Nifty jumped on positive global cues and further helped by earnings and R-Jio optimism

Market Wrap: 24/04/2018

NSE-NF (April):10521 (+36; 0.34%)

NSE-BNF (April):25019 (+72; +0.29%)

SPX-500: 2635 (-36; -1.34%)

Market Mantra: 25/04/2018

Updated: 08:25

SGX-NF: 10590 (-31; -0.30%)

Expected BNF opening: 24940 (-0.30%)

SPX-500: 2631 (-5; -0.18%)

(Gap-down opening on muted global/US cues amid higher US/global bond yields and a slump in tech/FANG shares on renewed data privacy woes of Facebook and mixed set of earnings from Wall Street)

March-Fut (Key Technical Levels)

Support for NF:

10540/10515-10470/10415-10380*/10340-10290/10240

Resistance to NF:

10615/10655-10675*/10725-10765/10815-10865/10925

Support for BNF:

24900/24800*-24550/24400-24250/24050-23850/23600

Resistance to BNF:

25175/25275-25450*/25655-25775/25850-26050/26150

Support for SPX-500:

2650/2630-2610/2595-2575/2550

Resistance to SPX-500:

2695/2705-2720/2730-2750/2765

Technical View (Positional-Nifty, Bank Nifty, SPX-500):

Technically, Nifty Fut-I (NF) has to sustain over 10675 for a further rally towards 10725/10765-10815/10865-10925/11015 in the short term (under bullish case scenario). 

On the flip side, sustaining below 10655-10615 NF may fall towards 10540/10515-10470/10415-10380/10340 in the short term (under bear case scenario).

Technically, Bank Nifty-Fut (BNF) has to sustain over 25275 for a further rally towards 25475/25655-25775/25850-26050/26150 in the near term (under bullish case scenario).

On the flip side, sustaining below 25225-25175, BNF may fall towards 24900/24800-24550/24400-24250/24050 in the near term (under bear case scenario).

Technically, SPX-500 now has to sustain over 2705 for a further rally towards 2730/2750-2765/2785 in the near term (under bullish case scenario).

On the flip side, sustaining below 2695, SPX-500 may fall towards 2680/2650-2630/2610 in the near term (under bear case scenario).

Valuation metrics:

Nifty-50: 10614; Q2FY18 EPS: 410; Q2FY18 PE: 25.89; Avg FWD PE: 20; Proj FY-18 EPS: 418; Proj Fair Value: 8360

Bank Nifty: 25042; Q3FY18 EPS: 820; Q2FY18 PE: 30.54; Avg FWD PE: 20; Proj FY-18 EPS: 961; Proj Fair Value: 19220

The Indian and global market story on 24/04/2018:

The Indian market (Nifty Fut/India-50) closed around 10621 on Tuesday, jumped by almost 0.34% on positive global cues and further helped by earnings optimism led by RIL and HDFC Bank. The index heavyweight, RIL was also boosted by R-Jio’s telecom subscribers’ additions to a new record for March despite some confusion regarding its accounting principle.

As a result, Nifty Fut made a day high of 10635 after making a session low of 10568 and Nifty spot closed above 10600 for the first time since Feb’18 and made 11-weeks closing high. The 3.6% rally in RIL alone helped the benchmark index (Nifty) by almost 29 points.

Although higher crude oil and higher Indian/global bond yields were negative for the Indian market, the market seemed to have ignored the negative macroeconomic development and preferred the stable Q4 corporate earnings so far. But pressure on metals and tech shares have also affected the market sentiment on Tuesday. Metals were under pressure on a report that the US may reconsider Rusal sanction under certain conditions. Techs (IT) were under stress after reports that US may not allow spouses of H1B visa holders in the US, who has gone there for contractual work.

Indian 10Y bond yield was hovering around 7.75%, which is negative for the PSU bank’s huge bond portfolio amid increasing MTM loses and thus PSU banks came under renewed selling pressure. USDINR was also hovering around 66.60, at multi-months high and affecting the overall macroeconomy and the market, but it may be positive for the Nifty earnings as almost 60% of that came from exporters.; i.e. Nifty is also an export-heavy index.

