurdles and lack of buyers.
On Friday, Nifty was supported mostly by HDFC Bank, RIL,
VEDL, Tata Steel, ICICI Bank, Sun Pharma, IOC, Bajaj Finance, Yes Bank and ITC
(65 points altogether).
Nifty was dragged by Infy (H1-B visa issues), Asian Paints
(higher oil/RM cost), Gail, Eicher Motors and M&M (7 points cumulatively).
Overall on Friday, Indian market was helped by almost all
the sectors like banks & financials (fall in bond yield, positive for their
MTM in bond portfolio), automakers, FMCG,
mixed techs (higher USD and H1-B visa issues), media, metal (encouraging bids
for stressed assets under NCLT/IBC auction), Pharma (reports of US FDA relief
and higher USD, positive for their export earnings), reality, consumption,
energy (higher oil) and infra stocks.
All eyes may be now on India’s Q3FY18 GDP, which is slated
to come as 6.9% vs 6.3% prior (Y/Y) and other macro data (PMI/auto sales) apart from the surging oil & the fiscal dilemma.
SGX-NF
BNF
USDJPY
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