Wednesday, 16 May 2018

Market Mantra (Nifty Fut/Bank Nifty Fut/SPX-500): 16/05/2018

Updated: 08:10

SGX-NF: 10740 (-76; -0.70%)

Expected BNF opening: 26300 (-0.70%)

SPX-500: 2708 (-1; -0.04%)

Note: Gap-down opening on subdued global cues amid renewed North Korean concern and surging US bond yields. The Indian market may face additional stress on political uncertainty in Karnataka (KA) state elections, where BJP/NDA fell short of a simple majority and got 104 seats against the requirement of 112, whereas INC got 78 and JDS+ got 38 seats with others at 2 seats. Thus JDS+INC post-poll alliance is claiming to form the government with the strength of 116 seats.

Now all eyes will be on the KA governor whether he will invite the single largest party (BJP) or the post-poll alliance majority (JDS+INC) to form the next government (BJP will be positive for the market, while JDS+INC being seen as negative for the risk-on sentiment).

Apart from the formation of the KA government, the market is worried about rising poll influence of smaller regional parties in India (anti BJP, anti/friendly INC) to fill the political vacuum out of INC extinction as the party is fast becoming a “signboard” party despite “very hard work” by RAGA. The problem is that at this point of time, there is no alternative opposition leader against NAMO, but we may not see the same 2014 “Modi wave” in 2019 and as such regional politics/parties will make a greater influence on India’s policy matters in the coming days.

The government will now also focus on higher rural spend, MSP and also farm loan waiver and all these political populism coupled with higher oil may keep the fiscal discipline question alive and we may see higher Indian bond yields and higher USDINR, both of which may not be good for the Indian economy and the market.

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 (Nifty, Bank Nifty, SPX-500):

Technically, Nifty Fut-I (NF) has to sustain over 10825 for a further rally towards 10875/10935-10975/11055-11150/11195-11225/11375 in the short term (under bullish case scenario). 

On the flip side, sustaining below 10805 NF may fall towards 10730/10715-10685/10625 and further 10570/10530-10485/10425 in the short term (under bear case scenario).

Technically, Bank Nifty-Fut (BNF) has to sustain over 26700 for a further rally towards 26825*/27000-27150/27300 and further 27500-27700/27975 in the near term (under bullish case scenario).

On the flip side, sustaining below 26650-26450 BNF may fall towards 26275/26125*-26000/25800 and further 25600/25300-25100/24950 in the near term (under bear case scenario).

Technically, SPX-500 now has to sustain over 2725 for a further rally towards 2750/2775-2805/2820 and further 2855/2880-2895 in the near term (under bullish case scenario).

On the flip side, sustaining below 2715, SPX-500 may fall towards 2695*/2675-2655/2625 and further 2610-2590 in the near term (under bear case scenario).

Valuation metrics:

Nifty-50: 10802; Q3FY18 EPS: 403; Q3FY18 PE: 26.80; Avg FWD PE: 20; Proj FY-18 EPS: 418; Proj Fair Value: 8360

Bank Nifty: 26474; Q3FY18 EPS: 807; Q3FY18 PE: 32.81; Avg FWD PE: 20; Proj FY-18 EPS: 961; Proj Fair Value: 19220

SPX-500: 2711; TTM Q4-2017 EPS: 111; TTM PE: 24.42






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