Market Wrap
<https://www.iforex.in/news/nifty-consolidates-closed-almost-flat-amid-subdued-global-cues-caution-ahead-fed-42077>:
19/09/2017 (17:00)
NSE-NF (Sep):10169 (-7; -0.07%)
(TTM PE: 26.43; Abv 2-SD of 25; TTM Q1FY18 EPS: 384; NS: 10148; Avg PE:
20; Proj FY-18 EPS: 418; Proj Fair Value: 8360)
NSE-BNF (Sep):25076 (+19; +0.08%)
(TTM PE: 28.23; Abv 2-SD of 25; TTM Q1FY18 EPS: 887; BNS: 25041; Avg PE:
20; Proj FY-18 EPS: 961; Proj Fair Value: 19220)
For 20/09/2017:
*Key support for NF: 10150-10090*
*Key resistance for NF: 10205-10250*
*Key support for BNF: 24900-24800*
*Key resistance for BNF: 25150-25250*
*Hints for positional trading:*
*Technicals indicate that, NF has to sustain over 10205 area for further
rally towards 10250- 10325 & 10385-10455 area in the short term (under
bullish case scenario).*
*On the flip side, sustaining below 10185 area, NF may fall towards
10150-10090 & 10050-9975 area in the short term (under bear case scenario).*
*Similarly, BNF has to sustain over 25150 area for further rally towards
25250-25350 & 25585-25785 area in the near term (under bullish case
scenario).*
*On the flip side, sustaining below 25100 area, BNF may fall towards
24900-24800 & 24600-24500 area in the near term (under bear case scenario).*
*Indian market*(Nifty Fut) today closed around 10169, almost flat, but
with a negative bias (-0.07%) after a choppy day of trading in which it
made an opening minutes high of 10179 and mid day low of 10148 as market
turned cautious in lines of subdued global cues ahead of Fed tomorrow.
Indian market today also opened almost unchanged tracking muted
global/Asian cues and Nifty Spot has made another record high of around
10179 in the opening minutes itself and then turned flat with a negative
bias.
Market may be on concerned of another NPA/AQR types of disruptions for
new SEBI rule to disclose any loan default by the listed cos to be
effective from Oct’17 on an ongoing basis; this may put more stressed
cos & NPA in the limelight and may cause another wave of AQR types of
disruptions in the system/market.
A loan default by a co even for one day may put it on further liquidity
crisis as banks may refuse to extend further loans. In that event, there
may be a significant liquidity crunch for the SMES & also for the small
& midsized corporates as significant amount is also blocked with the
Govt in the form of unrealized input tax credit fiasco, advance direct
tax payment coupled with a not fully functional GSTN network for
processing GST returns & claims.
Under the new system, monthly interest for a business loan in terms of
CC has to be paid on the 29^th day, otherwise it may be reported by the
banks or has to be disclosed by the co by next day of the default.
Earlier if a co was unable to pay the monthly obligation by 89^th day
(three months), then Bank may treat it as a default and reported that.
Today market may have also focused on Govt’s fiscal stimulus talks in
the forthcoming budget to revive the slowing economy ahead of key state
& general elections in 2018-19; but considering the muted GST
collections for the 1^st month on account of huge input tax credit
claims for the transition stocks and ongoing glitches in the GSTN
network, there may be some constraint for the Govt capex in H2FY18,
which was the sole driver for India’s GDP in the last few years.
Under the fiscal stimulus, Govt may also try to reform the direct tax
mechanism to make it more simpler & affordable to improve the overall
tax/GDP ratio; but reform in petro products taxation may looks remote at
this stage as Govt can’t afford to lose an easy way to collect
substantial tax revenue. Market may be also looking for some corporate &
personal tax sops to revive private capex & consumer spending.
Market may have also focused on meeting between PMO-FMO/FIN MIN
secretaries & CEA today to take stock of the Indian economic conditions
today; but as par latest repot, that meeting is also postponed today.
Market is expecting that Fed will only announce its BS/QE bond tapering
program this time with a revised dot-plots to keep the Dec’17 hike
probability live; Fed may stop reinvestments of the matured bond
principle and began to sell the QE bonds in the market at very gradual
pace of $10 bln/pm for next 10 years in an auto-pilot mode.
As such QE unwinding experiment was never tried before by a major
central bank, it’s an uncharted territory and thus Fed will watch the
financial market response for some months before resuming its rate hike
cycle again. As Fed will supply QE bonds in the market, bonds price may
fall and yields may rise also for the 10YUSTSY, which is equivalent to
some interest rate hike in the US economy.
Thus, Fed may not take the risk of dual QT (both QE bond tapering &
interest rate hike) in the coming months and for that it has various
excuses available in the form of subdued US economic data including
retail sales, recent spate of hurricanes in US, ongoing geo-political
tensions involving NK, Trump’s own political jitters involving his
Russian link and poor visibility of legislative agenda including the
fiscal/infra stimulus narrative.
