Nifty closed the GST week almost 1.5% higher on smooth roll out and
earnings recovery optimism for the PSBS; what’s next?
Market Wrap: 07/07/2017 (17:00)
NSE-NF (July): 9668 (-5; -0.05%) (TTM PE: 24.47; Near 2 SD of 25; Avg
PE: 18; TTM EPS: 395; NS: 9666)
NSE-BNF (July): 23460 (-21; -0.09%) (TTM PE: 29.50; Near 3 SD of 30; Avg
PE: 20 TTM EPS: 795; BNS: 23449)
For 10/07/2017:
*Key support for NF: 9615-9580*
*Key resistance for NF: 9725-9775*
*Key support for BNF: 23300-23100*
*Key resistance for BNF: 23575-23800*
*Time & Price action suggests that, NF has to sustain over 9725 area for
further rally towards 9775-9835 & 9875-9915 in the short term (under
bullish case scenario).*
*On the flip side, sustaining below 9705-9675 area, NF may fall towards
9615-9580 & 9535-9485 & area in the short term (under bear case scenario).*
*Similarly, BNF has to sustain over 23575 area for further rally towards
23650-23800 & 23900-24050 area in the near term (under bullish case
scenario).*
*On the flip side, sustaining below 23525-23400 area, BNF may fall
towards 23300-23100 & 23000-22800 area in the near term (under bear case
scenario).*
Nifty Fut (July) today closed around 9668, almost flat (-0.06%) after
making a day high of 9682 and opening session low of 9644.Nifty Fut
(July) today opened around 9654, almost 13 points down following tepid
global cues even after panic buying of JGB bonds by BOJ at 0.11% yield
in a desperate attempt to keep the JGB yield lower around 0.00% in its
effort under YCC, after ECB minutes yesterday shows about hints of QE
tapering, which resulted in a global bond rout and slump of global stock
market; Era of easy money may be over!!
Overnight US market (DJ-30) also closed lower (-0.74%) tracking global
chorus of QT and subdued US economic data (ADP pay roll /ISM-Non MFG
PMI) coupled with plunge in tech shares; but supported by banks &
financials to some extent in a story of sector rotation on prospect of
higher interest rate regime.
After opening lower, Indian market made a smart recovery shrugging off
the worries of global central bank tightening amid GST optimism and
supported by Pharma due to series of approvals of some key drugs
molecule by US FDA recently and bargain hunting after recent sell-off.
FMCG counters were also in the limelight with some PSBS due to buzz of
further consolidation in the Indian Public Sector Banks space (PSBS);
but private banks & auto stocks were in pressure.
Indian market yesterday also got some support from the FMO comment that
despite farm loan waivers, states will be not allowed to deviate from
their path of fiscal discipline; i.e. they may not be permitted to
borrow more than their scheduled limit this year.
Although, this may be great step in the right direction, various states
may be also facing severe revenue crunch after GST kicks in and they
lost various other avenues of revenue collections. Some of the states
which are waiving off farm loans may be also under significant stress
and even resorting to austerity and we may see huge fall in Govt capex
in those states.
Today, Indian market faced some sharp selling in the last half an hour
of trade after Govt warned that Manufacturers may go to Jail if they
failed to reprint the revised MRP on the old stocks after GST. Also,
logistics (Trucks) may be facing some disruptions for the e-way bill issues.
PSBS were also came under huge selling pressure in the closing session
after FMO indicated that Govt may not be able to provide additional
capitalization for them in excess of FY-18 budget estimate and they have
to arrange for their own capitals from the market and by deleveraging
various available non-core assets.
Most of the PSBS and also some Private Banks may require additional
capital in excess of Rs.25000 cr by FY-18 for requirement of regulatory
provisions in the IBC NPA cases as directed by the RBI.
Looking ahead, Indian market may focus on global chorus Of QT
(Quantitative Tightening), further development of GST implementation
despite an apparent smooth roll out so far. Also, all eyes may be on the
Q1FY18 earnings trajectory, which is expected to be again subdued this
time, NPA resolution & progress of monsoon, which is so far above 5% LPA
and may be good for the rural economy.
Technically, Nifty-Fut (July) may be now facing good hurdles around 9725
area with immediate support placed around 9615-9580 zone. Indian market
may be also under some stress as EM may be vulnerable to global
bandwagon of QT in the days ahead.
Today Nifty was supported by RIL (telecom & earnings optimism despite
concern about elevated capex), Lupin/Auro Pharma/DRL (bargain hunting &
defensive bet/sector rotation amid concern of QT), LT, HUL & Bharti
Airtel ( buzz of consolidation/JV with Tatacomm) and some Private Banks
(Yes/Kotak/Indusind)
Nifty was dragged by HDFC, ICICI, Axis Bank, ITC, INFY & TCS; overall
only 18 scrips in Nifty were in green today out of 51 stocks.
