*Nifty Closed The Week Almost 3.6% Lower, The First Weekly Loss In The
Last 6 Weeks Dragged By SEBI “Shelling”*
Market Wrap: 11/08/2017 (17:00)
NSE-NF (Aug):9738 (-117; -1.19%) (TTM PE: 24.58; Nr. 2 SD of 25; Avg PE:
20; TTM EPS: 395; NS: 9711)
NSE-BNF (Aug):24080 (-226; -0.93%) (TTM PE: 30.17; Abv 3 SD of 30; Avg
PE: 20 TTM EPS: 795; BNS: 23986)
For 14/08/2017:
*Key support for NF: 9695/9665-9605*
*Key resistance for NF: 9780-9830*
*Key support for BNF: 23800-23600*
*Key resistance for BNF: 24250-24450*
*Hints for positional trading:*
*Time & Price action suggests that, NF has to sustain over 9830 area for
further rally towards 9895-9950 & 10020-10065 area in the short term
(under bullish case scenario).*
*On the flip side, sustaining below 9800-9780 area, NF may fall towards
9695/9665-9605 & 9560-9525 area in the short term (under bear case
scenario).*
*Similarly, BNF has to sustain over 24300 area for further rally towards
24450-24550 & 24700-24900 area in the near term (under bullish case
scenario).*
*On the flip side, sustaining below 24250-24150 area, BNF may fall
towards 24090-23800 & 23600-23300 area in the near term (under bear case
scenario).*
Nifty Fut (Aug)/India-50 today closed around 9738, slumped by another
117 points (-1.19%) after making an opening session high of 9800 and
late day low of 9710, tracking geo-political tensions from NK to Doklam
and terrible report card by SBI as both corporate & retail/SME NPA
surges significantly despite ongoing RBI/IBC efforts to crack down on
stressed assets.
Indian market (Nifty Fut-Aug/India-50) today opened around 9777, down by
almost 100 points tracking subdued global cues amid intensifying “war of
words” & game of chicken between Trump & Kim. Trump further escalated
the war-mongering mood this morning by tweeting that “military solutions
are now fully in place, locked & loaded, should North Korea act unwisely”.
Among all these simmering NK geo-political tensions, Indian market today
is closed in deep red after making an early recovery to 9800 amid
lingering geo-political tensions from NK to Doklam, coupled with concern
of stretched valuations due to muted/mixed Q1 earnings and SEBI “Shelling”.
Today all eyes were also on SBI report card, the largest lender of the
country to gauze the underlying trend of corporate/SME/retail NPA. But
it disappointed in every asset quality front miserably and thus market
succumbed further as it is no longer interested in absolute profit
figure of the bank, which is a function of provisions at these days.
Indian market sentiment was further affected today after Govt basically
downgraded its GDP estimate, but kept the headline CPI projection around
4% in its semiannual economic survey on strength of INR, challenge of
farm loan waivers & an effective implementation of GST.
This was further confirmed later in the day today after IIP plunged in
June at (-) 0.1% against estimate of 0.6% (prior: 1.7%). Indian IIP
turns negative for the 1^st time in last two years and may be also an
indication of deflationary trend in the economy after an average IIP of
around 3% in the last few months (IIP was 2.8% in May); but it may be
also due to pre-GST disruptions.
Market was also under severe pressure today after some reports indicate
that there are serious allegations of money laundering and cooking of
accounts against some of the well known suspected “Shell cos”
originating from 2009-11 in relation to PACL scam and coal block
allocation issues; SIFO, ED, IT, CBI are all investigating the matters.
Technically, Nifty Fut (Aug) now has to sustain over 9695/65 area;
otherwise the zone of 9605-9560 may come soon; for any bounce back, it
has to sustain over 9830 area for 9895-9950 zone in the coming days.
Nifty was today supported by Pharma (DRL, Auro Pharma, Lupin), IT (INFY,
Wipro), OMC/Oil & Gas (BPCL, Gail) and Axis & Yes Bank.
Nifty was dragged by RIL, Metals (Hindalco-subdued report card), SBI
(worsening asset quality), BOB, Sun Pharma, ONGC etc; most importantly
report card from some other PSBS were also very tepid on asset quality
fronts. Overall, 36 scrips out of Nifty 51 has closed in moderate to
deep red today.