Fed may be on hold in Dec’17 and will think about rate hikes in 2018
from March’18 onwards (Q1CY18) under new leadership, if Yellen not get
an extension; if there is no definitive signal of a Dec’17 rate hike by
Fed tomorrow, then it may be interpreted as dovish by the market and USD
may fall, which is negative for global equities, especially for the
export heavy Asian & EU index including Nifty, but may be positive for
the US stock market.
A lower USD may be good for the Indian economy & macros, but may not be
good for the market (Nifty) as almost 60% of Nifty earnings are coming
from export of products & services. Also, a negative Asian & EU cues
because of weaker USD may affect the overall Indian market sentiment,
already under pressure for stretched valuations.
After muted Q1FY18 earnings amid Pre-GST disruption, now Indian market
may be also apprehending a similar Q2 on the back of GST transition &
implementation pains and disruptions in GSTN network. Small traders,
specially the informal section are very slow & reluctant for GST
registration and necessary book keeping, fearing retrospective effect as
they may have never accounted their business income before.
Today Nifty was supported by Tata Motors, Bharti Infratel, Kotak Bank,
Gail, IOC, ICICI Bank, BPCL, ITC, Infy & Adani Ports. Nifty was dragged
by HDFC, RIL, HDFC Bank, L&T, SBI, Eicher Motors, VEDL, Auro Pharma,
Axis Bank & Sun Pharma. Overall, Auto & FMCG & selected private banks
gained, while Metals, Pharma, PSBS & banks dragged the market today.
Gail was up by over 5% today for renewed optimism about gas distribution
& utilities business on prospect of multi year growth with an EPS CAGR
of over 15%; similarly other gas distribution stocks has gained quite
smartly today.
Tata Motors rallied almost 5% today on purchase of additional stakes by
Tata Sons (promoters group) in order to consolidate its stake in the co
by 1.7% more to 36.4%; similarly other Tata group of cos such as Tata
Chemicals gained today. Bharti Infratel extended its gain by another
2.36% on buzz of an imminent tower deal (deleveraging).
Coal India slumped by over 2% on concern of regulatory fines
(environment issue) for around Rs.20000 cr by Odisha Govt following a SC
order.
*Globally*, Asia-Pacific stocks were mixed today tracking muted global
cues as market may be cautious ahead of Fed & BOJ and on increasing
US-SK war drills in the Korean peninsula to put “peaceful pressure
campaign” on NK and elections in Germany & NZ this week coupled with a
snap poll for JP next month (mild political risks).
Another report that China/PBOC is now considering further financial
liberalization to ease its capital/currency controls and opening up of
the financial sector may be also boosting the overall market (risk-on)
sentiment; PBOC has already made Yuan significantly higher in the last
few months and thus it’s now ready for sweeping economic reforms
including less control over its currency ahead of the 19^th communist
party congress next month.
Yesterday US has also indicated that they have some war strategy that
will prevent any cascading NK attack on SK in case of a war, without
divulging much details about it. Market may be also worried about any
drastic change in US policy under Trump for the Iran nuke deal and any
trade war stance against China. But some optimism about US tax reform
policy & Trump’s ability to pass his legislative agenda on the strength
of his bipartisan stance may be also helping USD/US bond yields/US stock
market apart from hopes of an upbeat Q3 earnings.
*Overnight US market*closed in positive; DJ-30 gained by around 0.28%,
S&P-500 was up by 0.15% to close around 2504 and NASDAQ edged up by
0.1%, helped primarily by banks on higher US bond yields favourable for
their business models, but dragged by techs, especially Amazon on
concern of viability of its new subscription business model. Market may
be also expecting some breakthrough in the US healthcare bill issues by
this month.
*US stock future (SPX-500)*is now trading around 2503, almost unchanged
on muted Asian cues ahead of EU market opening. USDJPY gained some pips
on talks of an early JP election by next month favourable for Abe amid
his increasing popularity on NK missile crisis handling and an
unprepared oppositions; Abe may continue JP QQE for more time while BOJ
may be tinkering some back door/indirect QQE tapering under Kuroda,
whose term will end next year.
Elsewhere, *Australia (ASX-200)* is closed around 5714, edged down by
almost 0.10% on higher AUDUSD (negative for export heavy AU market),
pressure of airlines(disruptions in NZ airlines), media & healthcare
stocks; but was helped by banks & financials on prospect of higher US
bond yields,telecoms (upbeat results from TPG telecom), basic materials
resources/metals stocks (higher metal prices today).
*AUDUSD*is now trading around 0.7987, up by almost 0.35% tracking the
RBA minutes today which was basically upbeat AU economic outlook &
improving labour market although it was worried about rising household
debt and a strong AUD. As par RBA, further rise in AUD may affect GDP &
inflation; but the strength in AUD may be also a function of weakness in
USD. Thus RBA minutes may be less dovish than market was expecting and
coupled with that an upbeat AU house price index data for Q2 at +1.9%
(YOY) may have also boosted the AUD today.
