Monday, 23 April 2018

Nifty edged up on mixed global cues and tech optimism boosted by an upbeat report card from TCS

Market Wrap: 20/04/2018

NSE-NF (April):10595 (+17; +0.16%)

NSE-BNF (April):25050 (-98; -0.39%)

SPX-500: 2670 (-23; -0.85%)

Market Mantra: 23/04/2018

Updated: 08:25

SGX-NF: 10575 (-20; -0.19%)

Expected BNF opening: 24980 (-0.25%)

SPX-500: 2676 (+5; +0.20%)

(Gap-down opening on subdued global/US cues amid higher US/EU bond yields despite reduced tensions on North Korea and US-China trade war)

March-Fut (Key Technical Levels)

Support for NF:


Resistance to NF:


Support for BNF:


Resistance to BNF:


Support for SPX-500:


Resistance to SPX-500:


Technical View (Positional-Nifty, Bank Nifty, SPX-500):

Technically, Nifty Fut-I (NF) has to sustain over 10615 for a further rally towards 10655/10675-10725/10765-10815/10865 in the short term (under bullish case scenario). 

On the flip side, sustaining below 10595 NF may fall towards 10530/10500-10475/10425-10390/10340 in the short term (under bear case scenario).

Technically, Bank Nifty-Fut (BNF) has to sustain over 25275 for a further rally towards 25475/25655-25775/25850-26050/26150 in the near term (under bullish case scenario).

On the flip side, sustaining below 25225, BNF may fall towards 25000/24900-24800/24600-24400/24250 in the near term (under bear case scenario).

Technically, SPX-500 now has to sustain over 2705 for a further rally towards 2730/2750-2765/2785 in the near term (under bullish case scenario).

On the flip side, sustaining below 2695, SPX-500 may fall towards 2680/2660-2630/2605 in the near term (under bear case scenario).

Valuation metrics:

Nifty-50: 10564; Q2FY18 EPS: 410; Q2FY18 PE: 25.77; Avg FWD PE: 20; Proj FY-18 EPS: 418; Proj Fair Value: 8360

Bank Nifty: 24944; Q3FY18 EPS: 820; Q2FY18 PE: 30.42; Avg FWD PE: 20; Proj FY-18 EPS: 961; Proj Fair Value: 19220

The Indian market (Nifty Fut/India-50) closed around 10595 on Friday, edged up by almost 0.16% on positive to mixed global cues and renewed optimism about tech after an upbeat report card (higher revenue) from TCS along with 1:1 bonus for the shareholders. Nifty Fut made a low of around 10531 but recovered quite smartly in the late hour’s trade boosted by techs and TCS, while banking stocks were under pressure, especially the PSU banks on the concern of strict NPA rules by the RBI. All focus was on the TCS for its $100 bln club market capitalization.

Metals were also under pressure on fall in global prices amid speculation Russia will come to the aid of Rusal and may nationalize the company to avoid US sanctions. Although oil was under some stress on Friday, the overall higher trajectory of the oil hovering around $68 and eyeing the $75 mark (Crude oil/WTI) has also affected the market sentiment on the concern of higher fiscal deficits.

Indian rupee (INR) fell by 0.52% on Friday and made 52 weeks low against US dollar around 66.21 and 10Y Indian bond yields also jumped to 7.734%, eyeing the recent high of 7.80% again, pressurizing the banks for their MTM loss on the bond portfolio. INR fell on the concern of fiscal discipline and political populism despite hawkish minutes from RBI, thinking about rate hikes in 2018.

As par RBI governor Patel, the Indian economy may grow by around 7.4% in FY-19., whereas it likely grew at 6.6% in FY-18 against 7.1% in FY-17. For FY-19, RBI is optimistic about higher government capex coupled with manufacturing and services. But RBI also flagged higher oil prices as a significant risk to the inflation and economy. As par IMF, India is now the fifth largest economy of around $2.6 tln in the world, displacing France after the US, China, Japan, Germany and the UK.

