Friday 28 September 2018

Market Mantra (Nifty Fut/Bank Nifty Fut/USDINR/SPX-500): 28/09/2018

The Indian market is under renewed stress Friday on lingering worries about the IL&FS credit crisis and its contagion effect on the overall financial and corporate bond market. There was a report that SEBI has asked MF houses not to roll over their current exposure to Indiabulls Housing Finance, DHFL. But later SEBI has officially denied any such advisory. Meanwhile serial defaults by the IL&FS continue and all these creating like a panic situation in the market despite RBI/government effort to boost up the market sentiment by a number of liquidity enhancement measures (LCR/OMO/ talk of special MF liquidity window).

On Thursday, the Indian market slips further after imposing additional import duties on several consumer goods and electronic items (to stem ballooning trade/current account deficit), coupled with higher oil, higher USD and ongoing liquidity and NPA crisis in the NBFC space (Indian version of shadow banking and sub-prime lending); big private banks also dragged on growing concern about “hidden NPA”. The market is now also concerned about India’s “sub-prime” NPA (retails/MSMEs) and housing loans apart from the huge corporate NPAs.

The imposition of additional import tariffs on several consumers, electronic items as-well-as industrial goods may cause higher inflation and subdued consumer spending. Airlines were also under pressure after the government hiked import duties on ATF.

The market is now expecting another 0.25% rate hike by the RBI on 5th October (policy date) to bring the Indian rate at 6.75% to stem the currency (INR) fall. The Indian 10Y bond yield is now hovering above 8% and if it sustains above 8% for next few months, RBI may also hike by another 0.25% to 7.00% by Dec’18 or by Feb’19. Historically, the spread between Indian 10Y bond and the RBI repo rate is around 1% and thus either the 10Y bond yield has to fall below 7.50% or the RBI has to hike to 7%. The 2nd probability (RBI hike) is higher.

The current spread between the Indian 2Y bond yield (7.996%) and 10Y bond yield (8.042%) is around 5 bps. A few days ago, during the corporate bond market panic days, 2Y yield made a high of 8.395%, whereas 10Y jumped to 8.231% and the spread was at -16 bps. All these are indicating the Indian version of bond yield inversion/flattening and an imminent slowdown or “correction” of the “hot” economy down the next 2-3 years.

Updated: 09:15

Nifty-SGX-NF: 11100 (+70; +0.63%)
                                                                 
Bank Nifty-BNF: 25415 (+216; +0.86%)

USDINR-I: 72.88 (+0.00; +0.00%)

SPX-500: 2922 (+2; +0.08%)

Fut-I (Key Technical Levels)

Support for NF:

11080/11000-10970/10940*-10910*/10860-10810/10780-10750/10700

Resistance to NF:

11105/11135*-11195*/11215-11240/11295-11315/11345-11385/11415

Support for BNF:

25400/25200-25000/24900*-24650*/24400-24100/24000-23800/23650

Resistance to BNF:

25575*/25675-25750/25850-26050*/26150-26250/26350-26575/26700

Support for USDINR-I:

72.30/72.00*-71.50/71.25*-70.95/70.70-70.50/69.95-69.60/69.15

Resistance to USDINR-I:

72.95/73.05*-73.35*/73.75-74.25/74.50-75.00/75.65-77.50/79.70

Support for SPX-500:

2915*/2905-2885/2860-2840/2815-2790/2750

Resistance to SPX-500:

2945*/2960-2990/3010-3035/3070-3095/3155

Technical View (Nifty, Bank Nifty, USDINR-I, SPX-500):

Technically, Nifty Fut-I (NF) has to sustain over 11155 for a further rally to 11195/11215-11240/11295-11315/11345 in the near term (under bullish case scenario). 

On the flip side, sustaining below 11135-11105 NF may fall to 11080/11000-10970/10940-10910/10860-10810/10780 in the near term (under bear case scenario).

Technically, Bank Nifty Fut-I (BNF) has to sustain over 25575 for a further rally to 25675/25750-25850/26050-26150/26250 in the near term (under bullish case scenario).

On the flip side, sustaining below 25525-25400 BNF may fall to 25200/25000-24900/24650-24400/24100-24000/23800 in the near term (under bear case scenario).