*Asia-Pacific market update:*
Elsewhere, Australian stocks (ASX-200) were closed in deep red around
(-0.80%) on concern of iron ore prices slump coupled with banking
worries; recently both AU Federal & State Govt has imposed some
regulatory taxes on various big AU banks.
Japan (Nikkei-225) was also closed lower (-0.32%) despite lower Yen
after BOJ intervention today in the bond (JGB) market. Global surge in
bond yields yesterday after ECB minutes revelation about their intention
for QE tapering, although with caveats of satisfactory inflation may be
responsible for slump in equities and Japan may not be an exception of
that also.
China (SSE) closed almost flat but off the day low; earlier it was
dragged by sell-off in some large cap stocks on concern over a
deleveraging related liquidity crunch amid ongoing tightening effort by
PBOC.
*European market update:*
European stocks were also opened subdued amid QT concern; but calm in
bond market after BOJ jawboning about purchase of JGB bonds at fixed
rate in an unlimited way has sent the JGB yields lower around 0.08% from
0.10% and thus EU stocks has also recovered to some extent. Today
utilities sector is supporting the EU market with some M&A news.
Also, upbeat US NFP job data is supporting the SPX-500 Fut and global
markets at this point of time despite subdued wage growth; EU market
also getting some support from recovery in global market sentiment after
US job data.
FTSE also staged some recovery after tepid UK economic data and
subsequent plunge in GDP, which is helpful for Britain’s export; it’s
now trading around 0.20% higher.
*US market update:*
Today’s much awaited US NFP job data may be termed as mixed; although
headline NFP number beats the market estimate by a mile, wage growth is
below market expectation and may be also subdued as far as wage
inflation is concerned.
US NFP (June): 222K ; EST: 179K; Prior: 159K-R
Average hourly earnings (MOM-June): 0.2%; EST: 0.3%; PRIOR: 0.1% -R
Average hourly earnings (YOY-June): 2.5%; EST: 2.6%; PRIOR: 2.4%-R
Unemployment rate: 4.4%; EST: 4.3%; PRIOR: 4.3%
Participation rate: 62.8%; PRIOR: 62.7%
Overall, at a glance headline NFP may be great; but US wage inflation
may be still elusive; also the fine prints of the NFP reveals that
quality of jobs and payments may not be good and number of part time
workers has also increased.
Market may not be now interested about NFP numbers, but more concerned
about US wage growth, which will ultimately fuel the US consumption and
subsequent inflation and in turn will also force Fed for further
normalization of its monetary policy.
But this mixed NFP report today may not prevent Fed for another rate
hike in Dec’17 and B/S tapering from Sep’17, as the root cause of the
tepid US wage growth may be structural, which a loose monetary policy
can’t rectify alone; it may require some structural/fiscal reform also.
Another point may be with June NFP, average headline number for the last
six months (Jan-June”17) is around 180K (179.83) against sequential
(Jul’16-Dec’16) number of around 193K (103.17); so not much fall
sequentially for the last six months considering US demographics &
saturation factor and structural changes in labour market such as
automation.
Still, US economy is producing around 186.5K jobs per month on an
average for the last 12 months with an average wage growth of 2.5% (YOY)
and that is not bad considering the trajectory of US inflation & GDP growth.
Fed may be on schedule for its path of QT, with B/S tapering from Sep’17
together with another rate hike in Dec’17 for its goal of monetary
policy normalization in order to prepare itself for next economic crisis
and ECB/BOJ may have to also follow Fed’s QT tune.
Meanwhile, USDJPY is blasting through 114 level towards the hurdle of
114.45 and Gold is further plummeting below 1210 towards the zone of
1195-1185; days of easy money may be over. Trump is again proved as
correct for his “blockbuster” forecast of US NFP after the GDP, although
it may also be pure coincident.
*<https://1.bp.blogspot.com/-t_TRSeFcFc4/WV-1WoUf_UI/AAAAAAAAMS4/eEmX2JWTZUcDC0XnJ1UCojLoFM4khG0bQCLcBGAs/s1600/SGX-NF-PATTERN-07-07-2017.png>*
***
SGX-NF*
**
*
*
*<https://3.bp.blogspot.com/-U1QhHZH6svc/WV-1bPKOoNI/AAAAAAAAMS8/O3SK2-gCkkoEFaFNOaHAl-XzCnYtGNBowCLcBGAs/s1600/BNF-PATTERN-07-07-2017.png>*
*****
BNF*
**
*
<https://4.bp.blogspot.com/-0PojuqIj1kQ/WV-1eTL1INI/AAAAAAAAMTA/hOvvkpSl0EAf-iSpI9R6rOSC04dGn2PFQCLcBGAs/s1600/USDJPY-PATTERN-07-07-2017.png>
*
*USDJPY*
*For consultation & advisory (paid mode):
*
https://t.me/joinchat/EGOLCEReY2eYFuFuWIJ7IQ
--
Thanks & Regards,
Asis Ghosh
--
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