Thursday 24 May 2018

Market Mantra (Nifty Fut/Bank Nifty Fut/SPX-500): 24/05/2018

Updated: 08:25

SGX-NF: 10465 (+47; +0.45%)

Expected BNF opening: 25680 (+0.50%)

SPX-500: 2726 (-4; -0.16%)

Fut-I (Key Technical Levels)

Support for NF:

10425/10395*-10345/10290-10245/10210-10150/10110

Resistance to NF:

10515*/10565-10605/10655-10700/10740-10800/10875

Support for BNF:

25650/25500*-25400/25300-25100/24950-24700/24550

Resistance to BNF:

25850*/25975-26050/26150-26300/26425-26600/26700

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 10515 for a further rally towards 10565-10605/10655-10700/10740-10800 in the short term (under bullish case scenario). 

On the flip side, sustaining below 10495-10475 NF may fall towards 10425/10395-10345/10290-10245/10210 in the short term (under bear case scenario).

Technically, Bank Nifty-Fut (BNF) has to sustain over 25895 for a further rally towards 25975/26050-26150/26300-26425/26600 in the near term (under bullish case scenario).

On the flip side, sustaining below 25850 BNF may fall towards 25650/25500-25400/25300-25100/24950 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: 10430; Q3FY18 EPS: 403; Q3FY18 PE: 25.88; Avg FWD PE: 20; Proj FY-18 EPS: 418; Proj Fair Value: 8360

Bank Nifty: 25685; Q3FY18 EPS: 807; Q3FY18 PE: 31.83; Avg FWD PE: 20; Proj FY-18 EPS: 961; Proj Fair Value: 19220

SPX-500: 2724; TTM Q4-2017 EPS: 111; TTM PE: 24.54

Note: Positive (gap-up) opening on the 4th anniversary of NAMO/BJP government coupled with mixed global cues after less hawkish FOMC minutes and Trump’s fresh tax proposal for imported cars into US @25%. As Fed may allow US core inflation to run a little hotter above 2% in line with their symmetrical target and although the 2nd Fed hike of June is now almost certain, there is some question over the 3rd hike either in Sep or Dec’18.

As a result, USD/US bond yield has dropped and US stocks got some boost on late Wednesday after the FOMC minutes. But Asian mood is quite subdued on US-China trade spats and Trump’s fresh salvo of 25% tax on imported cars to make American automakers “great” again ahead of the November mid-term US election.

The Indian market is also under stress on dilemma about oil tax, which is now among one of the highest in the world. The abnormally high tax on petrol/diesel is supporting the Indian Federal fiscal discipline to a great extent and thus any drastic excise duty cut ahead of the elections will be seen as “political populism” and any VAT cut by states will also be huge negative for the combined Indian fiscal deficit, which is already well above the red line.

The trifecta of higher USD, higher oil, and higher bond yield is already affecting EM coupled with political uncertainty and India is also not an exception, although to a much lesser extent.


The Indian market is also under stress on growing political unity among the regional parties and INC, boosted by the recent Karnataka election outcome, which is pointing towards a fractured mandate and a possible political uncertainty in the 2019 general election in the backdrop of DeMo, GST blues, and India’s jobless growth.

But the Indian market sentiment is also being supported by a robust recovery figure of Rs.0.83T of NPA amid NCLT/IBC and criminal legal action against the big celebrity corporate defaulters. The fear of losing control over their own company is forcing many defaulters to settle the NPA/NPL with the banks, even proactively, which was never seen before and thus may be one of the big success of the NDA government against crony capitalism and the Indian version of shadow/fraud banking.


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