Technically, USDINR-I has to sustain over 72.30 for a further rally to 72.95/73.05-73.35/73.75-74.25/74.50-75.00/75.65 in the near term (under bullish case scenario).

On the flip side, sustaining below 72.00, USDINR-I may fall to 71.50/71.25-70.95/70.70-70.50/69.95-69.60/69.15 in the near term (under bear case scenario).

Technically, SPX-500 has to sustain over SPX-500 has to sustain over 2950-2960 for a further rally to 2990/3010-3035/3070-3095/3155 in the near term (under bullish case scenario).

On the flip side, sustaining below 2945-2935, SPX-500 may fall to 2915/2905-2885/2860-2840/2815 in the near term (under bear case scenario).

Valuation metrics:

Nifty-50: 11000; Q4FY18 EPS: 402; Q4FY18 PE: 27.36; Avg FWD PE: 20; Proj FY-19 EPS: 425-450; Proj Fair Value: 8500-9000.


Bank Nifty: 25200; Q4FY18 EPS: 519; Q4FY18 PE: 48.55; Avg FWD PE: 20; Proj FY-19 EPS: 961-1000; Proj Fair Value: 19220-20000.

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NIFTY FUT


BANK NIFTY FUT


USDJPY

Wednesday 26 September 2018

Market Mantra (Nifty Fut/Bank Nifty Fut/USDINR/SPX-500): 26/09/2018

The Indian market (Nifty Fut-I/India-50) closed around 11097 Tuesday, jumped by almost +0.90% and bounced back from an earlier low of 10909 after the Indian government and its “plunge protection team leader” LICI vowed to do “anything required” to bailout IL&FS (at any cost) to prevent further contagion effect in the financial market.

The market sentiment was also boosted after the government “urged” the RBI to cut CRR in addition of more OMO/bond buying (Indian version of QE) to ease liquidity crisis and bailout the stressed NBFC/HFC sectors. Although the Indian stock market jumped, bond and FX market was not so much convinced as basically the government is now panicking for the whole situation.

The Indian stock market is now a victim of surging USDINR, boiling oil (Brent around $82) and skyrocketing bond yield (above 8%, comparable to Greece in their crisis period). The effect of global QT and Fed’s dual QT (rate hikes and B/S tapering) coupled with higher borrowing costs in India are now taking its toll and the market could have moderation in the forward earnings (EPS) and PE, which is already quite stretched above 27.50 against its historical/reasonable PE of 18-20 with an average EPS growth below 10% for the last few years despite “Modinomics”.

Looking ahead, the huge NPA divergence between RBI audits and that of the big private banks could also rerate the private banks & financials, which is one of the pillars of the Indian market.

Updated: 09:15

Nifty-SGX-NF: 11149 (+62; +0.56%)
                                                                 
Bank Nifty-BNF: 25619 (+276; +1.09%)

USDINR-I: 72.60 (-0.10; -0.15%)

SPX-500: 2927 (+6; +0.21%)

Fut-I (Key Technical Levels)

Support for NF:

11100/11040*-10995/10965-10940/10900-10850/10790-10750/10700

Resistance to NF:

11150/11180*-11200/11275-11295/11345-11385/11415-11475/11505

Support for BNF:

25450/25200*-25000/24900-24650/24400-24100/24000-23800/23650

Resistance to BNF:

25750/25850*-26050/26150-26250/26350-26575/26700-26850/26950

Support for USDINR-I:

72.40/72.00*-71.50/71.25-70.95/70.70-70.50/69.95-69.60/69.15

Resistance to USDINR-I:

72.90/73.05*-73.25/73.75-74.25/74.50-75.00/75.65-77.50/79.70

Support for SPX-500:

2915*/2905-2885/2860-2840/2815-2790/2750

Resistance to SPX-500:

2945*/2960-2990/3010-3035/3070-3095/3155

Technical View (Nifty, Bank Nifty, USDINR-I, SPX-500):

Technically, Nifty Fut-I (NF) has to sustain over 11200 for a further rally to 11275/11295-11345/11385-11415/11475 in the near term (under bullish case scenario). 

On the flip side, sustaining below 11180-11150 NF may fall to 11100/11040-10995/10965-10940/10900-10850/10790 in the near term (under bear case scenario).

