Market Wrap: 12/03/2018
NSE-NF (March):10433 (+217; +2.12%)
NSE-BNF (Jan):24760 (+447; +1.84%)
Valuation metrics:
NS: 10421; Q2FY18 EPS: 410; Q2FY18 PE: 25.41; Avg FWD PE: 20; Proj FY-18 EPS: 418; Proj Fair Value: 8360
BNS: 24760; Q3FY18 EPS: 822; Q2FY18 PE: 30.12; Avg FWD PE: 20; Proj FY-18 EPS: 961; Proj Fair Value: 19220
For 13/03/2018:
Updated: 07:45
SGX-NF: 10425; (-8 points; -0.08%)
Expected BNF opening: 24740 (-0.08%)
(Almost flat on muted global cues amid renewed concern of trade-war; all focus is now on US core CPI on Tuesday)
March-Fut (Key Technical Levels)
Support for NF:
10415/10370-10325/10285-10240/10180
Resistance to NF:
10485/10515-10560/10595-10660/10750
Support for BNF:
24700/24500-24300/24150-24000/23850
Resistance to BNF:
24900/25100-25300/25400-25550/25800
Technical View (Positional):
Technically, Nifty Fut-Jan (NF) has to sustain over 10515 areas for a further rally towards 10560/10595-10660/10750 zones in the short term (under bullish case scenario).
On the flip side, sustaining below 10485/10465 areas, NF may fall towards 10415/10370-10325/10285-10240/10180 zones in the short term (under bear case scenario).
Technically, Bank Nifty-Fut (BNF) has to sustain over 24900 areas for a further rally towards 25100/25300-25400/25550-25800/26050 zones in the near term (under bullish case scenario).
On the flip side, sustaining below 24850/24800 areas, BNF may fall towards 24700/24500-24300/24150-24000/23850 zones in the near term (under bear case scenario).
The Indian market story on 12/03/2018:
The Indian market (Nifty Fut-March/India-50) closed around 10433 on Monday, soared by almost 2.12% amid goldilocks global rally after a mixed US job data on Friday weekend. The Indian market made a huge short covering in late day trade after the positive opening of the European market and made a closing session high of around 10443; earlier it made an opening session low of 10295 after the gap up opening at around 10331, tracking positive global cues.
An expectation of good macro data (CPI/IIP) may have also triggered the FII led huge short covering coupled with the perception that Fed may go slow in its rate hikes trajectory after muted US wage growth. The benchmark 10Y Indian bond yield also fell by 0.55% on Monday to close around 7.634% on hopes of a softer Indian inflation, which came true after the market hours.
India may cheer the softer headline inflation and higher IIP, but core inflation is still very sticky above 5%:
On Monday, Indian headline CPI for February came as 4.44% vs estimate 4.70%; prior: 5.07% (Y/Y) amid huge fall in food/vegetable inflation. But core inflation was virtually unchanged and sticky at 5.1%.; it’s also far high above the RBI comfort level of 4%. Indian IIP for Jan also came upbeat at 7.5% vs estimate 6.7%; prior: 7.1% (Y/Y). The huge fall in food/vegetable inflation might be seasonal and a function of overproduction.
A combination of higher IIP and most probably higher Q4 GDP and consistently sticky and higher core inflation may keep the RBI in neutral mode for next few months. Although a slower headline Inflation for a second straight month may provide the RBI room to keep interest rates on hold for longer and this may be negative for India’s surging bond yields to some extent, but the sticky core inflation may be also a cause of headwind.
India’s NPA saga continues:
On Monday, Indian market came into some selling pressure in the 1st half on another big corporate loan fraud of Rs.50 bln in Andhra Bank involving Sterling Biotech and it now seems that more such skeletons may come out in the days ahead.
The Indian government has also launched a “surgical strike” on the NPA fiasco and taking several steps including marking of passports of any loan above Rs.0.50 bln and even cancellation or surrender of the passports of willful defaulters or IBC/NCLT cases to prevent fleeing out of the country after the mega default. RBI also begins a special audit of the PSBS.