But banks were also being supported by the buzz of extension of resolution period from present 180 to 360 days under IBC/NCLT process with “withdrawal” facility after NCLT admission. Banks were also being helped by the “fear psychosis” of several “stressed” firms and so-called willful corporate defaulters, who are now offering the banks for quick one time settlements of their debts as a result of IBC/NCLT process. Clearly, the earlier trend is reversed now as defaulter promoters/companies are now running behind the banks for NPA settlement rather than the banks running after them.

But the market may be also concerned about increasing litigations in the NCLT process, which may eventually discourage the angel investors from bidding Indian stressed assets aggressively. Also, there is a serious concern of mass unemployment as a result of corporate deleveraging in addition to spillover effect from earlier DeMo and GST blues.

On Tuesday, Nifty was helped by RIL, HDFC Bank, ICICI Bank, L&T, Yes Bank, M&M, Bajaj Fin, ONGC, ITC, IOC and others by around 81 points (68+13), while it was dragged by Infy, Hindalco, HCL Tech, VEDL, TCS, Tech-M, Wipro, SBI, Tata Steel, Tata Motors and others by almost 47 points (42+5) altogether.

Overall on Tuesday, the Indian market was helped by private banks, financials, automakers, FMCG, pharma, reality, consumption, energies (higher oil) and infra, while it was dragged by techs, media, metals, PSU banks.

Global cues were positive during Indian market hours on Tuesday:

US stock future (SPX-500) was up by 0.58% and European stocks edged up by 0.02% at a 2-1/2 month high as global government bond yields softened to some extent.  Also, technology stocks recovered from their 3-day steep decline led by a gain in SAP amid an upbeat guidance. In addition, strength in energy stocks was giving the overall market a boost with crude oil/WTI up 0.71%. But, overall gains in the European stocks were limited after the German April IFO business confidence fell more than expected to a 1-1/4 year low. A higher EUR was also negative for the European market on Tuesday.

Asian stocks closed mixed amid higher USD and oil, but lower metals: Japan +0.86%, Hong Kong +1.26%, China +1.99%, Taiwan -1.10%, Australia +0.60%, Singapore +0.14%, South Korea -0.64%, India +0.48% (Sensex).

China's Shanghai Composite climbed to a 1-week high on signs the government may ease its tightening (deleveraging) campaign to boost domestic growth.  In a statement released by state media following a Politburo meeting led by Chinese President Xi, the Chinese government mentioned the need to boost domestic demand for the first time since 2015 and dropped a reference to deleveraging on concern trade and debt risks could hit economic growth. 

Chinese stocks also soared following an overnight report from the China Securities Journal that liquidity tightening in China may ease while fiscal spending will increase in the days ahead; speculation of further easing from China re-emerged with subsequent similar reports of RRR cuts amid increasing trade tensions with the US.

Chinese stocks lead Asian indexes higher after Monday’s Politburo meeting and state-backed newspaper commentary signaled liquidity conditions will improve. As noted above, China roared higher amid press reports that China has further room to cut RRR and is likely to ease liquidity tension this week.

The MSCI Asia Pacific index advanced 0.4%, with Rusal shares rising by around 30% in Hong Kong on hopes of sanction relief, while the blue-chip energy and property names led the upside in the Hang Seng. Still, there remained pressure on technology shares in Asia after a slew of companies reported disappointing earnings. The Philadelphia Semiconductor Index is down more than 7% over the past four days.

Asia-Pacific stock markets were mostly in the green with an improvement in tone seen in comparison to the overnight lackluster US performance where rising yields and declines in basic materials dampened sentiment. ASX- 200 traded positive, supported by gains in financials and energy names.

Elsewhere, Shanghai and Hang Seng outperformed after a mild net liquidity injection by the PBOC, as well as press reports that China has further room to cut RRR and is likely to ease liquidity tension this week. Furthermore, Rusal shares rose by around 30% in Hong Kong on hopes of sanction relief, while the blue-chip energy and property names led the upside in the Hang Seng.

Japanese stocks moved higher, led by a rally in exporters after USDJPY climbed to a 2-1/4 month high, which boosts exporters' earnings prospects.