Technically, Bank Nifty Fut-I (BNF) has to sustain over 25850 for a further rally to 26050/26150-26250/26350-26575/26700-26850/26950 in the near term (under bullish case scenario).

On the flip side, sustaining below 25800-25750 BNF may fall to 25450/25200-25000/24900-24650/24400-24100/24000 in the near term (under bear case scenario).

Technically, USDINR-I has to sustain over 72.40 for a further rally to 72.90/73.05-73.25/73.75-74.25/74.50-75.00/75.65 in the near term (under bullish case scenario).

On the flip side, sustaining below 72.00, USDINR-I may fall to 71.50/71.25-70.95/70.70-70.50/69.95-69.60/69.15 in the near term (under bear case scenario).

Technically, SPX-500 has to sustain over SPX-500 has to sustain over 2950-2960 for a further rally to 2990/3010-3035/3070-3095/3155 in the near term (under bullish case scenario).


On the flip side, sustaining below 2945, SPX-500 may fall to 2915/2905-2885/2860-2840/2815 in the near term (under bear case scenario).

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NIFTY FUT


BANK NIFTY FUT


USDJPY


BRENT OIL


GBPUSD



EURUSD

Monday 24 September 2018

Market Mantra (Nifty Fut/Bank Nifty Fut/USDINR/SPX-500): 24/09/2018

On Monday, the Indian market is under stress on higher USDINR, higher oil, and higher Indian 10Y bond yields above 8.10%. Finally, higher corporate bond yields above 9-11% are taking a toll on an inevitable debt bubble burst of banks & financials amid extremely higher borrowing costs, which are not viable for their business model. 

Also, the legacy issues of NPA divergence between RBI and those of big private banks and some PSBS, including SBI is dragging the overall market sentiment. Global cues are also subdued amid lingering Trump trade war.

Oil (petrol/diesel) being a politically sensitive product in India, the government is facing huge public as-well-as political backlash ahead of the general election in early 2019. Also, a government can “control” stock market, but controlling bond and FX market is much more difficult and often proved impossible. The market is expecting that LICI (government) could bailout IL&FS directly or indirectly, but that may also invite huge political “Hungama” (nuisance) at this moment.

Updated: 11:40

Nifty-SGX-NF: 11080 (-85; -0.75%)
                                                                 
Bank Nifty-BNF: 25270 (-390; -1.55%)

USDINR-I: 72.68 (+0.70; +0.51%)

SPX-500: 2927 (-8; -0.25%)

Fut-I (Key Technical Levels)

Support for NF:

11015/10970*-10940/10900-10840/10790-10750/10700

Resistance to NF:

11150/11180*-11245/11285-11325/11375-11415/11460

Support for BNF:

25000/24900*-24650/24400-24100/24000-23800/23650

Resistance to BNF:

25500/25750*-25950/26150-26300/26400-26550/26700

Support for USDINR-I:

71.70*/71.50-71.25*/71.00-70.70/70.10-69.85/69.15

Resistance to USDINR-I:

72.05*/72.25-72.55*/72.90-73.05/73.25-73.75/74.25

Support for SPX-500:

2915*/2905-2885/2860-2840/2815-2790/2750

Resistance to SPX-500:

2945*/2960-2990/3010-3035/3070-3095/3155

Technical View (Nifty, Bank Nifty, USDINR-I, SPX-500):

Technically, Nifty Fut-I (NF) has to sustain over 11200 for a further rally to 11245/11285-11325/11375-11415/11460 in the near term (under bullish case scenario). 

On the flip side, sustaining below 11180-11150 NF may fall to 11015/10970-10940/10900-10840/10790 in the near term (under bear case scenario).

Technically, Bank Nifty Fut-I (BNF) has to sustain over 25800 for a further rally to 25950/26150-26300/26400-26550/26700 in the near term (under bullish case scenario).

On the flip side, sustaining below 25750-25500/25400 BNF may fall to 25000/24900-24650/24400-24100/24000 in the near term (under bear case scenario).

Technically, USDINR-I has to sustain over 71.70 for a further rally to 72.05/72.25-72.55/72.90-73.05/73.25-73.75/74.25 in the near term (under bullish case scenario).

On the flip side, sustaining below 71.50, USDINR-I may fall to 71.25/71.00-70.70/70.10-69.85/69.15 in the near term (under bear case scenario).

