Market Wrap
<https://www.iforex.in/news/nifty-dragged-033-despite-positive-global-cues-amid-concern-stretched-valuation-39009>:
20/07/2017 (17:00)
NSE-NF (July): 9887 (-32; -0.33%) (TTM PE: 24.99; Near 2 SD of 25; Avg
PE: 20; TTM EPS: 395; NS: 9873)
NSE-BNF (July): 24243 (+35; +0.14%) (TTM PE: 30.46; Near 3 SD of 30; Avg
PE: 20 TTM EPS: 795; BNS: 24213)
For 21/07/2017:
*Key support for NF: 9870-9820*
*Key resistance for NF: 9960/9985-10005*
*Key support for BNF: 24250/24150-24000/23900*
*Key resistance for BNF: 24350-24500*
*Time & Price action suggests that, NF has to sustain over 10005 area
for further rally towards 10050-10115 & 10195-10250 in the short term
(under bullish case scenario).*
*On the flip side, sustaining below 9985-9960 area, NF may fall towards
9905/9870-9820 & 9760- 9715 area in the short term (under bear case
scenario).*
*Similarly, BNF has to sustain over 24350 area for further rally towards
24500-24700 & 24875-25050 area in the near term (under bullish case
scenario).*
*On the flip side, sustaining below 24250 area, BNF may fall towards
24150/24000-23900 & 23700-23500 area in the near term (under bear case
scenario).*
Nifty Fut (July) today closed around 9886, almost 32 points down after
making an opening minutes high of 9929 and late day low of 9866 in a
range bound day of trading; but it underperform the Asian/Global market
today as almost all of them were in green tracking overnight positive US
cues and some fall in EUR & JPY.
The primary reasons for this underperformance may be subdued earnings
from some pivotal companies and concern of stretched valuations. Kotak
bank & Bajaj Auto report card today me be below market estimate.
Also, there was some report that Govt may forecast far lower inflation
than earlier RBI estimate citing various macro economic factors and good
monsoon and might also blame the central bank for its consistent failure
of inflation forecasting and more rate cuts opportunities.
It’s clear that, now Govt may put more pressure on the RBI to cut
drastically, more than the token 0.25% once or twice in a year;
expectations may be that, in line with the underlying CPI, which is
hovering now around 1.54%; at 1.25% RRI (neutral rate), the RBI repo
rate should be around 3-5% (assuming average CPI 2-4%) instated of the
6.25% or 6% (if RBI cut 0.25% in Aug).
But, any drastic cut may devalue INR more and may also bring blood bath
in the Indian high yield bond markets, paving panic exit for the FPIS
both from bond as well as EQ market.
Another factor may be the ongoing Ind-China tension at Sikkim LOC, which
may turn serious at any point of time despite best effort being made by
India for a diplomatic solution; but China is firm in its stand that
until & unless India removes its soldiers from there, there will be no
fruitful talks. All these may have kept the Indian market sentiment in
depress today.
Indian market (Nifty Fut), todayopened around 9928, almost unchanged
tracking flat global/Asian cues ahead of BOJ Kuroda’s presser; BOJ has
hold its monetary policy (unchanged) as expected with a virtual
admission to defeat in deflation.
Indian market may now focus on RIL & other Q1 earnings trajectory and
also on the ongoing legal tussles of NPA/IBC cases, which may take
significant time frame for any actual resolution.
As par some report, TTSL (Tata Tele Services), which has already a loan
of around Rs.40000 cr including Rs.8000 cr of telecom spectrum deferred
payment, is now seeking another Rs.5000 cr fresh loan to fund its capex
requirement; but the banks are now refusing to grant fresh loans and
planning for some CDR (corporate debt restructuring); corporate stressed
B/S may be a major issues for Indian economy and private capex; only
Govt capex is now stimulating the economy.
Indian banks now need huge capital as excess provisions & hair cut
(waive off) obligations for this mammoth NPA and thus, there is
significant risk of future equity & EPS dilution on poor visibility of
the underlying credit growth.
Today Nifty was supported by Axis Bank (digital push & search for a new
CEO, who may be more pro-active), ONGC (favourable merger with HPCL),
HDFC Bank (deleveraging push).
Nifty was today dragged by metals (Tata Steel), Pharma, IT (INFY) FMCG
(ITC), PSBS (SBI/BOB) & RIL (ahead of result today, which came slightly
above estimates after market hours); overall nearly 80% of the Nifty
constituents were in red today.
Looking ahead, Nifty Fut (July) has to sustain above 9870-9820 area;
otherwise expect more fall. For any rally from here, it need to break
above 9960-9985 & 10005 zone.