European stocks opened on the back foot, but have seen rebounded in the green amid relatively light news flow. Looking at the sectors, energy names were outperforming amid the rise in oil prices, but telecom names lag behind with Telenor, weighing on the sector following weak report card. FTSE-100 (UK) was boosted by a weak GBP.

USDJPY STORY:

EURUSD STORY:

SGX-NF

BNF

SPX-500

USDJPY

Nifty skids from the day high on subdued global cues amid higher bond yields soon after TCS touched the $100 bln market cap and government squabbling over excise duty cut on fuels

Market Wrap: 23/04/2018

NSE-NF (April):10585 (-0.50; 0.00%)

NSE-BNF (April):24956 (-50; -0.20%)

SPX-500: 2670 (+0.15; +0.01%)

Market Mantra: 24/04/2018

Updated: 08:00

SGX-NF: 10550 (-35; -0.33%)

Expected BNF opening: 24865 (-0.35%)

SPX-500: 2678 (+6; +0.24%)

(Gap-down opening on muted global/US cues amid higher US/EU bond yields and plunge in commodities amid reports that the US may reconsider its sanctions on Rusal)

March-Fut (Key Technical Levels)

Support for NF:

10515/10470-10415/10380*-10340/10290-10240/10170

Resistance to NF:

10595/10615-10655/10675*-10725/10765-10815/10865

Support for BNF:

24800*/24550-24400/24250-24050/23850-23600/23300

Resistance to BNF:

25050/25275-25450*/25655-25775/25850-26050/26150

Support for SPX-500:

2660/2640-2630/2605-2595/2575

Resistance to SPX-500:

2695/2705-2720/2730-2750/2765

Technical View (Positional-Nifty, Bank Nifty, SPX-500):

Technically, Nifty Fut-I (NF) has to sustain over 10615 for a further rally towards 10655/10675-10725/10765-10815/10865 in the short term (under bullish case scenario). 

On the flip side, sustaining below 10595-10575 NF may fall towards 10515/10470-10415/10380-10349/10290 in the short term (under bear case scenario).

Technically, Bank Nifty-Fut (BNF) has to sustain over 25275 for a further rally towards 25475/25655-25775/25850-26050/26150 in the near term (under bullish case scenario).

On the flip side, sustaining below 25225-25175, BNF may fall towards 25050/24800-24550/24400-24250/24050 in the near term (under bear case scenario).

Technically, SPX-500 now has to sustain over 2705 for a further rally towards 2730/2750-2765/2785 in the near term (under bullish case scenario).

On the flip side, sustaining below 2695, SPX-500 may fall towards 2680/2660-2630/2605 in the near term (under bear case scenario).

Valuation metrics:

Nifty-50: 10585; Q2FY18 EPS: 410; Q2FY18 PE: 25.82; Avg FWD PE: 20; Proj FY-18 EPS: 418; Proj Fair Value: 8360

Bank Nifty: 24944; Q3FY18 EPS: 820; Q2FY18 PE: 30.42; Avg FWD PE: 20; Proj FY-18 EPS: 961; Proj Fair Value: 19220

The Indian and global market story on 23/04/2018:

The Indian market (Nifty Fut/India-50) closed around 10585 on Monday, almost flat but skids from the day high of 10623 and made a low of 10551 amid subdued global cues and higher US/EU bond yields coupled with stress in metals on reports that the US may reconsider its sanctions on Russian aluminum conglomerate Rusal. The Indian market also came under intense selling pressure after TCS touched the milestone target of $100 bln market capitalization and another report that Government is not interested to cut additional excise duties on fuels.

On Monday, the Indian government virtually rejected the idea of cutting excise duties on petrol and diesel to help the consumers amid an ongoing surge in oil, hovering around $69 for WTI. The government is worried about the impact on the fiscal deficit for such action as every rupee (Rs.1) cut in fuel excise costs the government revenue of Rs.14 bln. The government has also denied that it has asked OMCs not to hike fuel priced to cushion the impact of oil price hike. The government will not advise OMCs to control price as it can’t let PSU OMCs “bleed” by asking for price controls.

The government stance on the fuel price may have mixed impact on the economy and the market. While the market may be relieved that there will be no apparent political populism with fuel prices and that is also positive for the fiscal discipline front, there will be another dilemma about increasing inflationary impact because of higher fuel prices on the economy, which is also negative for the fiscal deficit eventually. So, this is like a double whammy situation for the Indian economy regarding excessive tax components on fuels and the higher crude oil.

