Market Wrap: 28/03/2018
NSE-NF (April):10153 (-62; -0.61%)
NSE-BNF (April):24360 (-145; -0.59%)
Valuation metrics:
NS: 10114; Q2FY18 EPS: 410; Q2FY18 PE: 24.67; Avg FWD PE: 20; Proj FY-18 EPS: 418; Proj Fair Value: 8360
BNS: 24263; Q3FY18 EPS: 820; Q2FY18 PE: 29.59; Avg FWD PE: 20; Proj FY-18 EPS: 961; Proj Fair Value: 19220
For 02/04/2018:
Updated: 08:00
SGX-NF: 10215 (+62; +0.60%)
Expected BNF opening: 24500 (+0.60%)
(Gap-up opening on positive global cues and catch-up rally after two consecutive trading holidays in which US market rebounds on short covering and bargain hunting of techs and lower USD despite Trump’s Amazon tantrum).
March-Fut (Key Technical Levels)
Support for NF:
10185/10145-10095/10030-9985/9945-9900/9840
Resistance to NF:
10255/10275-10300/10350-10395/10425-10465/10495
Support for BNF:
24450/24250-24150/24040-23950/23850-23600/23400
Resistance to BNF:
24600/24875-25150/25400-25550/25825-26050/26255
Technical View (Positional):
Technically, Nifty Fut-March (NF) has to sustain over 10300 for a further rally towards 10350-10395/10425-10465/10495 in the short term (under bullish case scenario).
On the flip side, sustaining below 10275-10255 NF may fall towards 10215/10185-10145/10095-10030/9985-9945/9900 in the short term (under bear case scenario).
Technically, Bank Nifty-Fut (BNF) has to sustain over 24600 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 24550-24450, BNF may fall towards 24250/24150-24040/23950-23850/23600-23400/23150 in the near term (under bear case scenario).
The Indian market story on 28/03/2018:
The Indian market (Nifty Fut-March/India-50) closed around 10115 on Wednesday (last trading day on 28th March), on negative global cues amid “tech wreck” on the concern of US bar on China investments in US tech sector sensitive for “national security” and Trump’s Amazon tantrum along with ongoing data breach fiasco for Facebook.
The Indian market sentiment was also affected by the renewed surge in oil and 10Y bond yields which made a high of 7.412% from the low of 7.286% scaled on early Wednesday after a surprising cut in government borrowing for H1FY19. The market may not be convinced by the “window dressing” of government’s borrowing programme and the sole effort to keep the benchmark 10Y lower at any cost.
The Indian market was also under pressure on ICICI Bank-Videocon loan fiasco and CEO’s role in the same amid allegation of corruption/nepotism/conflict of interest/quid pro.
There is also another story of an advisory firm (corporate restructuring) linked to the CEO family, who has the broker role in various big corporate loan raising under the umbrella of consortium of banks, in which ICICI bank (CEO) has often the lead role in pitching for the grant of such huge loans in the credit committee. The advisory form usually got a hefty commission of 5% of the sanctioned limit/loan as per the allegation.
Thus the whole Indian banking system may be now under a trust deficit as the market is concerned that such alleged malpractices between CEOs of various banks and promoters of the companies do exist pointing towards a huge corruption and money laundering angle behind today’s Indian NPA saga.
On Wednesday, Nifty Fut (April) made an opening minute high of around 10195 and late day low of 10140 before the long weekend. Overall, for the FY-18, Nifty gained by almost 10%, while for March expiry series, it lost around 2.5%. The benchmark 10Y Indian bond yield surged by 9.2%, while oil is up by a massive 36% for FY-18.
On Wednesday, overall Indian market was dragged by banks and financials, automakers, FMCG, media, metals, pharma, reality, energies, infra, consumption and mixed techs. The selling was quite broad-based and solid ahead of the financial year ending and re-imposition of long-term capital gain tax (LTCGT).
After the market hour on Wednesday, the Indian government proudly announced total disinvestment proceeds at over Rs.1 tln for FY-18 from Rs.0.46 tln for FY-17. But that was primarily boosted by the ONGC-HPCL merger deal.
The total fiscal deficit in Apr-Feb’18 came at Rs.7.16 tln, which is around 120% of revised FY-18 target. Total spending came at Rs.19.99 tln vs Rs.17.53 tln (Y/Y), while total Receipts at Rs.12.83 tln vs Rs.11.47 tln with net tax revenue at Rs.10.36 tln.
As par RBI data, credit to core sector such as infra, metal, cement, petroleum products, coal group contracted, declined in Feb’2018, while non-food bank credit increased by 9.8% Y/Y and credit to agri & allied activities rose 9%.
