*Market Wrap: 09/05/2017 (16:30)*
*NSE-NF (May): 9351 (+7 points; +0.07%)*
*NSE-BNF (May): 22765 (-21 points; -0.09%)*
*For 09/05/2017:*
*Key support for NF: 9305-9265*
*Key resistance for NF: 9400-9475*
*Key support for BNF: 22625-22500*
*Key resistance for BNF: 22875-22950*
*Time & Price action suggests that, Nifty Fut (May) has to sustain over
9425 area for further rally towards 9475-9510 & 9550-9600 in the short
term (under bullish case scenario).*
*On flip side, sustaining below 9405-9385 area, NF may fall towards
9305-9265 & 9215-9170 area in the short term (under bear case scenario).*
*Similarly, BNF has to sustain over 22875 area for further rally towards
22950-23075 & 23200-23475 area in the near term (under bullish case
scenario).*
*On the flip side, sustaining below 22825 area, BNF may fall towards
22625-22500 & 22400-22225 area in the near term (under bear case scenario).*
Nifty Fut (May) today closed around 9351, almost flat (+0.07%) after
making a session high of 9373 & low of 9332 in an extremely choppy day
of trading. Indian market today also opened almost flat following mixed
global cues. Overnight US market also closed almost flat; but in the
morning China & Hong Kong market rebounds from their key technical
support area after some days of intense selling. USD/US bond yields is
gaining strength as smart money may be again entering risk assets after
the emphatic win of Macron in the French election, which reduced the EU
political risks to a great extent; although there are still significant
uncertainty about hard or soft Brexit.
In addition to upbeat NFP job data on last Friday, USD may also got some
support from positive US employment index data yesterday; but tepid
trend of wage inflation/growth and subdued consumer spending may also
limit any significant USD (“risk on”) rally from here; *one may watch
113.50-114.50 zone in USDJPY for any decisive movement.*
USDJPY, which may be now acting as a proxy for “risk on” trade, got
further boost from hawkish scripts made by some Fed members and some
dovish comments from Kuroda (BOJ) today. Real wages from Japan was
reported as -0.8% against expectation of +0.5%. The decline in real
wages is lowest in the last two years and may also force the BOJ to keep
its accommodative policy (QQE) by another 2 years at least till core CPI
in Japan reaches 2% level. Thus, the growing divergent monetary policy
between Fed & BOJ is causing more USD strength, which in effect may be
also worrying Trump & Co for their desire for a weaker USD.
Metals are stable today after some intense selling for the last few days
on the back of China concern (regulatory tightening on leveraged
position of iron ore coupled with supply glut). For the time being it
seems that, Crude Oil has also taken the support of $45-43 zone amid
increasing OPEC jawboning about extension of production cut agreement by
another 6 months after June’17 and ongoing supply glut due to increasing
US shale oil production. Gold was under some pressure today due to
strength in USD & decrease of EU political risks.
EU market was also trading in a “risk on” mode and DAX reached its 12
month high as EU political risks may have decreased to a great extent
now, coupled with some upbeat economic data.
But Indian market today failed to capitalize the positive global
sentiment, may be due to profit booking in the cement & PSBS counters
(SBI/BOB) and Pharma scrips (US FDA concerns). After initial euphoria,
it seems that market is increasingly skeptical about the real
effectiveness of the NPA policy because it does not address the key
structural issues for creation of the stressed assets itself and it may
be another long drawn out process. Also, most of the fragile PSBS are
not adequately well capitalized to take large “waive off” (haircuts). As
par some reports, Indian Banks may require waiving off around Rs.2 tln
for settlement & quick resolution of the NPA, which is a significant amount.
Domestic market may be also under pressure today due to IMF’s cautious
tone about India’s growth potential in FY-18 & FY-19. IMF projected
India’s GDP as 7.2% & 7.9% in FY-18 & 19, slightly below their earlier
forecast due to DeMo related economic disruptions & spillover effect,
tepid private investments and issues of twin balance sheets (huge
banking NPA & stressed corporate balance sheets).
Incidentally, today Fitch also forecasted upbeat trend of global GDP
from 2.5% in 2016 to 2.9% in 2017 & 3.1% in 2018. As par Fitch US growth
may come little sluggish, but China & Japan may contribute better.
There were also some reports of Govt’s proposal to increase PSBS
weightage in its forthcoming CPSE ETF. As par reports, the new CPSE ETF
may include top PSBS like SBI, PNB & BOB, while Govt may dilute its
stake of L&T, ITC & Axis Bank (SUUTI) by including these in the new CPSE
ETF. Inclusion in CPSE ETF may also dilute Govt’s stake in the above
three PSBS (SBI/PNB/BOB). Also, SBI is planning to raise more equity
capital and this may also affect its EPS (EQ dilution). All these may
have caused some selling/long unwinding in these scrips after recent
steep rally.
Indian market today was supported by capital goods (L&T), metals
(Hindalco, Tata Steel) and some IT counters on USD strength (Wipro, HCL
Tech, TECH-M, Infy).
Overall, although mixed Q4 report cards, ongoing incremental reforms by
the Govt, political stability and above all, robust domestic inflows is
now supporting the Indian market, there may be some lack of conviction
at such higher levels of the market, considering stretched valuations
and continuous FII selling for the last few weeks (China concern ??).
Market may be waiting for some definitive clues for its next movement
after the current phase of consolidation.
*Technically, Nifty need to sustain over 9425 area for the short term
target of 9500-9550 area and mid-term target of 9865-10100 zone by
FY-18; otherwise market may correct to some extent towards 9000-8470
area in the coming months. Earnings (EPS) need to catch up with the
rapid expansion of the valuation multiple (PE).*
<https://4.bp.blogspot.com/-qK77v18seVU/WRHQp6T-7SI/AAAAAAAALok/3bfVnoZkGBAj_HsrLyafl92pqdjjzp_EQCLcB/s1600/SGX-NF-PATTERN-09-05-2017.png>
SGX-NF
<https://1.bp.blogspot.com/-uuLVm_BH9HA/WRHQrxUOdcI/AAAAAAAALoo/zsDA1ySJAIwMHKLXps5Ag-P_WeupcFhAwCLcB/s1600/BNF-PATTERN-09-05-2017.png>
BNF *
*
Article c ourtesy: frontiza.com
<https://1.bp.blogspot.com/-imnMPF7_4Ns/WRHRy9EcBJI/AAAAAAAALo0/ySRrs5CPdnA2YCtUBrgEXAuwFZRXuWmDgCLcB/s1600/Frontiza-Logo.png>
--
Thanks & Regards,
Asis Ghosh
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