Monday, 16 April 2018

Nifty inched up on positive global cues on hopes of trade and Syrian war truce and the widening impact of PNB “loot”

Market Wrap: 13/04/2018

NSE-NF (April):10496 (+31; +0.29%)

NSE-BNF (April):25235 (+51; +0.20%)

SPX-500: 2656 (-8 -0.29%)

Market Mantra: 16/04/2018

Updated: 08:30

SGX-NF: 10435 (-61; -0.58%)

Expected BNF opening: 25050 (-0.60%)

SPX-500: 2664 (+7; +0.25%)

(Negative opening on subdued global cues after weekend symbolic US air-strikes on Syria, renewed political jitters in Japan -Abe, China OMO rate hike and subdued report card from Infy along with muted trade balance data; also talks of 4 rate hikes in 2018 may be bad for the Indian market/EM).

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 10525 for a further rally towards 10575/10630-10665/10725-10765/10815 in the short term (under bullish case scenario). 

On the flip side, sustaining below 10500 NF may fall towards 10415/10400-10365/10330-10250/10190 in the short term (under bear case scenario).

Technically, Bank Nifty-Fut (BNF) has to sustain over 25325 for a further rally towards 25450/24650-25775/25850-26150/26300 in the near term (under bullish case scenario).

On the flip side, sustaining below 25275, BNF may fall towards 25150/25050-24950/24800-24600/24400 in the near term (under bear case scenario).

Technically, SPX-500 now has to sustain over 2685 for a further rally towards 2705-2730/2750-2765/2785 in the near term (under bullish case scenario).

On the flip side, sustaining below 2665, SPX-500 may fall towards 2640/2620-2605/2575-2545/2525 in the near term (under bear case scenario).

Valuation metrics:

Nifty-50: 10481; Q2FY18 EPS: 410; Q2FY18 PE: 25.56; Avg FWD PE: 20; Proj FY-18 EPS: 418; Proj Fair Value: 8360

Bank Nifty: 25201; Q3FY18 EPS: 820; Q2FY18 PE: 30.73; Avg FWD PE: 20; Proj FY-18 EPS: 961; Proj Fair Value: 19220

The Indian market (Nifty Fut/India-50) closed around 10496 on Friday, inched up by almost 0.29%, but off the day high of 10527 despite positive global cues on hopes of a trade and Syrian war truce. But, the market slipped on the widening impact of PNB “loot” (theft/loan fraud) and made a session low of around 10456 amid news that 5 banks are under ED scanner for another huge consortium loan given to 47 subsidiary companies of Nirav Modi & Co. The banks are SBI, Axis, Syndicate, Union bank, and BOI.

There was also another report of SEBI probe on the ICICI Bank issue for the Videocon loan. Subsequently, all these news along with surging oil has affected the Banks and the Indian market sentiment despite earnings optimism and some encouraging macro data (lower headline CPI and upbeat IIP). The market was also under pressure from lack of NCLT resolution for some big corporate NPA and investigation nightmare with some of the top bank officials.

On Friday, Nifty was helped by RIL, Kotak Bank, HDFC, Infy, Tech-M, IBULLS Housing Finance, ICICI Bank, Eicher Motors, Wipro, Adani Ports and others by almost 50 points, while it was dragged by ITC, BPCL, IOL, Axis Bank, Maruti, SBI, HCL Tech, HDFC Bank, Bajaj Fin, Yes Bank and others by around 31 points altogether.

Overall, on Friday, Indian market was helped by financials, Techs, media, metals, pharma, selected private banks, reality, energies (higher oil), while dragged by public sector banks, FMCG.

Global cues were positive during Indian market hours on Friday:

US stock future (SPX-500) was up by 0.30% and European stocks were up by 0.50% at a 6-week high as fears of a trade war subside.  President Trump hinted late Thursday that the US may rejoin the Trans-Pacific Partnership (TPP) free-trade deal he pulled out of when he first took office and expressed optimism about a deal with China saying the two countries may ultimately end up not imposing tariffs on each other as they negotiate their differences.

Strength in energy stocks is also giving a boost to the overall market as crude oil climbed to more than 3 years on apprehension about Syrian attack by the US. The IEA also said less than 10% of the global surplus in oil inventories remain and OPEC is on the verge of "mission accomplished" in its quest to clear a global supply glut. 

Asian stocks closed mixed: Japan +0.55%, Hong Kong -0.07%, China -0.66%, Taiwan +0.09%, Australia +0.23%, Singapore +0.94%, South Korea +0.52%, India +0.27%. 

Chinese stocks moved lower on subdued China economic data after China March credit growth grew less than expected and after China's, March trade balance unexpectedly posted its biggest deficit in 13-months. China March new yuan loans rose +1.120 trillion yuan, weaker than expectations of +1.176 trillion yuan. March aggregate financing rose +1.33 trillion yuan, weaker than expectations of +1.80 trillion yuan.

The China March trade balance unexpectedly fell into a deficit of -$4.98 billion, weaker than expectations of a surplus of +$27.50 billion, the largest deficit in 13-months. March exports unexpectedly fell -2.7%, weaker than expectations of +11.8%, and the biggest decline in 15 months.  March imports rose +14.4%, stronger than expectations of +12.0% (Y/Y).

A rally in Japanese exporter stocks led Japan's Nikkei Stock Index higher after USDJPY climbed to a 6-week high, which boosts the earnings prospects of exporters, and after President Trump expressed interest in rejoining the TPP.

Asian equity markets were mostly higher as the region partially took a cue from Wall St, where sentiment was underpinned after US President Trump tweets further alleviated fears of an imminent strike on Syria. This resulted in firm gains across all US major indices, while the financial sector outperformed as yields rose in the wake of the recent hawkish FOMC minutes.

As such ASX 200 and Nikkei-225 were positive with Australian financials mostly kept afloat following an upbeat Financial Stability Review, while Japan benefitted from the weaker currency-heightened risk dynamic. Elsewhere, Hang Seng and Shanghai were underpinned at the open but then pared gains as the risk tone deteriorated following disappointing Chinese trade data and a CNY 100 bln net weekly drain by the PBOC, while the White House was also reported to be planning to escalate trade pressure on China. HKMA intervened in FX markets again and was said to have purchased HKD 2.44 bln to support HKD in defense of the peg.

In the latest trade war news, the White House was planning to increase trade pressure on China; additionally US Trade Representative will detail list of goods as early as next week that may be subject to 25% tariffs as part of possible $100 bln of additional tariffs on China, according to reports in WSJ. Russian lawmakers have drafted legislation for sanctions on US goods including Tobacco, agriculture, medicine, and consultancy.

European equities trade modestly higher, reaching a six-week high with builders and miners leading the gains to a third-straight weekly gain, largely due to the US has taken no decision on what (if any) military action should be taken on Syria (so far).The bullish tone has gotten a boost from trade-sensitive sectors in Europe after Trump expressed optimism on a deal with China and after reports late Thursday he was considering rejoining the TPP pact.





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