Wednesday 4 April 2018

Nifty edged up on mixed global cues and helped by RBI bond relief for bank’s MTM losses

Market Wrap: 03/04/2018

NSE-NF (April):10280 (+16; +0.16%)

NSE-BNF (April):24597 (+166; +0.68%)

Valuation metrics:

NS: 10245; Q2FY18 EPS: 410; Q2FY18 PE: 24.99; Avg FWD PE: 20; Proj FY-18 EPS: 418; Proj Fair Value: 8360

BNS: 24511; Q3FY18 EPS: 820; Q2FY18 PE: 29.89; Avg FWD PE: 20; Proj FY-18 EPS: 961; Proj Fair Value: 19220

For 04/04/2018:

Updated: 08:15

SGX-NF: 10275 (-5; -0.05%)

Expected BNF opening: 24580 (-0.05%)

(Gap down opening on terrible global/US cues amid China tariff retaliation and Trump’s Amazon blasting)

March-Fut (Key Technical Levels)

Support for NF:

10240/10215-10190/10150-10100/10030-9985/9945

Resistance to NF:

10300/10330-10385/10405-10465/10500-10545/10600

Support for BNF:

24525/24425-24325/24225-24150/24040-23950/23850

Resistance to BNF:

24650/24775-24900/25100-25300/25500-25850/26075

Technical View (Positional):

Technically, Nifty Fut-March (NF) has to sustain over 10330 for a further rally towards 10385/10405-10465/10500-10545/10600 in the short term (under bullish case scenario). 

On the flip side, sustaining below 10300 NF may fall towards 10240/10215-10190/10150-10100/10030 in the short term (under bear case scenario).

Technically, Bank Nifty-Fut (BNF) has to sustain over 24650 for a further rally towards 24775/24900-25100/25300-25500/25850 in the near term (under bullish case scenario).

On the flip side, sustaining below 24600, BNF may fall towards 24525/24425-24325/24225-24150/24040 in the near term (under bear case scenario).


The Indian market (Nifty Fut/India-50) closed around 10280 on Tuesday, edged up by almost 0.16% on mixed global cues amid Trump’s Amazon war and China trade retaliation coupled with RBI relief for the banks to spread its Q4 bond loses provisions up to next four quarters. Nifty Fut-I made an opening minute low of 10206 and a closing session high of 10297, primarily boosted by the public sector banks (PSBS) amid RBI bond loss relief, albeit temporarily.

The RBI bond relief also caused lower bond yields for the benchmark 10Y GSEC, which fell to a low of 7.312% from prior day’s close of 7.398%; i.e. down by almost 10 bps and also 50 bps from the recent high of around 7.80%, boosting the overall market sentiment, specially PSBS.

The Indian market sentiment was also boosted by an upbeat GST (Feb) as well as direct tax collection and auto sales numbers but dragged by a subdued Manufacturing PMI for March, which fell to 51.0 from 52.1 clocked in February (estimate: 52.8).

The Indian market also got some support from a key amendment of the IBC/NCLT rule, which will allow MSME defaulter promoters to bid for their own company, provided they are not marked as willful defaulters.

ICICI saga may continue for a much wider angle involving other banks:

ICICI bank got some boost amid the buzz of an imminent resignation of its CEO, which may pave the way for image rebuilding for the Bank. Also, being the largest private bank in India and “too large to fail”, the government will not allow the bank to sink as it would pose a systemic risk in the banking sector in that scenario.

There are reports that apart from Videocon, various other mid-sized corporates, having borrowing relationship with ICICI Bank are also investors of the controversial NuPower Company and thus the allegation of conflict of interest is gaining momentum apart from other wrongdoings. After the ICICI and Axis Bank fiasco, the government has ruled out a plan for an immediate privatization of the PSBS, but that option remains open for the future.

Meanwhile, after the market hours, Indian private weather forecaster Skymet has projected normal monsoon for India in 2018 and it sees 5% chance of excess monsoon rains in India this year. This is good news for the Indian rural economy and the market as the country still depends largely on rainwater for its farm output.

On Tuesday, overall Indian market was helped by banks and financials, automakers, media, metals, pharma, reality, consumption, energies, infra, while dragged by techs (H1B visa concern and lower USDINR) and selected private banks (HDFC twins). ICICI Bank was the top Nifty gainer and contributed almost 40% of Nifty gains after days of slump amid CEO controversy with Videocon loan.

Tire (Tyre) stocks were in the limelight on trade protection measure by the government after it imposed 15% tax from previous 10% on imported radials for Trucks and buses.

EU and US cues were supportive of the Indian market on Tuesday:

On Tuesday, global cues were supportive of the Indian market. US stock future (SPX-500) was trading higher by 0.50% as some of the gloom from Monday dissipated and as overseas stock markets did not fall as far as US stocks did on Monday. The Euro Stoxx-50 was down only by 0.58%, which is a substantially smaller decline than Monday's 2.23% plunge in the SPX-500 index.

Asian stocks closed with losses of less than -1%: Japan Nikkei -0.45%, Hong Kong Hang Seng +0.29%, China Shanghai -0.84%, Taiwan TAIEX -0.61%, Australian S&P 200 -0.13%, Singapore Str. Times -0.54%, South Korea KOSPI 200 -0.20%, India Sensex 30 +0.35%. Indian market basically outperformed its Asian peers on improved tone in the EU market after tepid opening. Also, a higher USD and lower EUR was beneficial for the export-heavy Asian as well as EU market.

The Trump administration is reportedly pushing for a preliminary NAFTA agreement that it can announce next week ahead of Mexican as well as US elections in November. Trump is gradually shifting his global trade war stance towards China only.

On Tuesday, the Australian central bank (RBA) announced its monthly policy meeting and left its key interest rate unchanged at a record low of 1.5% for the 20th straight month, which was fully in line with market expectations. RBA tone was quite optimistic and it may be termed as “less dovish” hold.

BOJ Governor Kuroda told parliament that it is internally discussing how to begin exiting from its stimulus program but that it is too early to talk about details in public right now as it could create confusions.

Asian stocks were mostly lower as the downbeat tone rolled over from Wall St where China’s trade retaliation and tech woes weighed heavily across all the bourses, with overnight losses in the SPX-500 (-2.2%) exacerbated on technical selling after a break below the 200DMA (2580) while the Nasdaq underperformed as it slipped into the red YTD and into correction territory.

ASX 200 and Nikkei 225 both opened lower with the latter suffering the brunt of a firmer currency and with losses seen across tech names following similar underperformance in their US counterparts, which was led by selling in Amazon after Trump’s tirade on the online giant. Conversely, Australian stocks then recovered as mining stocks and energy names outperformed.

Hang Seng and Shanghai conformed to the tech-related losses and after the PBOC refrained from liquidity operations for an 8th consecutive occasion, while markets in Hong Kong also took their first opportunity to react to China’s tariffs on US products and reports of the government pressuring banks to halt local government lending.

European bourses have opened lower after losses on Wall St. and Asia overnight. Chinese trade retaliation and tech woes weighed heavily across the bourses. The tech sell-off rolled over from the previous sessions with the sector underperformed. Semi-conductors are amongst the worst performers as names take a hit on the news that Apple is looking to steer away from Intel chips to create their own by 2020.


On the flip side, Barclays was initially higher after reports the bank is planning a multi-million GBP share buyback. Miners were amongst the top performers after feeling the boost from firmer base metal prices. Finally, Sky was at the top of the FTSE 100 amid news that Fox is offering to sell Sky News to Disney as it seeks to obtain regulatory clearings for its proposed takeover of Sky.





SGX-NF


BNF 


WTI

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