Technically, SPX-500 has to sustain over SPX-500 has to sustain over 2950-2960 for a further rally to 2990/3010-3035/3070-3095/3155 in the near term (under bullish case scenario).


On the flip side, sustaining below 2945, SPX-500 may fall to 2915/2905-2885/2860-2840/2815 in the near term (under bear case scenario).

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NIFTY-SGX-NF


BANK NIFTY-BNF


CRUDE OIL-WTI

Friday 21 September 2018

Market Mantra (Nifty Fut/Bank Nifty Fut/USDINR/SPX-500): 21/09/2018

On Friday, the Indian market soared on positive global/US cues, lower oil (thanks to Trump tweet blasting OPEC), lower USDINR amid lower US dollar index, oil import/USD SWAP window, ease of US-China trade tensions by “less damaging” and “watered down” Trump tariffs at 10% (neutralized by China 10% Yuan devaluation) in lieu of 25% and China’s “muted retaliation”.

The market still thinks the present US-China duet as not an all-out “trade war” but a “trade skirmish/spats” only. The risk-on mood was further boosted after China’s pledge not to “devalue” Yuan further in its trade war against the US. A full-blown US-China/global trade war is positive for the US dollar amid risk-aversion, while the opposite is also true to some extent.

But the Indian market may also come under renewed stress as US dollar index could bounce back and India’s measures to support rupee are too little and too late. The below normal monsoon, IL&FS default crisis, new SEBI rules for AMC/MF distributions and higher import duties on certain industrial and consumer items may affect the market sentiment

Updated: 09:15

Nifty-SGX-NF: 11345 (+75; +0.65%)      
        
Bank Nifty-BNF: 26530 (+150; +0.55%)

USDINR-I: 71.95 (-0.48; -0.65%)

SPX-500: 2941 (+2; +0.07%)

Fut-I (Key Technical Levels)

Support for NF:

11315/11280*-11260*/11230-11180/11130-11050/10950

Resistance to NF:

11395/11415*-11460*/11485-11515/11535-11580/11605

Support for BNF:

26500/26250-26100/26000-25800/25650-25500/25400

Resistance to BNF:

26750*/26850-26950/27050-27200/27350-27500/27850

Support for USDINR-I:

71.70*/71.50-71.25*/71.00-70.70/70.10-69.85/69.15

Resistance to USDINR-I:

72.05*/72.25-72.55*/72.90-73.05/73.25-73.75/74.25

Support for SPX-500:

2915*/2905-2885/2860-2840/2815-2790/2750

Resistance to SPX-500:

2945*/2960-2990/3010-3035/3070-3095/3155

Technical View (Nifty, Bank Nifty, USDINR-I, SPX-500):

Technically, Nifty Fut-I (NF) has to sustain over 11415 for a further rally to 11460/11485-11515/11535-11580/11605 in the near term (under bullish case scenario). 

On the flip side, sustaining below 11395 NF may fall to 11315/11280-11260/11230-11180/11130 in the near term (under bear case scenario).

Technically, Bank Nifty Fut-I (BNF) has to sustain over 26750-26850 for a further rally to 26950/27050-27200/27350-27500/27850 in the near term (under bullish case scenario).

On the flip side, sustaining below 26700 BNF may fall to 26500/26250-26100/26000-25800/25650 in the near term (under bear case scenario).

Technically, USDINR-I has to sustain over 71.70 for a further rally to 72.05/72.25-72.55/72.90-73.05/73.25-73.75/74.25 in the near term (under bullish case scenario).

On the flip side, sustaining below 71.50, USDINR-I may fall to 71.25/71.00-70.70/70.10-69.85/69.15 in the near term (under bear case scenario).

Technically, SPX-500 has to sustain over SPX-500 has to sustain over 2950-2960 for a further rally to 2990/3010-3035/3070-3095/3155 in the near term (under bullish case scenario).


On the flip side, sustaining below 2945, SPX-500 may fall to 2915/2905-2885/2860-2840/2815 in the near term (under bear case scenario).

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NIFTY-SGX-NF


BANK NIFTY-BNF


SPX-500


USDJPY


EURUSD


GBPUSD


US DOLLAR INDEX-USDX


CRUDE OIL-WTI


GOLD