Meanwhile, the global rating agency, Moody’s has projected 0.80% improvement in the Indian NPA due to the proper resolution of cases in NCLT. But a lot will depend on the amount of haircut that banks have to forgo from NCLT/IBC cases.
The Indian market may be also worried about Rs.0.35 tln mismatch in GST collections, which may be a function of willful tax evasion, taking the opportunity for various loopholes and very complex structure of the return filling in the system.
The market is also concerned about farm loan waiver demand after a huge farmer’s rally on Monday in Mumbai. All these farm loan waivers and political populism ahead of state and general election may add to the already stressed fiscal deficit coupled with higher oil and lower revenue.
The PNB saga has now turned into a major political controversy involving the two main political parties on India (BJP-INC) and the market is concerned that the government is playing to the gallery in this election year, rather than to the business.
On Monday, Indian market was helped by banks and financials, automakers, FMCG, techs, media, metals, pharma, reality, consumption energy and infra, while dragged by PSBS to some extent; although PSBS has also recovered from deep loses. In brief, the short covering or the bargain hunting was quite broad-based and solid after 6-7 days of intense selling.
Asian markets were in deep green on Monday:
On Monday, most of the Asian stocks closed higher: Japan +1.65%, Hong Kong +1.93%, China +0.59%, Taiwan+1.26%, Australia +0.55%, Singapore +1.57%, South Korea +0.95%. China's Shanghai Composite rose to a 2-week high and Japan's Nikkei Stock Index posted a 1-1/2 week high as Asian markets rallied on optimism strength in the US economy will benefit Asian exporters as last Friday's Goldilocks jobs report showed the US labor market continued to strengthen without faster wage inflation.
Asia stocks were higher across the board as the region took its first opportunity to react to Friday’s rally on Wall St and jobs data from US where NFP smashed expectations, but wage growth slowed which in turn provided a goldilocks backdrop for stocks.
ASX 200 was led by commodity names after crude rallied over 3% on Friday and PM Turnbull confirmed Australia is to be exempted from US tariffs.
Nikkei 225 outperformed but closed off its best levels as the cronyism scandal continued to haunt PM Abe after Japan’s Finance Ministry confirmed documents had been doctored in a land-sale to a school operator which allegedly used ties to PM Abe’s wife to get a cheap deal on state-owned land.
Elsewhere, Hang Seng and Shanghai Comp. also gained although the mainland got off to a slow start as US-China trade war concerns somewhat lingered and as participants also mulled over Xi’s power consolidation after China’s legislature voted to formally scrap presidential term limits from its constitution. The PBOC injected CNY 90 bln via OMO.
As we know, Japanese Finance Minister Aso is under pressure to resign over a report regarding alleged favor to a school with connections to the Japanese PM Abe. The prime minister told parliament in February last year that he’d resign if any link emerges between himself or his wife Akie and the land deal.
The Yen jumped after Japan’s Finance Minister Taro Aso refused to step down despite news that his name and that of Prime Minister Abe were removed from documents connected with a land-sale scandal, creating uncertainty around the future of Abenomics. The advance, however, was pared after Aso said he won’t resign.
The European market was also upbeat:
On Monday, during Indian market hours, European stocks were up by around +0.52% at a 1-1/2 week high on gains in US stocks along with upbeat comments from ECB Executive Board member Coeure who said Eurozone growth "is strong and well distributed, and now reaches all regions and sectors." Also, there was positive news from German & Italian politics. DAX outperforms amid multi-billion revamp in German utility sector.
The European cash open mimicked the strong positive sentiment seen in Asia and in the US on Friday following US NFP data beating expectations but wage growth slowing down providing a goldilocks backdrop for stocks. Major bourses were in the green with the exception of the FTSE 100 underperforming weighed down by a strong sterling.
USD edged lower the second day as markets digested Friday’s jobs report, which kept stocks in Asia and Europe underpinned. In geopolitical news, North Korea reportedly wants a peace treaty and to build ties with the US, while its leader Kim also wants a US embassy in Pyongyang.
SGX-NF
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