As par some report, the government may cut excise duty on fuel by Rs.1-1.5 to ease retail prices of petrol and diesel ahead of the series of elections (political populism). But the government is confident that the reduction will not impact fiscal deficit numbers for FY-19; expected at 3.4-3.3%.

Notably, fuel prices in India has hit a record high as crude oil (WTI/Brent) is hovering around 3 years high and government has already imposed hefty excise duty (additional), when oil was around $40 for an easy revenue to meet up fiscal expenditure, but is not ready to withdraw its even if oil breaches $65 (WTI) as par its previous commitment.

The market is concerned that India’s rating may be rerated as oil is sustaining above the $60-65 as the country imports almost 80% of its oil requirement and the very high tax components has made the retail prices of fuel the highest in South-East Asia, affecting the overall economy (inflation) and making it very high cost instead the global trend of a Goldilocks economy.

Under such circumstances, the government cutting excise duty by Rs.1-2 per liter will not make much difference; government should look at the change in fuel pricing policy for a long-term structural solution.

On Friday Nifty was helped by TCS, Infy, HDFC Bank, HCL Tech, Tech-M, Coal India, HUL (buy back buzz), IOC, Bharti Airtel, Wipro and others by around 86 points (82+4), while dragged by RIL (Alok industry bid failure) ICICI Bank, HDFC, L&T, SBI, Yes Bank, ITC, Axis Bank, Tata Steel, Indusind Bank and others by almost 82 points (60+22).

Overall, on Friday Indian market was helped by techs, mixed automobiles, selected private banks, while dragged by banks & financials, mixed FMCG, media, metals (fall in global prices), pharma, reality, energies, and consumer stocks to some extent.

Global cues were positive to mixed on Friday during Indian market hours:

US stock future (SPX-500) was up by 0.13% on optimism about US corporate earnings will continue to surprise to the upside.  General Electric was up 3% in pre-market trading on better than expected earnings (EPS).  Gains in the overall market were also limited to increased trade tensions with China as the US Treasury Department considers using an emergency law to curb Chinese investment in sensitive technologies. 

Under a 1977 low known as the International Emergency Economic Powers Act, President Trump could declare a national emergency in response to an "unusual and extraordinary threat," which allows him to block transactions and seize assets.

European stocks were up around 0.48% at a 2-1/2 month high due to strength in exporter stocks and mixed earnings. Exporters were gaining on weakness in EURUSD which was down by around 0.32% at a 1-1/2 week low after German Mar PPI rose less than expected, which is dovish for ECB monetary policy ahead of next Thursday's ECB meeting.  FTSE-100 was also boosted exporters/MNC amid a slump in GBP following reduced rate hike options after Carney (BOE) flip-flops. Overall, telecoms helped on M&A news, but energies lagged on falling oil on Friday.

Asian stocks were closed mostly lower: Japan -0.13%, Hong Kong -0.94%, China -1.47%, Taiwan -1.75%, Australia -0.21%, Singapore -0.70%, South Korea -0.70%, India +0.11% (Sensex). Weakness in Asian technology stocks undercut Asian bourses after Taiwan Semiconductor Manufacturing, Apple's main chip supplier, dropped 6% after it forecasts weaker-than-expected revenue this quarter on slowing demand for smartphones.  The IMF earlier this week had said that global smartphone shipments declined for the first time in 2017.

Asia stocks traded lower after the subdued tone rolled over from the overnight where all major indices finished in the red amid tech woes after semiconductor giant TSMC downgraded its revenue forecasts on concerns of softer smartphone demand.

ASX-200 and Nikkei-225 opened negative although losses were mostly pared as the Energy sector remained afloat in Australia and with the Japanese benchmark finding some relief from a weaker Yen (higher USD).

Elsewhere, Taiwan’s Taiex was the laggard as TSMC slumped following the weak revenue outlook, while Hang Seng and Shanghai were lackluster after the PBOC skipped open market operations (OMO) and as trade tensions with the US lingered.





No comments:

Post a Comment