*Japan (Nikkei-225) *was the brightest spot in the Asian/Global market
so far today after yesterday’s holiday; it closed around 20299, up by
almost 1.86% to catch up the global market & closed above the 20k level
on weakness in Yen as *USDJPY* is now trading around 111.75 on hopes of
hawkish Fed tomorrow coupled with renewed optimism about US tax reform.
Also, a JP snap poll next month may have also increased the winning
probability of Abe, who may continue the QQE policy further in 2018,
negative for Yen. But Abe may also tinker with some idea of fiscal
stimulus and may also hike the JP sales tax from 8% to 10% to stimulate
inflation & growth. All eyes may be on the BOJ meet day after tomorrow
for any indication about backdoor QQE tapering.
JP market was today helped by insurers, mixed banks & financials on
higher US bond yields, exporters, automakers, techs (Nintendo), energies
but dragged by some glass makers (Asahi Glass).
*China (SSE)*closed around 3357, stumbled by almost 0.18% on recent
spate of mixed economic data coupled with some concerns of tighter
liquidity ahead of long seasonal holiday from 1^st Oct (Q3) and
quarterly health checks of commercial banks by PBOC. Almost all the
sectors has dragged the China market today except property stocks on
improving data.
PBOC today fixed the mid-point of *USDCNY* a little higher at 6.5530 vs
6.5419 yesterday and injected 150 bln Yuan to ease tighter China money
market ahead of advance corporate tax payments & holiday seasons. PBOC
is also planning next stage of economic/financial market liberalization
for China actively to attract more FPIS.
*Hong-Kong (HKG-33)*future is now trading around 28050, wobbled by
almost 0.30% on concern of stretched valuations of property developers
and general caution ahead of Fed tomorrow; some rate sensitive stocks
are dragging the market today.
Also, certain coal miners, China based property developers’ area
dragging the market after recent strength of Yuan. But Tech/IT shares
are helping the HK market today on auto related e-commerce platform
development. Overall Asia-Pacific markets are today consolidating in a
range for lack of any meaningful clues.
Meanwhile, *Crude Oil (WTI) *spot is trading around 50.20, up by almost
0.60% on optimistic demand/rebalancing forecast by IEA/OPEC, coupled
with some weekly decline in number of US oil rigs and less export by
Saudi Arabia and gradual resumption of US refineries in the Harvey
affected Texas area.
*EU Stocks Drop On Concern Of A Dovish Fed As A Strong EURUSD May Not Be
Good For EU Export Heavy Index:*
Elsewhere, *EU market* is trading almost flat at *Stoxx-600* with a
slight negative bias (-0.01%) ahead of Fed on concern of a dovish
Yellen, which is negative for USD and export heavy EU market. *DAX-30*
is down by around 0.10%, while *CAC-40* is up by almost 0.07% and
*FTSE-100* rallied by around 0.55%
FTSE is upbeat today on some pull back in GBPUSD after Carney sounds
less hawkish than expected yesterday coupled with a reported resignation
threat by Brexit minister Johnson over his differences with Theresa for
some Brexit deals differences over the huge divorce payment.
EU market is being dragged by Heineken today after 5.24% stake sell by
Mexico’s Femsa; but some super market stocks are helping the overall
market sentiment for optimistic outlook. Overall, consumer goods & basic
materials has declined, while energies & industrials are helping a bit.
USDJPY Flirting Around 111-112
<https://www.iforex.in/news/usdjpy-flirting-around-111-112-hopes-hawkish-fed-trumps-fiery-rhetoric-destroy-rocket-mans-nk-if-attacked-42083>
On Hopes Of A Hawkish Fed & Trump's Fiery Rhetoric To Destroy "Rocket
Man's NK, If Attacked"
<https://4.bp.blogspot.com/-zZM29NNyfYY/WcFjwdz5EiI/AAAAAAAANKQ/6guChZnTZNg79sZGqrgtpi-CNyfSadbKACLcBGAs/s1600/SGX-NF-PATTERN-19-09-2017.png>
SGX-NF
<https://3.bp.blogspot.com/-Dami1sfY6rY/WcFjyDhY5QI/AAAAAAAANKU/ux0FC1lBl-guqW4mfUyEFLuLyaytUDGWACLcBGAs/s1600/BNF-PATTERN-19-09-2017.png>
BNF
<https://2.bp.blogspot.com/-_rDPtSX-fz8/WcFj0pThBYI/AAAAAAAANKY/V4JX7ou-BIIOl5YeHDUR9CmUR76YX6E0ACLcBGAs/s1600/USDJPY-PATTERN-19-09-2017.png>
USDJPY
--
Thanks & Regards,
Asis Ghosh
--
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