*EU market*was also under pressure tracking NK tensions and higher EUR &
mixed earnings; so far Trump’s “Fire & Fury” comments may have caused
global equities to lose around $1 tln in the market capitalization in
the last few days; politics now have a bigger role than economics!!
EURO Stoxx-50 is now trading around 3415, down by almost 0.53% and more
over fell by almost 2.7% so far for the week, the largest weekly decline
since Nov’16, the US presidential election time.
DAX-30 is now trading around 12000, almost flat for the day after making
a low of 11927 so far and flirting with the 200-DEMA of around 11900
zone. Similarly, FTSE & CAC are down by around 0.80%, trying to cover
some shorts ahead of the weekend.
Indian market (Nifty Fut-Aug) today opened around 9777, down by almost
100 points tracking subdued global cues amid simmering NK-US tensions
and China-India border standoff at Doklam; almost all the major Asian
markets are in stress today as yesterday, Trump renewed his NK rhetoric
again by commenting that his previous “Fire & Fury” reference may not be
enough for Kim and NK must get their act together; otherwise things will
happen to them, they never thought possible.
In the process, Trump also vowed to increase the US defense budget by
billions of dollars in an attempt for increased fiscal spending for the
US economy!! But, his defense secretary preferred to take more
diplomatic approach to tackle this NK issues, stressing that tragedy of
a war well known and that a military conflict could be catastrophic.
NK, on the other side vows to mercilessly wipe out the provocateurs
(Trump), saying that US will suffer a shameful defeat!!
Among all these war-mongering & game of chicken between Trump & Kim,
China’s stand may be neutral if NK first attacks US military base and
US/SK retaliates; but if US & SK carry out any pre-emptive strikes
against NK to overthrow Kim and try to change the current geo-political
pattern of the Korean peninsula, China may not be a silent spectator and
will prevent them from doing so; ultimately China may not like a large
US military presence in its border/sea area.
Thus, all these lingering NK-US geo-political tensions coupled with
terrible US PPI data yesterday and some dovish script from Fed’s Dudley
is making the USDJPY lower and it plunged below the 109 mark ahead of
crucial US CPI data today; appeal of safe heavens of Yen, EUR, Gold has
made the risk trade off and moreover a surging EUR is negative for the
global stocks in addition of strong Yen and other export heavy Asian
currencies.
From the overall NK narratives so far, it seems that Trump may keep his
“Fire & Fury” momentum for some more days as it’s very helpful to keep
the USD down to make his dream of “America Great Again” and also to
divert attention of the core issues of US economy & his failure to
pursue legislative agenda like Trumpcare & US debt ceiling issues in
addition of poor visibility of Trumponomics rhetoric (US tax reform &
fiscal spending).
Overnight, US market (DJ-30) also closed lower around 0.93% down
tracking NK tension flare up, terrible US economic data, lower USD and
slump in FANG/Tech stocks coupled with some muted earnings. At a glance,
SPX-500, which is now trading around 2435 has immediate support of 2420
and sustaining below that 2400 area may be clearly visible as of now.
Indian market may be in further stress from the ongoing China-India
border stand-off at Doklam, which may take serious turn as some complex
geo-political issues and business interest of China is involved there
(CEPC-OBOR road connectivity), much to the dislike of India.
Apart from further SEBI “Shelling” and concern of muted/mixed Q1
earnings & stretched valuations, RBI’s dividend to the Govt of around
Rs.30656 cr vs expectations of around 1 lakh cr (DeMo profit?) and prior
figure of around Rs.65800 cr may be very disappointing and may also
cause a big fiscal hole despite upbeat indirect tax collections and
improved tax/GDP ratio as a fall out of DeMo.
Overall, keeping in view the May’2019 general election theme, Govt may
continue its war on black money/corruption narrative by digging more on
Shell cos, which may be a perfect vehicle for money laundering and also
by linking every financial transaction with UID & GST.
