Market Wrap
<https://www.iforex.in/news/nifty-edged-down-amid-muted-global-cues-after-expected-warning-missile-launch-nk-over-japan-41915>:
15/09/2017 (17:00)
NSE-NF (Sep):10096 (-19; -0.19%)
(TTM PE: 26.26; Abv 2-SD of 25; TTM Q1FY18 EPS: 384; NS: 10085; Avg PE:
20; Proj FY-18 EPS: 418; Proj Fair Value: 8360)
NSE-BNF (Sep):24845 (-84; -0.34%)
(TTM PE: 28.01; Abv 2-SD of 25; TTM Q1FY18 EPS: 887; BNS: 24844; Avg PE:
20; Proj FY-18 EPS: 961; Proj Fair Value: 19220)
For 18/09/2017:
*Key support for NF: 10040-9975*
*Key resistance for NF: 10160-10205*
*Key support for BNF: 24700-24500*
*Key resistance for BNF: 25050-25150*
*Hints for positional trading:*
*Technicals indicate that, NF has to sustain over 10160 area for further
rally towards 10205-10250 & 10325-10385 area in the short term (under
bullish case scenario).*
*On the flip side, sustaining below 10140 area, NF may fall towards
10100-10040 & 9975-9925 area in the short term (under bear case scenario).*
*Similarly, BNF has to sustain over 25050 area for further rally towards
25150-25250 & 25350-25500 area in the near term (under bullish case
scenario).*
*On the flip side, sustaining below 25000-24975 area, BNF may fall
towards 24700-24500 & 24400 -24250 area in the near term (under bear
case scenario).*
*Indian market*(Nifty Fut) today closed around 10096, edged down by
almost 19 points (-0.19%) after making an opening session low of 10065
and late day high of 10132 in a day of moderate volatility. Indian
market today opened around 10080, gap down by almost 37 points tracking
mixed global cues after NK “tested” another ICBM today early in the
morning over Japan, which is capable to hit US pacific military base
Guam as par its earlier commitments.
But, overall global risk aversion flows were quite muted as this missile
launch by NK was in expected line and coupled with that some real estate
linked sudden rebound in HK market, Indian market also tried for a
similar rebound, but it failed in the 1^st half of trade.
Indian market again tried to recover (short covering) in the post noon
session amid some reports that EPFO is planning to increase its equity
investments from present 15% to 25% of the investable corpus and is
seeking FMO approval. But it dropped again in the closing session, when
EU reacts with the news that today’s London metro blast is an act of
terrorism.
Apart from NK saber rattling, stretched valuations may be the primary
concern for the market and thus it’s not being able to break the life
time high of Nifty around 10138, despite repeated attempts; there may be
some lack of conviction.
Overall for the Indian market, it now seems that FIIS are in selling
mode for rising Korean geo-political tensions, global QT bandwagons and
coupled with that stretched valuations, muted Q1 earnings, falling GDP &
rising inflation and widespread farm loan waivers across the states, NPA
& concern of fiscal imbalance may be some of the headwinds.
Thus FIIS are consistently selling for the last few weeks despite some
green shoots and attraction of 4-D (Modinomics-demand, demography,
democracy & de-regulations); NK tensions may be just an excuse.
As par latest IMD update, overall monsoon may be slightly below normal
(-6%?) this year in India and this may not be good for the overall rural
economy considering widespread floods across the nation, which has also
affected the food inflation quite dramatically in the recent times;
coupled with that, petro inflation and overall price instability in
India may be also affecting the consumer spending & growth.
Also, as par some reports, cheaper imports are substituting local
manufacturing after DeMo coupled with drastic fall in export; all these
are GDP negative. So far, incrementally higher Govt capex may be helping
the Indian GDP to a great extent amid subdued private capex; but going
forward Govt may also feel stretched & imbalance in the fiscal math.
For the Indian middle class salary earners, discretionary consumer
spending may be also looking tough day by day as their salaries now
barely covers the basic needs & loan EMIs; Indian household BS may be
also stretched.
Another UN report also forecasted slower GDP growth for India in the
coming days coupled with higher unemployment rate for adverse effect of
DeMo & GST on informal sector.
Nifty was today supported by Infy, ONGC. HDFC Bank, Bajaj Auto, TCS with
collective contribution by around +7 points.
Nifty was dragged by ITC, IOC, Indusind Bank, ICICI Bank, SBI, RIL, Tata
Motors, Axis Bank, DRL, Auro Pharma by combined -10 points (approx).
