Market Wrap
<https://www.iforex.in/news/nifty-dropped-simmering-nk-tensions-coupled-fresh-concern-govts-war-black-moneyshell-cos-41425>:
06/09/2017 (17:00)
NSE-NF (Sep):9944 (-28; -0.28%)
(TTM PE: 25.82; Nr. 2-SD of 25; TTM Q1FY18 EPS: 384; NS: 9916; Avg PE:
20; Proj FY-18 EPS: 418; Proj Fair Value: 8360)
NSE-BNF (Sep):24316 (-72; -0.30%)
(TTM PE: 27.88; Abv 2-SD of 25; TTM Q1FY18 EPS: 887; BNS: 24729; Avg PE:
20; Proj FY-18 EPS: 961; Proj Fair Value: 19220)
For 07/09/2017:
*Key support for NF: 9875-9820*
*Key resistance for NF: 10000-10050*
*Key support for BNF: 24200-24000*
*Key resistance for BNF: 24525-24675*
*Hints for positional trading:*
*Time & Price action suggests that, NF has to sustain over 10000 area
for further rally towards 10050-10090 & 10160-10205 area in the short
term (under bullish case scenario).*
*On the flip side, sustaining below 9980 area, NF may fall towards
9940-9875 & 9820-9745 area in the short term (under bear case scenario).*
*Similarly, BNF has to sustain over 24525 area for further rally towards
24575-24675 & 24775-24875 area in the near term (under bullish case
scenario).*
*On the flip side, sustaining below 24475-24400 area, BNF may fall
towards 24300/24200-24000 & 23850-23700 area in the near term (under
bear case scenario).*
*Indian market*(Nifty Fut/India-50) today closed around 9944, dragged by
almost 28 points (-0.28%) after making an opening session low of 9910
and late day high of 9955. Indian market today opened in deep red around
9926, almost 49 points down following muted global/Asian cues amid
simmering NK tensions; but recovered to some extent tracking similar
movement in DAX-30 future (EU opening) ahead of ECB meet tomorrow and
made the day high.
But market again came into pressure in the last 15 mins of trade amid
some erroneous buzz of fresh nuke “earth quake” in NK and lost around 20
odd points from the day high. Also, fresh concern of Govt’s war on black
money/shell cos and reported direction by the PMO to the IT dept to
investigate into the DeMo money slashed in various bank accounts may
have affected the overall market sentiment today.
Apart from this, yesterday’s adverse SC verdict on the Jaypee Infratech
NCLT/IBC issues may be also a jolt on the overall NPA resolution process
and may have affected the market today; in any way, even if a stressed
co goes to the NCLT way, there are two options; i.e. actual resolution
(repayment/change in management/ownership) or liquidation.
Both the Govt & banks are now preferring the resolution process rather
than liquidation. But viability issues of most of the stressed assets
may be a huge challenge for the banks for a meaningful resolution, even
with a large hair cut. Market regulator, SEBI is also very concerned
about India’s legacy issues of twin BS and called for a meaningful
resolution at the earliest; this may be one of the black spots in India
story of “bright spots” amongst the major economies.
As par some reports, RBI may also ask the banks to deduct provision
short fall from capital. So far, standard provisions for NPA as
prescribed by the RBI may be around 70-75%, whereas most of the banks
are showing 50-60% provisions in their P/L A/C; thus this new RBI
direction may be also bad for the banks, especially for the ailing PSBS
and the overall NPA issues may be also dragging the market despite
intense resolution effort by the Govt/RBI/Banks.
Nifty was today supported by RIL, HDFC, IBULLSHSGFIN, HDFC Bank, Kotak
Bank, Yes Bank, Ultratech Cem & Hindalco (total positive contribution by
around 18 points).
Nifty was dragged by ITC, TCS, Axis Bank, Bosch, IOC, Sun Pharma, ICICI
Bank, Tata Motors, Infy & LT (total negative contribution by around 45
points).
Nifty was most dragged by ITC (-2.53%) after news of drastic fall
cigarette sales volume post GST coupled with spate of downgrade by some
analysts. Sun Pharma was also dragged by 3.63% after similar downgrade
due to its US based business skepticism, skepticism over Ranbaxy synergy
and lack of blockbuster products pipeline.
Infy was under renewed pressure (-0.7%) after reports of delaying Q2
report card to 24^th Oct, the first time in its history; apart from this
there was also report of heavy participation by its promoter in the
buyback offer by the co.
RIL today supported the Nifty most (+0.78%) ahead of bonus closing
record date tomorrow and favourable IUC charge recommendation by the IMG
coupled with R-Jio & GRM optimism. Kotak bank was also in the limelight
after analysts upgrade on hopes of strong growth across the verticals.
RIL has also acquired a Gujarat based co (Kemrock Ind), which was put up
for sale by its lenders for default on loans; this acquisition may help
RIL to foray into a new business of composites & carbon fibre, used in
various applications & industries, such as RE, mass transportation,
infra etc; positive for RIL’s petchem business portfolio.
Overall, Oil & gas (energies), Cements (price increase), NBFC, metals
has supported the market, while FMCG, IT, health care and PSBS dragged
the same.