Govt may be extremely right in its approach to fight corruption
ethically & morally, but it may not be good for the overall Indian
market & economy structure. But again, today’s pain may be tomorrow’s
gain; for the time being margin funding issues because of “Shelled cos”
may be turning into a serious headwind, especially for the HNI & heavily
leveraged retail investors/traders.
Indian Govt today tabled its mid-term economic survey (Part-II), in
which it has basically blamed the RBI for inaccurate forecast of CPI by
above 1% for the last 6 quarters out of 14 and predicted a headline CPI
below 4% by March’18 and also slightly downgraded the FY-18 GDP forecast
at 6.75-7.5%; i.e. Govt may be expecting an average GDP of around 7% in
FY-18, but it may be quite tough to achieve that.
Govt also pointed out at deflationary forces weighing on the economy and
current RBI repo rate is at least 0.25-0.75% above the neutral rate
assuming an average headline CPI of 3.5% +1.5% neutral rate; i.e. RBI
repo rate should be around 5%, whereas it’s now at 6%. As par the Govt,
current spree of farm loan waivers by various states may also cut
economy demand up to 0.7% of GDP.
Although, loan growth by the private banks may be robust, PSBS are
taking more calibrated approach to contain NPA from old landings rather
than adding more fresh loans; i.e. one can expect subdued credit growth
from the PSBS in the coming days.
From the overall version of the economic survey, it seems that Govt may
continue to bat for more RBI rate cuts to make India into an low cost
interest economy, where high RRI may be a legacy issue and also
responsible for today’s NPA mess. But, high deposit rate on small
savings & Indian high bond yields may be some of the real issues;
Govt/RBI has to face to cut rate drastically in the coming days.
Also, in reality, the present ultra low CPI of around 1.55% may be a
function of favourable base effect and sudden plunge in food inflation,
which may be also transitory. The adverse effect of farm loan waivers in
the economy may be also due to extreme political populism stance taken
by the ruling party (BJP) in the UP election to counter the adverse
effect of DeMo.
Thus, Indian market sentiment was further affected today after Govt
basically downgraded its GDP estimate, but kept the headline CPI
projection around 4%.
Elsewhere, *Australia (ASX-200)* is closed around 5693, down by almost
1.90% on simmering NK tensions after Trump escalated further “war of
words” despite some fall in AUDUSD; banks & financials,
metals/commodities/miners are all dragging the AU market today. Some RBA
jawboning also helped the AUDUSD to go lower to some extent today.
Although *Japan (Nikkei-225)* is closed today for a holiday, Nikkei-Fut
is trading in deep red around 19400 on lingering NK tensions & higher
Yen on safe heaven appeals; so far it made a low of around 19295; spot
was closed around 19730 yesterday.
*China (SSE)*is also in deep red around 3209 (-1.63%) mirroring NK
geo-political tensions and a strong Yuan as PBOC fixed USDCNY at 6.6642
vs 6.6770, the strongest since Sep’16 with neutral money market stance;
but for the current week, PBOC drained net 30 bln Yuan vs 40 bln last
week its ongoing effort to deleverage the Chinese economy and credit
fuelled growth. China Govt concern on soaring metal prices may be also
affecting the overall market sentiment.
*Hong-Kong (HKG-33)*is also trading in deep negative today around 26930
(-1.90%) following Trump’s rhetoric that NK should be very very nervous,
even if it did anything in term of thinking of an attack; it’s being
also affected by mixed/muted earnings from some of the pivotals and some
news of China clampdown on some internet firms on ground of
anti-national security contents; tech shares are also in pressure.
*SK stocks (Kospi-200)*today fell around 1.70% on NK concerns and sell
off in major tech & retail stocks, including Samsung.
*Oil (WTI)*also plunged to 48.25 today from yesterday’s high of 50.20
level on concern of Russian production surge coupled with ongoing
squabbling about Libya-Nigeria production and increased export supply by
Saudi Arabia. Also, report of subdued China demand for Crude may be
affecting the morale of Oil bulls today.
*Gold*is trading almost flat around 1287, after hitting a multi month
high of around 1289 earlier today on safe heaven demands.
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SGX-NF
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BNF
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USDJPY
--
Thanks & Regards,
Asis Ghosh
--
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