Also in reality, whatever the government is saying in public, it’s pressurizing the PSU OMCs internally not to hike fuel prices abruptly, keeping an eye on the forthcoming series of state elections.

In any way, Indian 10Y bond yield made a high of 7.769% on Friday amid concern of Indian fiscal discipline and higher US/global bond yields; USDINR was also upbeat on broad strength in US dollar amid ease of tensions on North Korea and US-China trade war. Subsequently, the overall market sentiment was muted, although exporters gained.

On Friday, Nifty was helped by Indusind Bank, RIL, M&M, Kotak Bank, Infy, HCL Tech, Sun Pharma, BPCL, Asian Paints, Yes Bank and others by around 58 points (41+17), while it was dragged by HDFC Bank (subdued report card) ICICI Bank, IBULLS HSG, HUL, Hindalco, ITC, L&T, VEDL, Grasim, HDFC and others by almost 36 points (28+8).

Overall on Friday, the Indian market was helped by selected PSU and private banks, automakers, techs, media, pharma, reality, consumption, energies (higher oil and earlier buzz of excise duty cuts), while dragged by financials, FMCG, metals (reports that the US may reconsider its sanction on Rusal), selected private banks and infra.

Global cues were muted during Indian market hours on Monday:

US stock future (SPX-500) was almost unchanged and European stocks edged up by 0.05% on optimism that the US and China could resolve their trade differences after US Treasury Secretary Mnuchin said he's "cautiously optimistic" of reaching an agreement on trade with China. 

Risk-on trade got some boost on reduced tensions in US-China trade war as well as US-North Korea “nuke war” on Monday. North Korea surprised the world on Saturday stating that it would immediately suspend all nuclear and missile tests scrap its nuclear test site and instead pursue peace and economic growth, a development which Trump quickly latched on.

Additionally, talk of a trip by the US Treasury Secretary Mnuchin to China also fueled hopes that the recent trade tensions between the world’s two biggest economies may be cooling off. The risk-on move was catalyzed by Mnuchin saying over the weekend that he is planning a trip to China; an indication the US is considering a truce in its trade war with China.

But, higher interest rates (bond yields) were also limiting the upside in stocks as the 10Y US bond yield climbed to a 4-1/4 year high of 2.998% and the 10-year German bund yield rose to a 2-1/4 month high of 0.639%.  European stocks were also under pressure despite weak EUR and higher bund yields and on signs of weakness in manufacturing activity after the Eurozone Apr Markit manufacturing, PMI fell -0.6 to a 14-month low of 56.0.

Asian stocks closed mostly lower despite higher USD: Japan -0.33%, Hong Kong -0.54%, China -0.11%, Taiwan -0.76%, Australia +0.29%, Singapore +0.17%, South Korea unchanged; India +0.10% (Sensex). Losses in technology stocks and suppliers to Apple weighed on Asian markets.  Apple has fallen for three straight sessions on concern about weakening global demand for iPhones after Morgan Stanley cut their forecasts for iPhone shipments by 1 million in the quarter ending in March and by 6 million for the current quarter.

Asia equity markets began the week lackluster after last Friday’s losses in the US market where all majors declined on continued tech weakness and losses in Apple amid concerns regarding iPhone demand. However, overnight pressures were contained in the Asia-Pacific region amid a further improvement of the geopolitical climate in the Korean peninsula after North Korea announced it will stop nuclear and ICBM testing, as well as begin dismantling a nuclear test site in the north of the country.

ASX 200 and Nikkei 225 were mixed with weakness in Japan the result of last week’s flows into the Yen. Elsewhere, Shanghai and Hang Seng were choppy amid a lack of drivers and a neutral position by the PBOC which injected CNY 80 bln via reverse repos to match maturing operations, although underperformance was observed in Hong Kong names.