Meanwhile, PNB has confirmed that they will honor LOUs worth Rs.650 bln on the basis of an undertaking by claimant bank in the Nirav Modi scam. Overall, apart from stretched valuation, the Indian market was under pressure on NPA and NCLT resolution litigations, corporate loan/bank scam, higher oil, fiscal discipline and re-imposition of LTCGT. The market is also concerned that RBI may eventually hike rate by Dec’2018 on sticky core inflation, still hovering around 5% and higher oil.
Global cues were negative during the Indian market hours on Wednesday:
On Wednesday, global cues were muted. US stock future (SPX-500) was up 0.05% and European stocks were down 0.68% as weakness in technology stocks dragged down global stock indexes. Weakness in energy stocks was another negative for the overall market with crude oil down 0.67% on concern a global supply glut may persist after API data late Tuesday showed US crude stockpiles rose 5.32 MB last week.
The slide in stocks has benefited government bond markets as flight-to-safety demand has pushed the 10-year German bund yield down to a 2-1/2 month low of 0.473% and pushed the 10-year T-note yield down to a 1-1/2 month low of 2.74%.
Asian stocks closed lower: Japan -1.34%, Hong Kong -2.50%, China -1.40%, Taiwan -1.10%, Australia -0.73%, Singapore -1.64%, South Korea -1.43%, India -0.62%. Asian equity markets followed U.S. markets lower as losses in technology stocks spread across the globe.
Asian equity markets traded negative across the board as the region followed negative cues from the losses on Wall St where trade concerns lingered and tech sold-off, while some also attributed the exacerbated pressure to flows heading into month-end and Easter break.
As such, ASX 200 and Nikkei 225 were lower as tech stocks conformed to the losses in their counterparts stateside, while weakness in commodities also contributed to the glum. Elsewhere, KOSPI, pharmaceutical, and metal stocks joined the tech underperformance after reports stated South Korea steel exports to the US would decline 30% under the new trade agreement and that South Korea will amend its premium pricing program for pharmaceuticals to allow participation of US drug makers.
Hang Seng and Shanghai Comp were also dragged by the tech slide while encouraging earnings from big four banks ICBC and China Construction Bank only provided brief support and was eventually engulfed by the stock rout.
European equities have extended on the risk-averse tone seen in the US and Asia, triggered by a tech sell-off which prompted losses within the IT sector in Europe in the morning trade, augmented by month-end flows.
Global cues were mixed on Thursday:
On Thursday, global cues were positive to some extent. US stock future (SPX-500) was up 0.37% and European stocks are up +0.66% as technology stocks recover after two days of losses. Also, European automakers are higher on M&A activity after Renault SA and Nissan Motor were said to be in merger talks.
Strength in Germany's labor market is another positive for European equities after the German Mar unemployment rate fell to a record low 5.3%. Trading activity was subdued ahead of the long holiday weekend with the US and Europe closed Friday and Europe also closed Monday for the Easter holiday.
Asian stocks settled mostly higher: Japan +0.61%, Hong Kong +0.24%, China +1.22%, Taiwan -0.18%, Australia -0.52%, Singapore +1.34%, South Korea +0.64%, India closed for holiday. China's Shanghai Composite recovered from losses in the last hour of trade and closed higher on reports of buying from state-sponsored funds. Wednesday's rally in USDJPY to a 2-week high boosted Japanese exporter stocks as the Nikkei Stock Index closed higher.
Helping the mood were media reports that Japan had sounded out North Korea’s government about a bilateral summit, and that North Korea had also discussed the possibility of a broader meeting with other global leaders. As a result, Japanese shares closed higher even as the yen retraced some of Wednesday’s slump.
Asian equity markets traded indecisively as bourses failed to completely shrug-off the lackluster lead from Wall St. where the major indices were subdued amid month-end flows and continued tech losses. ASX 200 and Nikkei 225 were mixed with Australia dragged lower by tech as well as recent weakness across commodities, while the Japanese benchmark was propped up for most the day by a softer currency.
Elsewhere, Hang Seng and Shanghai Comp were choppy in the midst of earnings season and with initial gains seen following reports of VAT reductions by China, although continued liquidity inaction by the PBOC and ongoing trade tensions with the US eventually weighed. PBOC skipped the OMO for a net daily drain of CNY 40 bln.
European equities were back into positive territory, improving on the mixed tone seen in Asia overnight and shrugging-off the losses on Wall Street. Defensive sectors are in the red with focus on utilities and healthcare whilst broad gains are seen across all the other sectors.
SGX-NF
BNF
USDJPY
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