Market Wrap: 05/03/2018 (17:00)
NSE-NF (March):10357 (-99; -0.95%)
(NS: 10359; Q2FY18 EPS: 407; Q2FY18 PE: 25.45; Avg FWD PE: 20; Proj FY-18 EPS: 418; Proj Fair Value: 8360)
NSE-BNF (Jan):24868 (-70; -0.28%)
(BNS: 24819; Q3FY18 EPS: 821; Q2FY18 PE: 30.23; Avg FWD PE: 20; Proj FY-18 EPS: 961; Proj Fair Value: 19220)
For 06/03/2018:
Updated: 07:30
SGX-NF: 10405; (+48 points@0.46%)
(Gap up on positive global/US cues after an indication that Trump may relent on his trade protectionist agenda)
Expected BNF opening: 25000
March-Fut (Key Technical Levels)
Support for NF: 10390/10350-10290*/10240
Resistance for NF: 10450/10490*-10550/10650
Support for BNF: 24800/24650-24450*/24300
Resistance for BNF: 25000/25300*-25450/25675
Technical View (Positional):
Technically, Nifty Fut-Jan (NF) has to sustain over 10450 areas for a further rally towards 10490-10550 and 10590-10650 zones in the short term (under bullish case scenario).
On the flip side, sustaining below 10430 areas, NF may fall towards 10390-10350 and 10290-10240 zones in the short term (under bear case scenario).
Technically, Bank Nifty-Fut (BNF) has to sustain over 25300 areas for a further rally towards 25450-25675 and 25800-26050 zones in the near term (under bullish case scenario).
On the flip side, sustaining below 25250-25000 areas, BNF may fall towards 24800-24650 and 24450-24300 zones in the near term (under bear case scenario).
Market
wrap:
The Indian market (Nifty Fut-March/India-50) closed around 10358 on Monday (5th March), tumbled by almost 0.95% on subdued global cues amid Trump’s trade tantrum coupled with an ongoing saga about India’s largest bank fraud in the history. Metals & autos dragged the market on the concern of Trump’s tax on foreign steel and aluminum. Nifty-Fut made an opening session high of around 10395 and a session low of 10320.
Global rating agencies are also concerned about India’s public sector banks (PSBS) on increasing incidents of frauds and an inherent weakness in corporate governance. Rating agency S&P has called for accelerated reforms at Indian banks while expecting further loses in the PSBS. As par S&P, the rate of stressed assets (NPL/GNPA) in the PSBS may be 13-15% against an official rate of 12.3%. Moody’s expects that Indian government will stick to its fiscal deficit target despite some headwinds.
On Monday, USDINR-I edged down by around 0.13% to 65.29, while the benchmark Indian bond 10YGSEC jumped by another 0.41% to close around 7.776%. A higher bond yield is generally not helpful for the equity market on higher borrowing costs. India is currently offering the highest bond yield among the Asian peers of EM.
India’s service PMI was terrible in February:
The Indian market came under pressure further after a terrible service PMI for February, which printed much below the boom/bust line of 50 at 47.8 vs prior 51.7. Activity in India’s service industries contracted in February for the first time since November as rising price pressures (inflation) led to a decline in new businesses orders. The pace of contraction the strongest since August, thereby ending the recent recovery experienced by India’s service sector after DeMo & GST blues.
As par Markit: “Anecdotal evidence pointed to weak underlying demand conditions in the service economy. However, (services) firms seem to believe that the decline is transitory as they raised their staffing levels at the joint-fastest pace since June 2011, in line with positive projections of activity growth”.
As par economists, despite declining slightly in January, fuel prices remained elevated. That and expectations of massive government spending (capex) over the coming year are likely to keep the inflation rate above the RBI’s medium-term target of 4% in the near future, increasing the chances of a hike by RBI.
In February, manufacturers also faced accelerating inflation, pushing overall input prices to rise at their quickest pace in three and a half years. The contraction in services activity offset an expansion in manufacturing and caused a composite PMI, which includes both, to plunge to 49.7, its lowest since August’17, from 52.5 in January’18.
Global cues were negative on Monday Indian trading hours:
On Monday, most of the other Asian markets closed lower: Japan -0.66%, Hong Kong -2.28%, China +0.07%, Taiwan -0.52%, Australia -0.57%, Singapore -1.17%, South Korea -1.22%. Losses in Asian metals producers and exporters led markets lower there with Japan's Nikkei Stock Index falling to a 4-3/4 month low, thanks to Trump’s trade war rhetoric, USD was also down, which is negative for the export-heavy Asian market.
Asian equity markets began a risk-packed week with a downbeat tone as region digested Italian elections, China economic announcements, and continued trade war concerns. This ongoing political uncertainty and rise of the Euro-skeptics dampened the risk-0n sentiment.
China edged up despite a subdued service PMI after Chinese Premier Li promised more market reforms and reiterated China's 2018 growth target "at around 6.5%."
Li delivered the Economic Work Report at the NPC in which he announced that China maintained GDP growth target at about 6.5% this year but dropped the reference to ‘higher if possible’. Li further stated that China will keep prudent monetary policy neutral and maintain proactive fiscal policy, while China will also take further measures to lower tax burden for companies.
On Monday, at the time of Indian market closing, US stock future (SPX-500) was down -0.29% on concern about the implications of US tariffs on the global economy. European stocks were almost flat on German political stability and Italian political anarchy/uncertainty and concern of a looming trade war led by Trump. Italy’s stocks and bonds were the standout losers as Italy's FTSE MIB Index remained in the red, dropping around 1%, after paring an earlier drop of as much as 2%.
On Monday, Indian market was helped by techs (renewed analyst optimism), mixed PSBS, while dragged by private banks, financials, FMCG, media, metals, pharma (renewed fear psychosis out of US-FDA inspections), reality, consumption, energies, and infra stocks.
SGX-NF
BNF
EURUSD
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