Overall, power generation & distribution cos are in severe pressure for
shortage in coal and low hydro power generation in drought affected
southern states; DRL was down as a UK drug firm has filed a patent
lawsuit against it; Lupin was in positive limelight after reports of
favourable plant inspection audit by US FDA. ONGC was up by over 4% on
“upbeat” prospects of oil as it is now hovering around $50.
Banks were also under pressure and dragged the overall market sentiment
for adverse Fitch report pointing to huge capital requirements by 2019
for Basel-III norms & low credit growth. Although HDFC bank bucked the
trend, HDFC was in pressure for SEBI lens on its HDFC Life IPO, raising
some questions.
As par some reports, Aircel may invoke bankruptcy of his own under IBC
and in that scenario, its exposure of Rs.11900 cr Indian debt has to be
provided as provisions for 50% immediately and rest within next 180
days; thus lenders of Aircel like SBI, BOB, PNB, Syndicate and J&K Banks
were under some pressure today.
Meanwhile, India’s current account deficit (CAD) for Q1FY18 increased
sharply to $14.3 bln; (i.e. 2.4% of GDP vs 0.1% YOY; 0.6% QOQ) primarily
due to rise in trade deficit; not a good news for the policymakers as
FPIS outflow may increase in the days ahead in lines with global tunes
of QT (Fed/ECB/BOE/BOC).
But, for Aug, exports grew at a healthy pace at 10.3% YOY to $23.82 bln,
while imports were at $31.46 bln, up by almost 21% on YOY basis. In
July, exports grew at 3.9% and thus improving figure in Aug may also
provide policy makers some relief as the economy is struggling due to
weak domestic demand after DeMo & GST disruptions.
Globally, most of the*Asia-Pacific markets* were in red today after NK
launched another ICBM early in the morning today over JP airspace
towards and flew by around 3700 km, following its threat yesterday to
“sink JP & reduce US mainland into ashes & darkness by a Nuke”!!
NK has termed it as a part of normal process to boost its nuke self
defence and indicated that dialogue will only begin, when US scraps its
hostile policy & sanctions for NK; it’s not intended for JP being a
symbolic launch.
But overall risk aversion flows to the safety of heavens (Yen, CHF,
Gold, Bonds) may be quite muted till now as this launch was in expected
line. NK was reported for preparing another ICBM for the last few days
after US/UN sanctions. Market may be also gradually habituating for such
frequent NK provocations & ongoing “war of words” between Kim & Trump
until some serious miscalculations by both of the sides.
So far, today’s US reaction is very limited & measured calling for China
& Russia for more “pressure” on NK and Trump has not tweeted till now
his rhetoric about the latest NK ICBM launch. But, this whole NK issue
may also invite some trade protectionist & sanction measure against
China by US for not agreeing to an all out oil embargo on NK.
As par China, this is not possible as it may pose more risk from NK at
its border and due to porous border; an all out sanction may not be so
much effective. China also said that it does not hold the key to Korean
crisis and China has already made enormous sacrifices and paid a price
to implement the UN resolutions; thus various directly involved parties
(US/SK/JP) should take the responsibility on Korean peninsula issues.
Thus, until “war of bullets/nukes”, all such “regular” NK provocations &
subsequent market volatility may be an opportunity for both traders &
investors. Kim/NK provocations may be also positive for US defence
industry as JP& NK has already increased their defence budget
significantly to “combat” NK, which may be also good for the economy of
both the countries (fiscal stimulus). Frequent NK missile & nuke games
may be also helping the US economy & Trump to keep USD lower for its
export benefit & imported inflation.
Overnight *US market *closed mixed over fear of another NK ICBM launch
despite an upbeat US CPI data yesterday; *USDJPY* was unable to sustain
over the 111 mark, equivalent to 10YUSTSY yields of 2.20%. Also, some
confusion about Trump’s tax deal with some of his opposition DNC members
at a WH dinner party may have affected the overall US market sentiment
yesterday. Apart from NK ICBM, USD also suffered some blow in the early
Asian session today after US TSY Sec has expressed some reservations of
Fed QT for the sake of US growth.
DJ-30 closed around 0.20% higher, while S&P-500 lost 0.11% & closed
around 2496 and NASDAQ dragged by almost 0.48%; Boeing has helped DJ
yesterday after analyst (DB) upgrade for this aerospace & defence
stock/sector. But techs, consumer discretionary were under pressure,
while energies has helped the market by some extent. *US Stocks Fut
(SPX-500)* is now trading almost flat around 2494 (-0.07%) after some
initial drops tracking the NK ICBM flight path, which ultimate has no
risk over the JP soil and blasted deep into the pacific!!