Elsewhere, Australia (ASX-200) was closed in moderate green at around
5761 (+0.50%) as AUDUSD retraced from the 0.80 levels after an upbeat AU
jobs report today. Apart from some drops in AUD, upbeat guidance from an
oil & gas co (Santos) has also helped the market today.
Japan (Nikkei-225) closed around 20145, up by 0.63% as Yen slipped
against USD; also an upbeat export data (+9.7% gains for June) and some
optimism about energy related shares may have supported the JP market today.
China (SSE) closed around 3240, almost up by 0.30% after PBOC today
injected a net 60 bln Yuan; apart from PBOC support, upbeat metal/iron
ore prices because of strong China GDP data may be also supporting the
overall market sentiment.
Hong Kong (HKG-33) closed around 26740, up by almost 0.30% following
overall positive global cues amid some drop in EUR & Yen.
*EURUSD Is Blasting Above 1.16 And Marching Towards 1.18 As Market Does
Not Believe In Draghi’s Dovish Script; Stocks Plunged After Surge In EUR
Combined With Increasing US Political Risks:*
EURUSD is now trading around 1.1635, almost up by 0.90% after making a
HOD of 1.1661 so far (23 months high) on signal of QT talk by Draghi,
who indirectly hinted that ECB will discuss the future of the QE at one
of its next two meetings.
Today ECB stayed pat as expected; it has also made no change in its
official statement that ECB is ready to increase the size & duration of
QE, if required. Earlier there was some speculation that the reference
of this “size & duration” may be omitted, but it was not and thus
initially EURUSD plunged to almost 1.1487.
But at the presser (Q&A), although Draghi may have tried his best to
sound like a dove, keeping in mind the strength of EUR, the overall
statement, Q&A may be enough for the market to believe that a gradual
ECB QE tapering signal is indeed coming, be it at the next month’s
Jackson Hall Symposium or at the next Sep’17 meeting; basically, market
today does not believe in Draghi’s dovish script despite his best effort.
Draghi basically encourages more structural reforms in EZ to keep the
economy going rather than through excessive dependence on monetary
stimulus (QE).
Overall, it seems that Draghi/ECB may be preparing itself to signal a
coordinated QE tapering in the Aug Jackson Hall Symposium along with Fed
and other major G-10 central banks to avoid a disorderly market movement.
*Technically, EURUSD may now face some resistance around 1.17090-1.17465
and beyond that the area of 1.1810 is now clearly visible; immediate
support is now around 1.16240-1.16090.*
Meanwhile stocks are plunging as a result of strong EUR, Draghi’s
indirect QT hint and some adverse report that US special prosecutor
(Muller) may extend his probe into Trump business & financial
transactions apart from the Russian link investigations; US political
jitters may turn ugly in the coming days and that may be the only excuse
for the Fed and also ECB to scale back/delay their QE tapering talk.
<https://1.bp.blogspot.com/-j11vB9cHPDk/WXDiaHlV99I/AAAAAAAAMbY/3JN9vdBF0xIolUaxbjoDYtesj2ECh_1hwCLcBGAs/s1600/SGX-NF-PATTERN-20-07-2917.png>
SGX-NF
<https://3.bp.blogspot.com/-DGPPy49Lkuc/WXDil0REs5I/AAAAAAAAMbc/G7D0mQq64jsHJZpdAScFxLX1D1overD4wCLcBGAs/s1600/BNF-PATTERN-20-07-2017.png>
BNF
<https://1.bp.blogspot.com/-jhMy-AI2Dn0/WXDitJoDdjI/AAAAAAAAMbg/wOjHJ907xecvRTTeoAa_MWz4-M_OUsxKgCLcBGAs/s1600/EURUSD-WK-20-07-2017.png>
EURUSD
<https://4.bp.blogspot.com/-ZUFB2k2yUpg/WXDiwcWR1aI/AAAAAAAAMbk/zf0553wgwUA5e9UEMQLMRzG5d1HNltgXQCLcBGAs/s1600/EURUSD-FIBB-20-07-2017.png>
EURUSD
FOR MORE
https://www.iforex.in/news/eurusd-blasting-above-116-and-marching-towards-118-market-does-not-believe-draghi%E2%80%99s-dovish-script-39017
https://www.iforex.in/news/asia-trading-upbeat-strength-usd-after-boj-stays-pat-lowers-inflation-projection-expected-38959
https://www.iforex.in/news/usd-got-boost-amid-confused-neutral-boj-thriving-elusive-inflation-38975
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Thanks & Regards,
Asis Ghosh
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