Friday, 27 April 2018

Nifty jumped on positive global cues and earnings optimism

Market Wrap: 26/04/2018

NSE-NF (May):10623 (+31; +0.29%)

NSE-BNF (May):25030 (+198; +0.80%)

SPX-500: 2665 (+28; +1.04%)

Market Mantra: 27/04/2018

Updated: 08:40

SGX-NF: 10650 (+27; +0.25%)

Expected BNF opening: 25100 (+0.30%)

SPX-500: 2668 (-7; -0.26%)

(Gap-up opening on positive global/US cues amid some fall in US bond yields and USD coupled with upbeat earnings from techs and increasing prospect of North Korean truce and fall in EUR after soft jawboning by Draghi & Co)

Fut-I (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 10685 for a further rally towards 10730/10780-10815/10860 in the short term (under bullish case scenario). 

On the flip side, sustaining below 10665 NF may fall towards 10635/10615-10570/10540 in the short term (under bear case scenario).

Technically, Bank Nifty-Fut (BNF) has to sustain over 25250 for a further rally towards 25450/25655-25775/25850 in the near term (under bullish case scenario).

On the flip side, sustaining below 25200-25100, BNF may fall towards 25000/24800-24700/24550 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 in the near term (under bullish case scenario).

On the flip side, sustaining below 2675, SPX-500 may fall towards 2660/2645-2630/2610 in the near term (under bear case scenario).

Valuation metrics:

Nifty-50: 10618; Q2FY18 EPS: 410; Q2FY18 PE: 25.90; Avg FWD PE: 20; Proj FY-18 EPS: 418; Proj Fair Value: 8360

Bank Nifty: 25011; Q3FY18 EPS: 820; Q2FY18 PE: 30.50; Avg FWD PE: 20; Proj FY-18 EPS: 961; Proj Fair Value: 19220

On Friday, the Indian market opened around 10668 and made a high of 10725 so far, on hopes of solid earnings from the index heavyweight RIL, which is up by almost 3% and eyeing the $100 bln market cap. Nifty Fut-I is now trading around 10710, jumped by almost 0.73%, also boosted by positive global/US cues amid some fall in US bond yields and USD coupled with upbeat earnings from techs and increasing prospect of North Korean truce and fall in EUR after soft jawboning by Draghi & Co.

The Indian market (Nifty Fut/India-50) closed around 10619 on Thursday, jumped by almost 0.47% on positive global cues as US 10Y bond yield slips below the psychological red line of 3% coupled with earnings optimism from some blue chips like Yes Bank. Apart from private banks, Techs and FMCG counters also helped the Nifty in late hours of trade and Nifty Fut made a high of 10644 after an opening session low of 10577 in a moderate day of volatility amid FNO expiry and rollover of positions and theme of “sell in May and go away”.

PSU banks were under stress as the benchmark Indian 10Y bond yield surged to 7.785%, eyeing the level of 7.80%. There was also some buzz that keeping in view about surging bond yields, higher oil, and inflation, RBI may take a hawkish stance or even a hike in its June policy meeting. Some of the major banks like SBI, HDFC are also hiking their fixed deposit rates and the market is concerned that this will be eventually followed by a hike in base lending rates.

The Indian market is also concerned about increasing reports of corporate bank loan frauds after the PNB-Nirav Modi fiasco. Almost all the big corporate NPAs are now classified as “frauds” involving corruption angle with top bank officials and the crony promoters. It now seems that the country is a heaven of big celebrity billionaire defaulters as a result of rampant bank loan frauds.

Elsewhere, Yes Bank soared by 8% on the better-than-expected and healthy report card. Wipro also recovered from 5% plunge and closed around 2% down after terrible earnings and poor guidance.

On Thursday, Nifty was boosted by Yes Bank, ITC, TCS, Infy, Kotak Bank, HUL, HDFC Bank, Indusind Bank, RIL, Eicher Motors and others by around 80 points (67+13), while it was dragged by L&T, SBI, Bharti Airtel, Axis Bank, Bharti Infratel, Wipro, Tata Steel, Bajaj Fin, Ultratech Cement, Lupin and others by almost 30 points (22+8) altogether.

On Thursday, overall Indian market was helped by private banks, automakers, financials, techs (higher USDINR around 67.08), consumption, and energies, while dragged by PSU banks, reality, infra and media, pharma stocks to some extent.

Global cues were positive on Thursday during Indian market hours:

US stock future (SPX-500) was up +0.25% and European stocks were up +0.35% on positive corporate quarterly earnings. Facebook was up 6% in pre-market trading to lead the overall market higher after it reported stronger-than-expected Q1 revenue. 

Automakers were higher on a report that China's State Council is considering cutting the import duty on passenger cars to 10% or 15% from the current 25% levy, with a decision possibly as early as next month. China imported 1.22 million vehicles last year, or about 4.2% of the country's total of about 28.9 million automobiles. China MOFCOM repeated its opposition to unilateralism and protectionism, while it added that some Chinese firms have given up on the US market amid uncertainty.

The market awaits the conclusion of Thursday’s ECB meeting and comments from ECB President Draghi after the policy meeting. Asian stocks closed mixed on higher USD: Japan +0.47%, Hong Kong -1.06%, China -1.38%, Taiwan -0.68%, Australia -0.18%, Singapore +0.06%, South Korea +1.30%, India +0.62% (Sensex). The major Asia-Pacific markets traded mixed as it failed to fully benefit from a mild tailwind after the gains in the US amid the focus on a deluge of earnings.

Weakness in technology stocks fueled losses in China's Shanghai Composite on reports of a probe by the US Justice Department into Huawei Technologies, China's largest maker of telecommunications equipment, for possible violations of sanctions banning sales to Iran. Shanghai and Hang Seng were downbeat amid the backdrop of rising money market rates and another substantial consecutive net liquidity drain of CNY 150 bln by the PBOC on Thursday.

Weakness in the yen boosted Japanese exporter stocks and led the Nikkei Stock Index to a 1-3/4 month high after USDJPY climbed to a 2-1/2 month high on Wednesday. Nikkei-225 was underpinned by recent JPY weakness and with Tokyo Electron the outperformer after its FY net firmly topped estimates.

KOSPI was the biggest gainer amid optimism ahead of Friday’s inter-Korean summit and after tech giant, Samsung Electronics released its Q1 final results. South Korea said that President Moon will meet with North Korea leader Kim at the border on Friday at 0930 local times. In related news, there were also comments from a BOK official that any economic cooperation with North Korea will bolster South Korean consumer sentiment.

Elsewhere, ASX-200 was indecisive as Australia also reflected on the broad weakness during the prior day’s holiday closure.

European stocks trade with little in the way of firm direction as traders await today's ECB. FTSE-100 was boosted by a falling GBP. Utilities were in demand, but energies were under stress following subdued earnings from Shell despite higher oil.





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