Updated: 08:50
SGX-NF: 10530 (-12; -0.11%)
Expected BNF opening: 25770 (-0.15%)
SPX-500: 2733 (+0.50; +0.02%)
Note: Almost flat to the negative opening on subdued global cues as the market is concerned about the credibility of US-China trade truce and higher bond yields. Apart from political turmoil, the Indian market may be also worried about surging oil and its ultimate adverse effect on inflation and dual deficit (current account and fiscal deficit).
The Indian market is under stress in line with its EM peers, although to a much lesser extent due to the trifecta of higher oil, higher bond yields, and higher USD. The EM may face a significant fund out-flow and India, being a part & parcel of the same EM economies, is also susceptible to such pain despite its so-called “robust” macros and a “strong” currency.
On Monday, the benchmark 10Y bond yield edged up by almost 0.50% to 7.901% and USDINR-I is currently trading around 68.20, up by almost 0.25%. Although the government is putting a brave face despite higher oil (Brent crude), now hovering around $80 and domestic prices of petrol and diesel are now around almost Rs.80-70, the adverse effect of higher diesel (gasoline) prices on inflation and essential goods may be a double whammy for the government. If it goes for ED reduction, then fiscal deficit may be adversely affected and on the other hand, if it does not, then it may pay a political price for such high inflation.
RBI may also be on the hawkish hold stance on 7th June, considering sticky and upward nature of India’s core inflation, which is now hovering around 5.50%, much above the medium term RBI target of 4% and also miles above the global standard of 2% price stability.
Although Banks are cheering the Bhushan Steel resolution by Tata Steel, it may be an exception but also may be noted that it’s merely a change of borrowers from dubious & inefficient erstwhile Bhushan promoters to a more credible and efficient Tata management. But Tata Steel also has to borrow around Rs.21 bln for the Bhushan take over and the B/S of Tata Steel is already stressed.
Fut-I (Key Technical Levels)
Support for NF:
10485*/10450-10425/10395-10345/10280-10170/10125
Resistance to NF:
10575*/10595-10660/10710-10770/10800-10875/10935
Support for BNF:
25600*/25400-25300/25100-24950/24700-24550/24300
Resistance to BNF:
25850*/26050-26200/26350-26600/26700-26825/26950
Support for SPX-500:
2715/2695*-2675/2655-2625/2610
Resistance to SPX-500:
2740/2750*-2775/2805-2820/2855
Technical View (Nifty, Bank Nifty, SPX-500):
Technically, Nifty Fut-I (NF) has to sustain over 10595 for a further rally towards 10660/10710-10770/10800-10875/10935 in the short term (under bullish case scenario).
On the flip side, sustaining below 10575-10555 NF may fall towards 10485/10450-10425/10395-10345/10280 in the short term (under bear case scenario).
Technically, Bank Nifty-Fut (BNF) has to sustain over 25850 for a further rally towards 26050/26200-26350/26600-26700/26825 in the near term (under bullish case scenario).
On the flip side, sustaining below 25800 BNF may fall towards 25600/25400-25300/25100-24950/24700 in the near term (under bear case scenario).
Technically, SPX-500 now has to sustain over 2750 for a further rally towards 2775/2805-2820/2855 and further 2880-2895 in the near term (under bullish case scenario).
On the flip side, sustaining below 2740, SPX-500 may fall towards 2725/2715 and 2695/2675-2655/2625 and further 2610-2590 in the near term (under bear case scenario).
Valuation metrics:
Nifty-50: 10517; Q3FY18 EPS: 403; Q3FY18 PE: 26.10; Avg FWD PE: 20; Proj FY-18 EPS: 418; Proj Fair Value: 8360
Bank Nifty: 25810; Q3FY18 EPS: 807; Q3FY18 PE: 31.98; Avg FWD PE: 20; Proj FY-18 EPS: 961; Proj Fair Value: 19220
SPX-500: 2733; TTM Q4-2017 EPS: 111; TTM PE: 24.62
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SGX-NF
BNF
SPX-500
WTI
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