USDJPY STORY:

EURUSD STORY:

GBPUSD STORY:

SGX-NF

BNF

SPX-500

USDJPY

Nifty edged up on mixed global cues and tech optimism boosted by an upbeat report card from TCS

Market Wrap: 20/04/2018

NSE-NF (April):10595 (+17; +0.16%)

NSE-BNF (April):25050 (-98; -0.39%)

SPX-500: 2670 (-23; -0.85%)

Market Mantra: 23/04/2018

Updated: 08:25

SGX-NF: 10575 (-20; -0.19%)

Expected BNF opening: 24980 (-0.25%)

SPX-500: 2676 (+5; +0.20%)

(Gap-down opening on subdued global/US cues amid higher US/EU bond yields despite reduced tensions on North Korea and US-China trade war)

March-Fut (Key Technical Levels)

Support for NF:

10530/10500-10475/10425-10390*/10340-10290/10240

Resistance to NF:

10595/10615-10655/10675*-10725/10765-10815/10865

Support for BNF:

25000/24900*-24800/24600-24400/24250-24050/23850

Resistance to BNF:

25275/25450*-25655/25775-25850/26050-26150/26300

Support for SPX-500:

2660/2640-2630/2605-2595/2575

Resistance to SPX-500:

2705/2720-2730/2750-2765/2785

Technical View (Positional-Nifty, Bank Nifty, SPX-500):

Technically, Nifty Fut-I (NF) has to sustain over 10615 for a further rally towards 10655/10675-10725/10765-10815/10865 in the short term (under bullish case scenario). 

On the flip side, sustaining below 10595 NF may fall towards 10530/10500-10475/10425-10390/10340 in the short term (under bear case scenario).

Technically, Bank Nifty-Fut (BNF) has to sustain over 25275 for a further rally towards 25475/25655-25775/25850-26050/26150 in the near term (under bullish case scenario).

On the flip side, sustaining below 25225, BNF may fall towards 25000/24900-24800/24600-24400/24250 in the near term (under bear case scenario).

Technically, SPX-500 now has to sustain over 2705 for a further rally towards 2730/2750-2765/2785 in the near term (under bullish case scenario).

On the flip side, sustaining below 2695, SPX-500 may fall towards 2680/2660-2630/2605 in the near term (under bear case scenario).

Valuation metrics:

Nifty-50: 10564; Q2FY18 EPS: 410; Q2FY18 PE: 25.77; Avg FWD PE: 20; Proj FY-18 EPS: 418; Proj Fair Value: 8360

Bank Nifty: 24944; Q3FY18 EPS: 820; Q2FY18 PE: 30.42; Avg FWD PE: 20; Proj FY-18 EPS: 961; Proj Fair Value: 19220

The Indian and global market story on 20/04/2018:

The Indian market (Nifty Fut/India-50) closed around 10595 on Friday, edged up by almost 0.16% on positive to mixed global cues and renewed optimism about tech after an upbeat report card (higher revenue) from TCS along with 1:1 bonus for the shareholders. Nifty Fut made a low of around 10531 but recovered quite smartly in the late hour’s trade boosted by techs and TCS, while banking stocks were under pressure, especially the PSU banks on the concern of strict NPA rules by the RBI. All focus was on the TCS for its $100 bln club market capitalization.

Metals were also under pressure on fall in global prices amid speculation Russia will come to the aid of Rusal and may nationalize the company to avoid US sanctions. Although oil was under some stress on Friday, the overall higher trajectory of the oil hovering around $68 and eyeing the $75 mark (Crude oil/WTI) has also affected the market sentiment on the concern of higher fiscal deficits.

Indian rupee (INR) fell by 0.52% on Friday and made 52 weeks low against US dollar around 66.21 and 10Y Indian bond yields also jumped to 7.734%, eyeing the recent high of 7.80% again, pressurizing the banks for their MTM loss on the bond portfolio. INR fell on the concern of fiscal discipline and political populism despite hawkish minutes from RBI, thinking about rate hikes in 2018.

As par RBI governor Patel, the Indian economy may grow by around 7.4% in FY-19., whereas it likely grew at 6.6% in FY-18 against 7.1% in FY-17. For FY-19, RBI is optimistic about higher government capex coupled with manufacturing and services. But RBI also flagged higher oil prices as a significant risk to the inflation and economy. As par IMF, India is now the fifth largest economy of around $2.6 tln in the world, displacing France after the US, China, Japan, Germany and the UK.

