Market Wrap: 15/03/2018
NSE-NF (March):10366 (-59; -0.57%)
NSE-BNF (Jan):24795 (-138; -0.55%)
Valuation metrics:
NS: 10360; Q2FY18 EPS: 410; Q2FY18 PE: 25.27; Avg FWD PE: 20; Proj FY-18 EPS: 418; Proj Fair Value: 8360
BNS: 24792; Q3FY18 EPS: 822; Q2FY18 PE: 30.16; Avg FWD PE: 20; Proj FY-18 EPS: 961; Proj Fair Value: 19220
For 16/03/2018:
Updated: 08:05
SGX-NF: 10324; (-42 points; -0.40%)
Expected BNF opening: 24695 (-0.40%)
(Gap-down on subdued global/US cues amid ongoing concern of US trade war, White House purges and Muller’s Russian investigation. Muller subpoenaed Trump’s business organizations for documents relating to his Russian transactions)
March-Fut (Key Technical Levels)
Support for NF:
10285/10240*-10180/10140-10100/10040
Resistance to NF:
10385/10405*-10455/10495-10535/10605
Support for BNF:
24750*/24650-24500/24400-24150/24000
Resistance to BNF:
24950/25100*-25250/25450-25550/25650
Technical View (Positional):
Technically, Nifty Fut-Jan (NF) has to sustain over 10405 for a further rally towards 10455/10495-10535/10605 in the short term (under bullish case scenario).
On the flip side, sustaining below 10385 NF may fall towards 10340/10285-10240/10180-10140/10100 in the short term (under bear case scenario).
Technically, Bank Nifty-Fut (BNF) has to sustain over 24950 for a further rally towards 25100/25250-25450/25550 in the near term (under bullish case scenario).
On the flip side, sustaining below 24900, BNF may fall towards 24750/24650-24500/24400-24150/24000 in the near term (under bear case scenario).
The Indian market story on 15/03/2018:
The Indian market (Nifty Fut-March/India-50) closed around 10366 on Thursday, slumped by almost 0.57% in a late hour selling on the widening impact of PNB “loot” and subsequent summoning of former SBI chairs by SFIO in the old KFA loan case and the US complain to WTO against India’s export subsidies.
On Thursday, the Indian market opened in a subdued tone (gap-down) on the US-led trade war concern not only against China but also against India as US has also moved to WTO and filed a case against India for its export subsidies. There was also news that PNB has unearthed another “small loot” (loan fraud/theft) of Rs.90 mln for the same Gitanjali group of companies, under Rs.13 bln alleged loan fraud.
The market made the day high amid news of FII limit increase in the bond market:
Nifty-Fut made a day high of around 10429 on news that government is actively considering an increase in FII cap on Indian bond markets (GSEC), but made a closing session low of 10359 after news of SFIO summoning of the former SBI chairs in the old KFA case. Selling pressure intensified in banks & financials as the market is concerned about the fall out of this PNB scam and widening impact on other banks including the private ones.
The market is also concerned about a toothless banking regulator in India (RBI) as acknowledged by the RBI governor itself on Wednesday and severe lack of corporate governance in the PSBS, where such large corporate loan frauds is a regular phenomenon, being a legacy issue.
After RBI allegation against the government to make it toothless, on Thursday government hits back and said RBI has enough “tooth” (power) to regulate banks, banks' branches and the government has no role in monitoring banks' operations; only RBI should look at banks' loan accounts.
The market is also concerned about that cost of borrowings for importers may shot up after the ban of LOU/LOC by the government/RBI as a result of this PNB fall out.
Aftermarket hours on Thursday, India’s trade deficit figure for February came as good at -11.98B vs estimate of -14.30B; prior: -16.30B. But, the market is concerned about an imminent trade war with the US for Trump’s trade protection rhetorics. For February, Indian exports grew by 4.5%, while import grew by 11% on YOY basis. Apr-Feb Exports came at $273.73 BLN, Up 11% YOY, while April-Feb Cumulative Imports At $416.87 BLN, Up 21% YoY.
Indian market is also concerned about growing political friction within NDA (BJP) government as several allies are now against the government for various issues and some allies’ parties, such as TDP are also planning for a symbolic no-confidence motion against the NAMO government. Thus, the path of the 2019 general election may not be an easy ride for NAMO as thought earlier.
On Thursday, Indian market was mainly dragged by banks & financials, FMCG, energies, while supported by selected private banks such as HDFC Bank, fertilizer stocks (extension of Urea subsidy till 2020).
Global cues were mixed:
On Thursday, at the time of Indian market closing, US stock future (SPX-500) was down slightly by -0.05% on trade concerns after incoming White House economic adviser Kudlow said the US will take a tougher line on trade with China.
European stocks were up +0.18% on lower EUR/EU bund yields and reduced interest rate concerns along with upbeat comments from ECB’s Villeroy. The 10-year German bund yield fell to a 1-1/2 month low of 0.574% after a spate of soft jawboning by Draghi & Co and buzz of EU tax hikes on techs. Villeroy on Thursday said: "we see a welcome alignment of stars against a background of robust recovery across Europe and gradual progress on inflation."
Asia-pacific stocks closed mixed: Japan +0.12%, Hong Kong +0.34%, China -0.01%, Taiwan -0.18%, Australia -0.24%, Singapore -0.61%, South Korea +0.23%. Chinese stocks fell back on trade concerns after incoming White House economic adviser Kudlow signaled the Trump administration was readying a larger round of tariffs against Chinese imports when he said China has earned a "tough response" for not playing by the rules of trade.
Asian markets were closed in a subdued session in which there were a few notable standouts such as Japan's Nikkei, which erased early losses to finish up 0.12% despite a stronger Yen and an ongoing scandal surrounding Prime Minister Abe and Finance Minister Aso.
Japan’s equity market has been holding up relatively well as of now as a result of suspected BOJ intervention but it will have to decline some more if US shares deepen their losses. There was also some speculation that the BOJ was aggressively buying up ETFs on Thursday.
Talking about government intervention, there definitely was some in China where shares wiped out early losses with an afternoon turnaround that was due to Chinese state funds or the so-called plunge protection team buying shares in the open market in the afternoon because authorities want markets to be stable during annual legislative meetings in Beijing. ChiNext Index closes up 0.4% after sliding 1.6%. The Shanghai Composite Index wipes out a 0.6% loss to end virtually unchanged. Hang Seng Index and Hang Seng China Enterprises Index both rose by 0.3%.
Overall, the global risk-on mood was muted as markets appear to be running out of reasons to stay optimistic this week. The White House purge and concerns about a more protectionist US policy agenda are certainly at the heart of that and soft retail sales report also seemed to put the brakes on the ‘Goldilocks’ economy scenario which was pushed after last Friday’s US employment report.
Besides the old trading pattern of “buy the dips”, which may or may not recur, markets remain at a crossroads right now as they struggle with a number of concerns: how US trade policy will play out, broader geopolitical tensions and potentially slowing economic growth in the US. As a consequence, price action has become rather erratic as the market is now waiting for the next catalyst which as of now seems to be the Fed meeting on 21st March, but the market is now clearly in control of politics rather than economics.
SGX-NF
BNF
USDJPY
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