Market Wrap: 16/03/2018
NSE-NF (March):10238 (-134; -1.29%)
NSE-BNF (Jan):24635 (--208; -0.84%)
NS: 10195; Q2FY18 EPS: 410; Q2FY18 PE: 24.87; Avg FWD PE: 20; Proj FY-18 EPS: 418; Proj Fair Value: 8360
BNS: 24490; Q3FY18 EPS: 822; Q2FY18 PE: 29.79; Avg FWD PE: 20; Proj FY-18 EPS: 961; Proj Fair Value: 19220
SGX-NF: 10200; (-38 points; -0.38%)
Expected BNF opening: 24540 (-0.38%)
(Gap-down on subdued global cues on reports that following the abrupt firing of former FBI deputy director Andrew McCabe, Trump may be eyeing US special counsel Muller’s firing, which may evoke another wave of US political jitters)
March-Fut (Key Technical Levels)
Support for NF:
Resistance to NF:
Support for BNF:
Resistance to BNF:
Technical View (Positional):
Technically, Nifty Fut-Jan (NF) has to sustain over 10330 for a further rally towards 10385-10435-10495-10545/10595 in the short term (under bullish case scenario).
On the flip side, sustaining below 10300-10250 NF may fall towards 10170/10140-10120/10100-10070/10040-9995/9950 in the short term (under bear case scenario).
Technically, Bank Nifty-Fut (BNF) has to sustain over 24950 for a further rally towards 25100/25250-25400/25600-25800 in the near term (under bullish case scenario).
On the flip side, sustaining below 24900, BNF may fall towards 24800/24600-24450/24250-24150/23950-23850/23600 in the near term (under bear case scenario).
The Indian market story on 16/03/2018:
The Indian market (Nifty Fut-March/India-50) closed around 10238 on Friday, tumbled by almost 1.29% on renewed political jitters after TDP, a key ally of NDA/BJP government decided to quit the NAMO government and moved/supported a symbolic “no confidence” motion against the Modi government on certain “injustice” done to the state (AP).
Also, several other “sympathetic” political parties from other states like AIDMK in TN and almost all the opposition parties are ready to support the no-confidence motion against the BJP government on various other issues. Nifty-Fut made an opening high of 10344 and a late day low of 10197 on the 1st no-confidence motion against the NDA government coupled with Trump’s trade war rhetoric and ongoing White House purge.
The Indian market tumbled after “no-confidence” move by TDP against the government:
Although there is no threat to the government out of this “symbolic” no-confidence motion in the Parliament, the market may be quite worried about forthcoming series of state elections and also the general election. Moreover, after the recent debacle in by-poll elections in UP and Bihar, the political uncertainty may be haunting the market as 2019 general election may not be an easy ride for NAMO.
Also, the market may be looking for any excuse to sell or book profit (long unwinding) in the last month of the financial year (FY-18/March) as from the next month, LTCGT (long-term capital gain tax) will be applicable.
As, the current valuations are quite stretched around 25 PE (reported Q3FY18) and along with that increasing instances of corporate bank loan frauds, rising NPA, a sense of trust deficit on the whole banking sector, especially PSBS (public sector banks), the widening impact of the PNB “loot” (theft/loan fraud) and mixed/deteriorating macros of the Indian economy may have made the market sentiment fluid coupled with negative global cues (such as the US-led trade war rhetoric).
The PNB fiasco is now turning into a major political issue and “war of words” between the government and the banking regulator (RBI) after Patel (RBI) broke his “silence” last week. Also, reports of no additional recaps funds from the government for the PNB may have affected the overall sentiment on Friday. RBI/government clamp down on LOU/LOC may be also affecting the PSBS sentiment, as their overseas banking operations might be affected quite severely. RBI ban of LOU/LOC may also increase borrowing costs.
There are also uncertainties about how PNB will repay its fraud LOU issued to the Gitanjali group of companies for around Rs.15 bln. PNB has also moved to the RBI for a permission of account window dressing so that PNB could show the Gitanjali loan loss provisions over next 4 quarters, rather than in 1 quarter as par normal accounting rules.
In the ongoing Indian NPA fiasco, ABG Shipyard may be another example of big corporate fraud/genuine business failure, which may cost several Indian banks to the tune of Rs.16.4 bln, where banks like ICICI, SBI, PNB, and IDBI are involved. The ABG Shipyard assets have no bidder right now even at the throwaway price of Rs.2.20 bln.
Indian macro was also subdued:
After the market hours on Friday, Indian trade balance for Q4 came as - $44.10B vs prior -32.80B (QOQ); Current account deficit (CAD) came as -2% of GDP vs prior -1.20% (QOQ) and 1.4% (YOY), significantly higher due to rising trade deficits (CAD for Oct-Dec’17 is at $13.5 bln).
Although the benchmark 10Y Indian bond yield closed around 7.558% on Friday, significantly lower than the recent high of 7.80% in line with its global peers, the market is still concerned about the impact of higher bond yields (lower bond prices) on Indian Bank’s bond portfolio MTM.
On Friday, Indian market was dragged by almost all the major sectors like banks and financials, automakers, FMCG, techs, media, metals, pharma, reality, consumption, energies, and infra as selling was quite solid and broad-based.
Global cues were mixed on Friday Indian market hours:
On Friday, during Indian market hours, Asian market was mixed, while US stock future (SPX-500) edged up by around 0.06% and European stocks were up 0.45% on lower EUR and EU bund yields.
Muted inflation pressures in the EZ fueled a rally in 10-year German bunds to a 1-3/4 month high, which was underpinning EU stocks. EZ Feb CPI was unexpectedly revised lower to 1.1% y/y from 1.2% y/y, the smallest pace of increase in 14-months, and ECB’s Praet warned against an early shift in guidance on stimulus as increased labor supply in the Eurozone may be holding down wages and therefore inflation.
Asian stocks closed mixed: Japan -0.58%, Hong Kong -0.12%, China -0.65%, Taiwan +0.08%, Australia +0.48%, Singapore -0.16%, South Korea +0.04%. China's Shanghai Stock Index fell to a 1-week low and was undercut on concerns about the Trump administration's trade policies, while Japanese stocks retreated after muted Japanese IIP data and lower USD, negative for the export savvy Japanese market.
Overall, growing US political jitters and white house turmoil and Trump’s trade war tantrums may have now changed the market psychology from “buy the dips” to “sell the rebounds”.
Asian stocks traded mixed following an indecisive lead from the US and as overnight trade lacked any tangible catalysts to dictate price action. ASX 200 and Nikkei 225 were mixed with Australia led by Consumer Staples on a deleveraging news, while Nikkei 225 was kept subdued by a firmer JPY as a result of Japanese as well as US political jitters. as cover-up allegations were fueled by reports PM Abe knew of the document alterations days before the public admission.
Elsewhere, Hang Seng and Shanghai Comp. were choppy after the PBOC skipped open market operations and instead announced to lend CNY 327 bln via its MLF, while US equity futures were briefly pressured on administration instability concerns after initial reports that National Security Adviser McMaster was said to be removed from position, although this was later denied by the White House.