The Indian market opened in deep green Monday on
positive China cues amid personal tax cut and some other stimulus hopes there
to fight Trump tariffs, terror. But the
Indian market soon succumbed to around 10278 from the opening high of 10405 on
another wave of NBFC/HFC default crisis despite lower oil and lower USDINR. The
market is currently trading around 10320, edged up almost +0.16% as the European
market is poised to trade in green on China optimism and less than the severe downgrade of Italy by Moody’s late
Friday.
As per market rumors,
there is a serious crisis brewing in the Indian market as DHFL & India
Bulls are apparently not being able to fulfill their mortgage customers
disbursements. And there is a talk in the market
that BNP cannot sell any paper of DHFL, India Bulls that they hold. The DHFL
may in a serious trouble as they have to repay/roll-over around Rs.13.50B by
December, whereas they have only Rs.3B in their books (cash/cash equivalent).
In either way, even if an HFC like DHFL
is able to roll-over their sky-high debt, it will be at a much higher cost
(yield). Meanwhile, the DHFL is trying to sell their mortgage book that is Rs.15B.
The Indian money/CP market is now quite tight. The
MMFS FIXED deposit rate has jumped from 8% to 8.7% in 1 month, although the 10Y
Indian bond yield dropped to around 7.90% from the recent high of 8.23% after a
dovish hold by the RBI and some fall in
global bond yields.
As per reports, various “high-profile” Indian
NBFC/HFC companies are now in deep financial trouble amid an environment of
higher borrowing costs and lower demand. Max India is in trouble and there is a
talk in the market that HDFC is asking
for more documentation for disbursing mortgage disbursements which are already sanctioned
as mortgages loans were given at 8.35% and borrowing costs have shot up after
that.
There is another report that Piramal is also
trying to sell their pharma business to create liquidity. The main problem may
be subdued realm estate activities and much higher supply than the actual core
demand. Edelweiss, DHFL, Piramal, India Bulls have totally lent about Rs 1.5T
to real estate and a lot is now stand stilled as real sales never happened amid
India’s own sub-prime woes. The NCLT cases have jumped 25% in the last 1 month as more Developers are going to
get into trouble.
The NBFC/HFC “doomsday” stories are adding salt to India’s macro woes and the
market is already in the bear territory (sustaining below 200 DEMA of around
10800). The valuations are still stretched amid mixed Q3 earnings reports. Higher borrowing costs are
bound to affect highly leveraged Indian corporates barring few blue-chip exceptions that are almost debt free.
The NBFC/HFC and also the infra woes clearly suggesting that all are not good
for the Indian economy despite the government’s
huge infra spending to stimulate growth. There are some flaws in the overall
economic model and project viability itself. The government, on its part, is trying to contain the contagion
effect, but it may be too large and too
widespread.
Updated: 10:30
Nifty-SGX-NF:
10315 (+12; +0.12%)
Bank
Nifty-BNF: 26285 (+210; +0.85%)
USDINR-I:
73.30 (-0.07.; -0.10%)
SPX-500: 2774 (+7; +0.24%)
Fut-I (Key Technical Levels)
Support for NF:
10260/10230*-10180/10140*-10100/10030-9950/9850-9700/9650
Resistance to NF:
10395/10415*-10460/10490*-10525/10600-10655/10675-10725/10780
Near-term broad range: 9950-10850
Support for BNF:
25200/25050*-24900/24700*-24400/24250-24100/24000-23800/23600
Resistance to BNF:
25550*/25850-26075*/26200-26350/26425-26575/26775-26975/27200
Near-term broad range: 23600-26075
Support for USDINR-I:
73.45/73.00*-72.55*/72.25-72.00/71.50-71.25/70.95-70.70/70.35
Resistance to USDINR-I:
74.05/74.35*-74.75*/75.00-75.65/76.00-76.55/77.00-77.50/79.70
Near-term broad range: 73.00-75.00
Support for SPX-500:
2770/2745-2710/2690-2675/2650-2620/2600-2585/2565
Resistance to SPX-500:
2805*/2820-2840*/2875-2890/2905-2925/2945-2960/2990
Near-term broad range: 2690-2890
Technical
View (Nifty, Bank Nifty, USDINR-I, SPX-500):
Technically, Nifty Fut-I (NF) has to sustain over 10415 for a
further rally to 10460/10490-10525/10600-10655/10675-10725/10780 in the near
term (under bullish case scenario).
On the flip side, sustaining below 10395-10355 NF may fall to 10260/10230-10180/10140-10100/10030-9950/9850
in the near term (under bear case scenario).
Technically, Bank Nifty Fut-I (BNF) has to sustain over 25550
for a further rally to 25850/26075-26200/26350-26425/26575-26775/26975 in the
near term (under bullish case scenario).
On the flip side, sustaining below 25500 BNF may fall to 25200/25050-24900/24700-24400/24250-24100/24000
in the near term (under bear case scenario).
Technically, USDINR-I has to sustain over 73.45 for a further
rally to 74.05/74.35-74.75/75.00-75.65/76.00-76.55/77.00 in the near term (under bullish case
scenario).
On the flip side, sustaining below 73.00, USDINR-I may fall to 72.55/72.25-72.00/71.50-71.25/70.95-70.70/70.35
in the near term (under bear case
scenario).
Technically,
SPX-500 has to sustain over 2805 for a further rally to
2820/2840-2875/2890 and 2905/2925-2945/2960 in the near term (under bullish
case scenario).
On the flip side, sustaining below 2795-2770,
SPX-500 may fall to 2745/2710-2690/2675 and 2650-2620 in the near term (under bear case scenario).
Valuation metrics:
Nifty-50: 10350; Q4FY18 EPS: 402; Q4FY18 PE: 25.75;
Avg FWD PE: 20; Proj FY-19 EPS: 425-450; Proj Fair Value: 8500-9000
Bank Nifty: 25450; Q4FY18 EPS: 519; Q4FY18 PE:
49.04; Avg FWD PE: 20; Proj FY-19 EPS: 961-1000; Proj Fair Value: 19220-20000
(assuming NPA recovery).
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