Market Wrap: 22/03/2018
NSE-NF (March):10116 (-64; -0.63%)
NSE-BNF (Jan):24124 (-202; -0.83%)
Valuation metrics:
NS: 10115; Q2FY18 EPS: 410; Q2FY18 PE: 24.67; Avg FWD PE: 20; Proj FY-18 EPS: 418; Proj Fair Value: 8360
BNS: 24141; Q3FY18 EPS: 822; Q2FY18 PE: 29.37; Avg FWD PE: 20; Proj FY-18 EPS: 961; Proj Fair Value: 19220
For 23/03/2018:
Updated: 08:30
SGX-NF: 9995 (-121; -1.20%)
Expected BNF opening: 23800 (-1.20%)
(Gap down on terrible global cues on US-China trade war and a fresh White House purge, NSA replaced by a known China and defense hawk)
March-Fut (Key Technical Levels)
Support for NF:
9950/9920-9865/9815-9760/9705-9680/9585
Resistance to NF:
10055/10110-10150/10210-10250/10300-10350/10400
Support for BNF:
23600/23400-23150/22995-22700/22500-22250/22000
Resistance to BNF:
23900/24200-24400/24600-24900/25150-25250/25550
Technical View (Positional):
Technically, Nifty Fut-Jan (NF) has to sustain over 10110 for a further rally towards 10150/10210-10250/10300-10350/10400 in the short term (under bullish case scenario).
On the flip side, sustaining below 10090-10055 NF may fall towards 10000/9950-9920/9865-9815/9760-9705/9680 in the short term (under bear case scenario).
Technically, Bank Nifty-Fut (BNF) has to sustain over 23900-24050 for a further rally towards 24200/24400-24600/24900-25150/25250 in the near term (under bullish case scenario).
On the flip side, sustaining below 23850-23800, BNF may fall towards 23600/23400-23150/22995-22700/22500 in the near term (under bear case scenario).
The Indian market story on 22/03/2018:
The Indian market (Nifty Fut-March/India-50) closed around 10116 on Thursday, tumbled by almost 0.63% on negative global cues amid Fed and Trump tantrum coupled with the far-reaching impact of the PNB “loot” (bank loan scam). There was a report that CEO of a top Indian private bank & her spouse may be directly involved with PNB scam star. Nifty Future made an opening session high of around 10238 and a late day low of 10110.
The Market is not so much concerned about a simple “trade war” between US-China, it’s much more:
Trump’s rhetoric about an all-out trade war with China is not a simple “trade war”; it’s an attempt to isolate China and undermine its growing influence & global superpower capacity in the disguise of a “trade war”. EU, NAFTA and other countries are being offered Trump’s metal tax exemption in lieu of supporting the anti-China stance of US. The market is clearly worried about the US-China duet and its impact on the global economy and politics.
Fed’s 2018-20 dot-plots of 7 more hikes may be hawkish for the stock market:
As expected, Fed raised US rate by 0.25% on Wednesday with a projection of 2 more hikes in 2018 and 3 hikes in 2019 coupled with another 2 rate hikes in 2020, citing an improving economic outlook. US policymakers continued to project a total of three increases this year as FOMC sees “the US economic outlook has strengthened in recent months”.
Although Powell has downplayed the Fed dot-plots, especially for the longer term as it’s a median of individual views, equity market may be worried about the Fed dot-plots for 2019-20. Fed has projected total 3 rate hikes in 2018 against 3 in the previous dot-plots while upgraded the same also by another 3 rate hikes against previous projections of 2 and added further 2 rate hikes in 2020. Thus, in effect, Fed may hike total 6 times in 2018-19 against previous projections of 5.
Thus essentially, it may be a hawkish hike by Fed for the equity market although in comparison to FX market expectations the same may be termed as a dovish hike because Fed projects total 3 rate hikes in 2018 against expectations of 4 by some market participants after super-duper hawkish testimony by Powell in his 1st testimony.
Now it seems that Fed is going to hike by another 7 times @0.25% each till 2020 and will make the US terminal rate around 3.50% from the present 1.75% and that maybe not good for US/global equities on possible higher bond yields and borrowing costs.
On the FX perspective, for now, the dovish Fed actions have drowned out some of the hawkish rhetoric, with the initial boost to US Treasury yields and the dollar from the Fed’s improved economic outlook fading quickly.
US Policy makers raised growth expectations, reduced unemployment rate estimates and set out a path of steeper rate increases through 2020. In the forecasts, Fed projected a median federal funds rate of 2.9% by the end of 2019, implying three rate increases next year, compared with two 2019 moves seen in December’17.
Meanwhile, as per reports, Trump plans to announce trade sanctions on China as soon as Thursday over intellectual property. The president is weighing duties of as much as $50 billion worth of Chinese goods through the package could still be altered and lightened. China is also preparing to hit back at Trump’s planned sweeping tariffs with levies aimed at agro-industries and states which tend to employ his supporters.
Indian market under additional pressure on a report that CEO of a top Indian private bank & her spouse may be directly involved with PNB scam star:
Amid all these negative global cues, the Indian market came under renewed pressure on a report that that CEO of a top Indian private bank & her spouse may be directly involved with PNB scam star and has helped to get the Rs.6 bln line of credit (loan) from a consortium of banks in lieu of “commissions” (kickbacks). The CEO may be summoned by the investigative agency shortly. As par market talk, most probably it’s the case of Axis Bank (unconfirmed).
For India, a hawkish Fed, higher bond yields, higher oil and huge NPA may not be good for the overall economy and the stock market.
Global cues were negative during Indian market hours on Thursday:
On Thursday during Indian market hours, US stock future (SPX-500) were down -0.70% and European stocks were also down -1.25%, both at 2-week lows, on global trade concerns as Trump is set to announce about $50 billion of tariffs against China over intellectual-property violations. Markets were also under stress on Facebook (techs) data theft fiasco.
European stocks were also under pressure on signs of a slowdown in manufacturing activity and plunge in USD. The Stoxx-600 Index dropped 0.9%, with 18 of 19 industry groups in the red. Technology, chemicals and lender shares were the worst sector decliners.
Asian stocks closed mixed: Japan +0.99%, Hong Kong -1.09%, China -0.53%, Taiwan -0.05%, Australia -0.22%, Singapore -0.56%, South Korea +0.53%, India -0.39%.
Asian stocks traded mixed as the region digested the fallout from the FOMC. ASX 200 and Nikkei 225 were varied with commodity-related stocks underpinned by gains in crude and the metals complex due to a softer USD, while the KOSPI also gained amid US tariff exemption hopes after US Trade Representative Lighthizer named South Korea as one of the countries likely to be exempted.
On the other side, Hang Seng and Shanghai underperformed with the US set to announce tariffs on China later in the day and after both the HKMA and PBOC raised rates in response to the Fed.
The PBOC stated that the increase in reverse repo rates meets market expectations and is a normal response to the Fed rate hike, while the Hong Kong Monetary Authority (HKMA) also raised rates by 25bps to 2.00% in lockstep with the Fed.
China's Shanghai Composite fell to a 2-week low on trade concerns and after the PBOC raised interest rates in open market operations when they sold 10-billion yuan of 7-day reverse repos at 2.55%, up from 2.50% in a previous operation.
SGX-NF
BNF
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