Thursday, 26 April 2018

Nifty tumbled on negative global cues and higher bond yields

Market Wrap: 25/04/2018

NSE-NF (April):10569 (-49; -0.46%)

NSE-BNF (April):24785 (-229; -0.91%)

SPX-500: 2639 (+5; +0.18%)

Market Mantra: 26/04/2018

Updated: 08:40

SGX-NF: 10580 (+11; -0.10%)

Expected BNF opening: 24810 (+0.10%)

SPX-500: 2649 (+5; +0.19%)

(Flat opening on mixed global/US cues amid higher bond yields and surge in Boeing on an upbeat report card coupled with higher USD, positive for export savvy Asian market)

March-Fut/Spot (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 in the short term (under bullish case scenario). 

On the flip side, sustaining below 10595 NF may fall towards 10515/10460-10415/10380 in the short term (under bear case scenario).

Technically, Bank Nifty-Fut (BNF) has to sustain over 25100 for a further rally towards 25200/25450-25655/25775 in the near term (under bullish case scenario).

On the flip side, sustaining below 25050, BNF may fall towards 24800/24550-24400/24250 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 2665, SPX-500 may fall towards 2630/2610-2595/2575 in the near term (under bear case scenario).

Valuation metrics:

Nifty-50: 10571; Q2FY18 EPS: 410; Q2FY18 PE: 25.78; Avg FWD PE: 20; Proj FY-18 EPS: 418; Proj Fair Value: 8360

Bank Nifty: 24814; Q3FY18 EPS: 820; Q2FY18 PE: 30.26; Avg FWD PE: 20; Proj FY-18 EPS: 961; Proj Fair Value: 19220

The Indian market (Nifty Fut/India-50) closed around 10569 on Wednesday, tumbled by almost 0.46% on negative global cues amid higher oil, higher bond yields and renewed pressure on banking & metal stocks. Nifty Fut made an opening session high of around 10613 and late day low of 10532 in a day of the volatile trading session ahead of the FNO expiry on Thursday.

Exporters (techs/IT) helped the Indian market on higher USDINR. Reality/property developers were in demand after a report of higher FSI (development area) in Mumbai from 1.33 to 3, which would be positive for affordable housing. Report cards from Wipro, Ultratech Cement were also muted, while Bharti Airtel has reported a mixed set of numbers.

Indian 10Y bond yield made a high of 7.779% on Wednesday, up by almost 10 bps from Tuesday’s close on higher oil, higher inflation concern and following the global trend of higher bond yields. Subsequently, Indian market, especially banks came under heavy selling pressure. Metals were also under stress on NCLT/IBC NPA resolution headwinds despite positive global cues (on metals).

Additionally, index heavyweight ICICI bank was in pressure on reports that the bank has dropped the plan for selling/deleveraging its housing finance unit coupled with another report that Essar group has lent to CEO’s spouse company after getting a loan from the bank. Axis bank was also under stress on the concern of poor earnings to be released on Thursday. But banks were also supported to some extent by the buzz of time extension for the NCLT/IBC NPA resolution mechanism.

On Wednesday, Nifty was helped by TCS, Bharti Airtel (telecom tower deal/deleverage), M&M, Infy, HCL Tech, Kotak Bank, Tech-M, Yes Bank, BPCL, Power Grid and others by around 27 points, while it was dragged by ICICI Bank, HDFC Bank, ITC, L&T, Maruti, HDFC, Indusind Bank, ONGC, VEDL, SBI and others by almost 72 points (47+25) cumulatively.

Overall on Wednesday, Indian market was helped by techs, reality, while dragged by almost all the other sectors like banks and financials (higher bond yields and renewed concern about NPA), FMCG, media, metals, pharma, energies, and infra stocks.

Global cues were negative during Indian market hours on Wednesday:

US stock future (SPX-500) was down by 0.52% and European stocks were down by 1.16% at a 1-week low on higher bond yields and higher borrowing costs, negative for both the economy and the corporate earnings. Stocks were under pressure because of stress in industrials and techs.

European industrial stocks sold-off following the nearly 7% plunge in Caterpillar on Tuesday. Industrial stocks sold-off amid cautious comments from Caterpillar's CFO on his outlook for the year and muted guidance, which fueled concern over profits in the sector as well as the health of the global economy. He said Q1 adjusted EPS "will be the high watermark for the year”. As a reminder, Caterpillar is seen as a bellwether of the US as well as the global economy.

Techs are under pressure on the renewed concern of data privacy as Facebook grilling is going on in full swing. Apart from Facebook, stocks of Alphabet (Google parent) are also under stress because of higher capex despite an upbeat report card. Subsequently, FANG shares were all dragging the US stock market.

Asian stocks closed lower despite higher USD and higher oil.: Japan -0.28%, Hong Kong -1.01%, China -0.35%, Taiwan -0.18%, Australia closed for holiday, Singapore -0.46%, South Korea -0.59%, India -0.33% (Sensex). Asian stocks traded negative across the board as the region followed suit from the broad weakness in overnight US market amid rising US yields, in which the Nasdaq 100 underperformed with losses of over 2% and industrials led the DJIA to lower after Caterpillar suggested that Q1 could be the apex for the year.

Tuesday's slide in US technology and industrial stocks weighed on Asian markets, although losses in Japanese stocks were tempered on weakness in the yen which is positive for exporters after USDJPY climbed to a new 2-1/4 month high. Nikkei-225 and KOSPI were lower with participants also digesting earnings releases, while Takeda was among the worst performers in Japan after the Co. further sweetened its offer in pursuit of Shire.

ASX and NZX were shut for ANZAC Day, while Shanghai and Hang Seng conformed to the downbeat tone after the PBOC skipped open market operations (OMO) which resulted to a net daily drain of CNY 150 bln, However, the losses in the mainland were contained amid continued chatter regarding further RRR cuts and as the previously announced cut took effect from Wednesday.

China researcher noted that deflation in China is possible as soon as Q4 this year and added that further reductions in RRR are expected, while there were also reports that a Chinese official sees large room for RRR reductions and sees it lowered by between 600-800 bps in 3 years.

European equities were seeing a lackluster start following terrible sentiment is seen Tuesday in the US and overnight Asia-Pacific market amid higher bund yields.





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