Market Wrap: 02/04/2018
NSE-NF (April):10270 (+118; +1.16%)
NSE-BNF (April):24432 (+93; +0.38%)
Valuation metrics:
NS: 10212; Q2FY18 EPS: 410; Q2FY18 PE: 24.91; Avg FWD PE: 20; Proj FY-18 EPS: 418; Proj Fair Value: 8360
BNS: 24328; Q3FY18 EPS: 820; Q2FY18 PE: 29.67; Avg FWD PE: 20; Proj FY-18 EPS: 961; Proj Fair Value: 19220
For 03/04/2018:
Updated: 08:15
SGX-NF: 10200 (-70; -0.68%)
Expected BNF opening: 24250 (-0.70%)
(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:
10180/10140-10090/10030-9985/9945-9900/9840
Resistance to NF:
10255/10300-10365/10395-10435/10465-10495/10535
Support for BNF:
24150/24040-23950/23850-23600/23400-23300/23150
Resistance to BNF:
24350/24550-24800/24900-25100/25300-25500/25800
Technical View (Positional):
Technically, Nifty Fut-March (NF) has to sustain over 10300 for a further rally towards 10365-10395/10435-10465/10495-10535 in the short term (under bullish case scenario).
On the flip side, sustaining below 10275-10255/10225 NF may fall towards 10180-10140/10090-10030/9985-9945/9900 in the short term (under bear case scenario).
Technically, Bank Nifty-Fut (BNF) has to sustain over 24550 for a further rally towards 24875/25150-25400/25550-25825/26050 in the near term (under bullish case scenario).
On the flip side, sustaining below 24500-24350, BNF may fall towards 24150/24040-23950/23850-23600/23400-23300/23150 in the near term (under bear case scenario).
The Indian market story on 02/04/2018:
The Indian market (Nifty Fut/India-50) closed around 10270 on Monday, jumped by almost 1.16% on global catch up the rally, an upbeat auto sales figure for March and buzz of RBI bond relief for the banks. But the market was also under some pressure on loan scam allegations for ICICI and Axis Bank. Nifty Fut-April made an opening session low of around 10164 and a closing minute high of 10275.
Banks made some sharp recovery in the last hour of trade on reports that RBI may allow them to spread bond trading loses (MTM provisions) for Q4FY18 over up to four quarters. As a reminder, almost 50% of operating profit of the public sector banks (PSBS) comes from their bond portfolio and as bond prices plummeted by almost 10% in FY-18, banks are now sitting on a huge MTM loss from their bond portfolio to the tune of Rs.200 bln.
The RBI relief may come as a major reprieve for the PSBS, which have been hard hit by trading losses from a sustained spike in bond yields over recent months since July’17 and are also struggling under the burden of provisioning for record levels of bad loans (NPA). After DeMo, Indian banks were required to hold more bonds for their regulatory requirement of SLR as liquidity surged.
But, the RBI bond relief for the banks may be temporary as it’s merely a window dressing of accounting norms and may not solve the basic issues of higher Indian bond yields and borrowing costs as fiscal deficit is quite stretched. The RBI bond relief may also backfire, as it shows the regulator/government is under panic and taking desperate steps to change the accounting rules as par convenience and thus confidence of the investors (FPIS) may also lose.
Indian macro data was positive on Monday:
After the Indian market hours, Infrastructure output for February came as subdued at 5.3% vs prior 6.1% (Y/Y). But direct tax collection for FY-18 soared by 17.1% to Rs.9.95 tln; corporate tax jumped by 17.1% and personal tax surged by 18.9%. February GST collections till 31st March was also upbeat at Rs.0.89 tln as compliance improved.
But overall Indian market mood was gloomy amid ICICI Bank loan fiasco with the Videocon group as the market may have also lost confidence on the repeated breach of basic corporate governance in the Indian banking system, be it public or private barring some exceptions. RBI may also intervene in the ICICI Bank issues as it had already intervened in the Axis Bank CEO Reappointment case.
On Monday, overall Indian market was supported by selected private banks (Kotak/HDFC), automakers, financials, FMCG, Techs (IT), media, metals, pharma (US FDA product approvals and favorable plant observations), reality, energies, consumption and infra, while it was dragged by selected private banks (ICICI/Axis) and PSBS.
Global cues were negative on a holiday thinned-trading during Indian market hours:
On Monday, during Indian market hours, overall global cues were negative as EU was on holiday. US stock future (SPX-500) was down 0.24% after China announced the implementation of its previously-announced tariffs on about $3 billion of US imports in retaliation for US metal tax.
Tech stocks remain on the defensive after Trump over the weekend tweeted criticism of Amazon regarding its use of the US Postal Service for deliveries, payment of little taxes or no taxes at all and the overall discounting business model adopted by the Amazon, which has forced hundreds of small retailers shutting down their operations.
Markets were closed for Easter Monday in UK, Australia, Canada, Hong Kong, and most of Europe. Asian stocks closed mostly lower on continued trade tensions after China announced the implementation of its tariffs on US products coupled with softer manufacturing PMI data from many countries in Asia: Japan Nikkei -0.31%, China Shanghai -0.18%, Taiwan TAIEX -0.29%, Singapore Str. Times +0.08%, South Korea KOSPI 200 -0.19%, but India BSE Sensex 30 +0.87%, was an exception.
Most of the Asian markets, which were open, saw aggressive profit-taking into the close: Chinese stocks erased gains to end Monday at session lows, following their worst quarter in two years. Chinese brokers bucked broad market declines after the government announced a trial program for Chinese Depositary Receipts.
On Monday, the PBOC raised the daily reference rate for the Yuan to strongest since 11th Aug 2015, which was the "day of the devaluation", as the dollar weakened: PBOC raised the Yuan reference rate by 0.19% to 6.2764 per USD.
SGX-NF
BNF
USDJPY
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