Overall, apart from NK rhetoric, market may be quite cautious after
hawkish hold by BOE yesterday, indicating an imminent rate hike move by
next 3-6 months to combat the higher trajectory of UK inflation, now
around 3%, if overall economic data looks good (i.e. data dependent).
Fed & ECB are also poised to announce their QE tapering soon and BOC has
already hiked twice in the last two meets. A global QT may not be good
for the risk assets in 2018 and yesterday’s sudden improvement in US
core CPI may also help Fed to keep its hawkish tilt in the coming months.
Even if Fed does not hike rate in Dec’17, its BS tapering may also help
US bond yields to rise as Fed will sell its QE bond holdings in the
market (although it may be very gradual @10 bln/month for next 10 years).
Elsewhere, *Australia (ASX-200)* closed around 5695, down by almost
0.80% on NK missile risk aversion moves, negative for the metals &
commodity currencies; *AUDUSD* is almost flat now around 0.7997
(-0.06%). Today AU market was dragged by metals, miners, basic materials
& resources and also by banks & financials, while helped to some extent
by energies.
*Japan (Nikkei-225)*closed around 19909, up by almost 0.50% bucking the
regional trend as NK risk aversion move for Yen was basically limited
today; *USDJPY* is now trading around 110.65, moved higher after NK
panic low of 109.87 earlier. JP market was today supported by Toshiba’s
ongoing deleveraging news with Western Digital, some exporters, auto
manufacturers, electronics, banks, energies & Pharma cos, while dragged
by some retailers & consumer stocks. Overall optimistic JP economic
prospect may be also helping the market today and it’s able to close
around 3.2% higher for the week on recent rebound in USDJPY.
*China (SSE)*closed around 3354, down by almost 0.53% dragged by
metals/miners, banks & financials after yesterday’s subdued economic
data coupled with overall NK related risk aversion & trade sanction
move. But optimistic GDP projection (6.7%) by some analysts (Macquarie)
may have also contained the overall damage today.
PBOC today fixed the middle-point of *USDCNY* little lower at 6.5423 vs
6.5465 yesterday with a net injection of 200 bln Yuan; this week PBOC
has injected total 260 bln Yuan through OMO against 330 bln net drain
last week. Thus PBOC is now taking a more soft approach after recent
spate of tightening.
*Hong-Kong (HKG-33)*is now trading around 27785, almost unchanged, but
well off the NK panic day low of 27465 on smart recovery of some of the
leading property developers & banks, following upbeat Govt reports about
housing sales & investments. Also, some internet firms, resource co
related to China story of ethanol use in the auto fuel, steel
manufacturer (M&A news) and energies has helped the HK market today
despite general NK jitters.
Meanwhile, *Crude Oil (WTI)* was trading around 49.45, down by almost
0.85% after some overnight rally to almost 50.48 on forecast of better
demand & tighter supplies by IEA/OPEC; today WTI may be down for NK
tensions & oil embargo issues apart from recent strength in US; also
recent surge in gasoline use may be due to Harvey/Irma factor
(seasonal/one time) and forecast of colder weather in the coming months
may be also positive for NG & negative for WTI.
Technically, WTI now has to sustain above 50.50 zone for next leg of
rally towards 52.50; otherwise it may come down again.
USDJPY Is Upbeat On Hopes Of A Hawkish Hold By Fed
<https://www.iforex.in/news/usdjpy-upbeat-hopes-hawkish-hold-fed-next-week-line-boe-us-tax-reform-despite-ongoing-nk-saber-rattling-41929>
Next Week In Line With BOE & US Tax Reform Despite Ongoing NK Saber
Rattling
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SGX-NF
<https://2.bp.blogspot.com/-RMinCqtLO00/WbwhQYq7_uI/AAAAAAAANHk/Hp9VtBk5oxc4ceiYFqXf0lPcM-hTjqsxQCLcBGAs/s1600/BNF-PATTERN-15-09-2017.png>
BNF
<https://2.bp.blogspot.com/-yCBrMApGXWI/WbwhXXRKIsI/AAAAAAAANHo/AB6b9Ys6kV82jT3fLw4Oc0fRlnJDI7M3gCLcBGAs/s1600/GBPUSD-PATTERN-15-09-2017.png>
USDJPY
--
Thanks & Regards,
Asis Ghosh
--
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