The Indian market (Nifty Fut/India-50) is currently trading around 10680 on Thursday, slumped by almost 0.55% on subdued global cues amid concern of US-China trade negotiations outcome, the buzz of fresh sanctions on China ZTE and Huawei. The market is also under stress on Fed’s hawkishness about US inflation, which may prompt Fed for quicker rate hikes despite a “dovish hold” on Wednesday. The Indian market is also under pressure in an opinion poll published on Wednesday, which suggests INC win in Karnataka election.
The broader market is also under pressure on auditors’ red flags for some companies like HCC over subsidiaries valuation and doubts about a “going concern” coupled with another report that CBI has arrested CEO of P.C. Jewelers in suspected money laundering case involving Mehul Choksi & Co (Gitanjali Jewelers, accused of PNB “theft”).
Indian market skids on Wednesday on the concern of a hawkish hold by Fed and a probable INC win in Karnataka election as par an opinion poll:
The Indian market closed around 10744 on Wednesday, slumped by 0.34% on the concern of a hawkish hold by Fed coupled with another report of an opinion poll in the crucial (prestigious) Karnataka election, which suggests big INC victory over BJP.
For the Karnataka election, all previous polls have indicated close contest (“photo finish”) and no absolute majority either for INC or BJP. But a new poll done by C-Fore indicates that INC may win 118-128 seats against BJP’s 63-73, whereas another regional party (JD-secular) may win 29-36 seats. In the prestigious Bengaluru seat, INC may win maximum seats around 17-19, out of 28.
Although this may be premature, the market took it as negative as the Karnataka defeat for BJP may be indicating that there will be some “contest” in the 2019 general election in the backdrop of India’s “jobless growth”, DeMo and GST blues. Subsequently, the Indian market tumbled from the day high of around 10786 and made a low of 10706 in late-day trading, before settling around 10744 for the day, following positive European cues.
On Wednesday, Nifty was helped by ITC, Kotak Bank (buzz of Axis bank take over), HDFC Bank, HDFC, RIL, Axis Bank, ZEE Ent, L&T (deleveraging news), Cipla and others by around 73 points (72+1), while it was dragged by ICICI Bank, HCL Tech (subdued report card), VEDL (pressure on metals amid higher dollar index), SBI, TCS, Tata Steel, Indusind Bank, Sun Pharma, Yes Bank and others by almost 87 points (53+34) cumulatively.
Overall on Wednesday, Indian market was helped by selected private banks, financials, FMCG and energies to some extent, while dragged by PSU banks, automobiles (mixed sales report for April), techs, mixed media, metals, pharma, selected private banks, reality, consumption, and infra stocks. Selling was quite solid and broad-based on the broader market (mid-caps) than the benchmark index (Nifty).
On Wednesday, Indian 10Y bond yield made a low to around 7.702% from the recent high of around 7.785% on reports of increasing FII/FPI limits for the government Indian bonds (GSEC), but USDINR was up by 0.45% and closed around 67.10 on the concern of a hawkish hold by Fed.
Global cues were mixed on Wednesday during Indian market hours:
US stock future (SPX-500) was up 0.09% as technology stocks gain on the heels of a 5% increase in Apple in pre-market trading after it announced $100 billion buybacks and reported stronger-than-expected Q2 revenue and forecast better-than-expected Q3 revenue. But, overall market gains were contained ahead of Fed on Wednesday and whether policymakers may signal a faster pace to interest rate hikes. Basically, Markets were under stress on the concern of a hawkish hold by Fed.
European markets were up 0.43% at a 3-month high on lower EUR/EU bund yields and found support after Eurozone April Markit manufacturing PMI came higher. European markets have returned on an upbeat tone with all major bourses in the green following mass closures in the region yesterday. Germany’s DAX 30 was outperforming its peers. All sectors were firmly in the green with outperformance in materials as miners are lifted amid higher copper prices. The tech sector was feeling an Apple boost.
Asian stocks closed mostly lower on concern of a hawkish Fed and Muller subpoena talks on Trump coupled with US-China trade war: Japan -0.16%, Hong Kong -0.27%, China -0.03%, Taiwan -0.37%, Australia +0.58%, Singapore +0.04%, South Korea -0.32%, India +0.05% (Sensex).
Asian markets eventually saw a broad risk-averse tone despite initially trading mixed throughout most the session following a similar close on overnight US market, where stocks rebounded from the initial data-triggered selling pressure and the Nasdaq outperformed in anticipation of Apple earnings. The tech giant eventually reported a beat on EPS, announced a $100 bln share buy-backs authorization and raised dividends by 16%, although it slightly missed on revenue and iPhone sales.
US equity futures have since pulled-back from highs amid a bout of selling following reports that Special Counsel Mueller suggested the possibility of a subpoena if President Trump refuses to speak to investigators, although the pressure was suppressed shortly after it was determined this was from a meeting with Trump lawyers back in March.
Chinese stocks were little changed ahead of the arrival of a US trade delegation to Beijing Thursday, led by Treasury Secretary Mnuchin. Shanghai and Hang Seng traded subdued despite initial gains in the mainland on return from the extended weekend as it took its first opportunity to react to better than expected Chinese Official Manufacturing and Non-Manufacturing PMI data. However, the picture then gradually deteriorated following the Caixin Manufacturing PMI which may top estimates but showed Export Orders shrank for the first time since November 2016.
Japan's Nikkei Stock Index retreated from a 2-3/4 month high and closed lower despite higher USD after Japan April consumer confidence unexpectedly fell to an 8-month low. The Japanese market was also under stress on a slump in automakers amid weaker-than-expected US April auto sales figure from Toyota and Nissan. ASX-200 and Nikkei-225 traded mixed as earnings dictated price action.
Technical View (Positional-Nifty, Bank Nifty, SPX-500):
Technically, Nifty Fut-I (NF) has to sustain over 10755 for a further rally towards 10775/10800-10840/10870 in the short term (under bullish case scenario).
On the flip side, sustaining below 10735 NF may fall towards 10695/10675-10635/10590 in the short term (under bear case scenario).
Technically, Bank Nifty-Fut (BNF) has to sustain over 25675 for a further rally towards 25775/25850-25915/26050 in the near term (under bullish case scenario).
On the flip side, sustaining below 25625, BNF may fall towards 25500/25350-25150/25000 in the near term (under bear case scenario).
Technically, SPX-500 now has to sustain over 2665 for a further rally towards 2685/2705-2730/2750 in the near term (under bullish case scenario).
On the flip side, sustaining below 2655, SPX-500 may fall towards 2620/2610-2595/2575 in the near term (under bear case scenario).
SGX-NF
BNF
SPX-500
EURUSD
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