As par some report, the government may cut excise duty on fuel by Rs.1-1.5 to ease retail prices of petrol and diesel ahead of the series of elections (political populism). But the government is confident that the reduction will not impact fiscal deficit numbers for FY-19; expected at 3.4-3.3%.

Notably, fuel prices in India has hit a record high as crude oil (WTI/Brent) is hovering around 3 years high and government has already imposed hefty excise duty (additional), when oil was around $40 for an easy revenue to meet up fiscal expenditure, but is not ready to withdraw its even if oil breaches $65 (WTI) as par its previous commitment.

The market is concerned that India’s rating may be rerated as oil is sustaining above the $60-65 as the country imports almost 80% of its oil requirement and the very high tax components has made the retail prices of fuel the highest in South-East Asia, affecting the overall economy (inflation) and making it very high cost instead the global trend of a Goldilocks economy.

Under such circumstances, the government cutting excise duty by Rs.1-2 per liter will not make much difference; government should look at the change in fuel pricing policy for a long-term structural solution.

On Friday Nifty was helped by TCS, Infy, HDFC Bank, HCL Tech, Tech-M, Coal India, HUL (buy back buzz), IOC, Bharti Airtel, Wipro and others by around 86 points (82+4), while dragged by RIL (Alok industry bid failure) ICICI Bank, HDFC, L&T, SBI, Yes Bank, ITC, Axis Bank, Tata Steel, Indusind Bank and others by almost 82 points (60+22).

Overall, on Friday Indian market was helped by techs, mixed automobiles, selected private banks, while dragged by banks & financials, mixed FMCG, media, metals (fall in global prices), pharma, reality, energies, and consumer stocks to some extent.

Global cues were positive to mixed on Friday during Indian market hours:

US stock future (SPX-500) was up by 0.13% on optimism about US corporate earnings will continue to surprise to the upside.  General Electric was up 3% in pre-market trading on better than expected earnings (EPS).  Gains in the overall market were also limited to increased trade tensions with China as the US Treasury Department considers using an emergency law to curb Chinese investment in sensitive technologies. 

Under a 1977 low known as the International Emergency Economic Powers Act, President Trump could declare a national emergency in response to an "unusual and extraordinary threat," which allows him to block transactions and seize assets.

European stocks were up around 0.48% at a 2-1/2 month high due to strength in exporter stocks and mixed earnings. Exporters were gaining on weakness in EURUSD which was down by around 0.32% at a 1-1/2 week low after German Mar PPI rose less than expected, which is dovish for ECB monetary policy ahead of next Thursday's ECB meeting.  FTSE-100 was also boosted exporters/MNC amid a slump in GBP following reduced rate hike options after Carney (BOE) flip-flops. Overall, telecoms helped on M&A news, but energies lagged on falling oil on Friday.

Asian stocks were closed mostly lower: Japan -0.13%, Hong Kong -0.94%, China -1.47%, Taiwan -1.75%, Australia -0.21%, Singapore -0.70%, South Korea -0.70%, India +0.11% (Sensex). Weakness in Asian technology stocks undercut Asian bourses after Taiwan Semiconductor Manufacturing, Apple's main chip supplier, dropped 6% after it forecasts weaker-than-expected revenue this quarter on slowing demand for smartphones.  The IMF earlier this week had said that global smartphone shipments declined for the first time in 2017.

Asia stocks traded lower after the subdued tone rolled over from the overnight where all major indices finished in the red amid tech woes after semiconductor giant TSMC downgraded its revenue forecasts on concerns of softer smartphone demand.

ASX-200 and Nikkei-225 opened negative although losses were mostly pared as the Energy sector remained afloat in Australia and with the Japanese benchmark finding some relief from a weaker Yen (higher USD).

Elsewhere, Taiwan’s Taiex was the laggard as TSMC slumped following the weak revenue outlook, while Hang Seng and Shanghai were lackluster after the PBOC skipped open market operations (OMO) and as trade tensions with the US lingered.

USDJPY STORY:

EURUSD STORY:

GBPUSD STORY:

OIL/WTI STORY:

SGX-NF

BNF

SPX-500

USDJPY