*Globally*, almost all the Asia-Pacific markets except China were in
deep to moderate red tracking muted global cues on simmering NK tensions
& overnight plunge in USD/USTSY yields; 10YUSTSY yields plummeted to
almost 2% yesterday NY session, causing similar risk-off sentiment in
USD & Equities; USDJPY also slumped to almost 108.47, resulting in
another fresh wave of risk aversion movement across the asset classes. A
weak USD is bad for Asian export heavy stock market.
The reasons for such USD risk aversion movement may be various ranging
from NK jitters to dovish Fed talks & US policy paralysis. There was
renewed talk of NK ICBM/Nuke tensions as NK is supposed to test another
nuke enabled ICBM with higher payloads later this week around its
foundation day (9^th Sep) amid fresh round of “war of words” between NK
& US.
Yesterday NK ambassador at UN commented that the recent self-defence
measures (tests) are a “gift package” for the US and US will receive
more such gift packages from NK as long as US relies on reckless
provocation and futile attempts to put pressure on NK.
In response, Trump approved selling of highly sophisticated US military
equipments to both SK & JP to “counter growing threat” from NK, thus
contributing more on the escalated geo-political tensions. As par US
defence analysts, NK may have now 60 Nukes!!
But US defence industry may be the most beneficiary out of this legacy
tension of NK, which is running now for almost 25 years!! It seems that
NK tension is also good for SK & JP fiscal stimulus narrative apart from
US, as both the countries has increased their defence spending
significantly to “counter NK”.
Although, the new SK Prez is trying his best to resolve this NK tensions
through diplomatic negotiations and is taking the help of Russia
(Putin), it seems that Trump is unhappy about this aspect too!! As par
Putin, NK will not abandon its right of self-defence (Nuke), unless it
get guarantee of a no US attack in its soil.
USD also got some jolt from dovish scripts by two known Fed doves
yesterday & Kaplan today and market may be also concerned about long
list of US legislative agenda in Sep-Oct; considering the present state
of US political jitters & policy paralysis, market may be concerned that
timely extension of US debt limit may be an issue and there may be even
some types of US shut down drama, which may strip the coveted US
sovereign ratings. Trump’s approval rating graph (popularity) may be
also proportional to the graph of USTSY yields!!
Another factor may be that the Norwegian sovereign fund, which has
recently expressed its desire to abandon the EM bond market due to lack
of appropriate (sufficient) liquidity & some other risks and has also
expressed more interest in DM bond market like US & EU, which has not
such type of risk. Thus, talk of Norwegian sovereign fund buying or plan
to buy more 10YUSTSY, resulting in steep falls of yields.
*Overnight US market*also closed in deep red; DJ-30 was down by almost
1.07%, while S&P-500 was dragged by around 0.76% to close at 2458 and
NASDAQ was in 0.93% red; fresh concern of another strong Cyclone IRMA
may have also affected the overall US market sentiment yesterday after
recent huge damage caused by Harvey. US market was dragged by banks &
financials most yesterday on falling US bond yields, negative for the
NIM of banks.
*US stock future (SPX-500)*is now trading around 2459, almost flat
(-0.07%) ahead of ECB meet & Draghi presser tomorrow; if Draghi sounds
less dovish than market is expecting, then expect some rally in EUR,
which may not be good for the EU/global stocks.
Elsewhere, *Australia (ASX-200)* closed around 5690, down by almost
0.30% dragged by big four AU banks & financials on declining US bond
yields & metals, IT while being supported to some extent by a lower
*AUDUSD*, gold miners & energies; metals are largely lower today. AUDUSD
dropped today after subdued AU GDP data for Q2, which flashed as 1.8%
(YOY) against estimate of 1.9%; prior: 1.7%; on MOM basis it came as
0.8% vs 0.9% (EST) & 0.3% (Q1).
*Japan (Nikkei-225)*was closed around 19358, edged down by 0.14% on
Korean tensions, but well off the day low of 19255 on some early Asian
session recovery in USD; but overall strong Yen is hurting the JP market
sentiment along with mixed M&A news & index rejig. Recently, FIIS are
selling JP stocks quite heavily on NK geo-political risks and even BOJ
ETF purchase is not able to counter that FII selling.
*USDJPY*was hovering around 108.55 and dangerously looking to the 108
support zone. JP market is also being dragged by banks & financials as
probabilities of a rise in US rates are now virtually nil in Dec’17 and
Fed BS tapering may be also an extremely gradual “auto-pilot” process,
spanning over 10 years or so. Thus USTSY yields are also lower affecting
the banks. JP wage data also came subdued today on tepid summer bonus
payment.
*China (SSE)*was closed around 3385, almost flat (+0.03%), so far
unfazed by NK tensions; a strong Chinese Yuan against USD because of
PBOC tightening may be also good for China banks on better margin/NIM
perception. Yuan is also now regarding as a safe haven currency in times
of geo-political crisis (like Yen, CHF or even EUR).
Today China market was dragged by real estate, financials, metals, while
gold miners helped it to some extent. PBOC today fixed USDCNY slightly
lower at 6.5311 vs 6.5370 yesterday with net drain of 120 bln Yuan by
OMO. As par some reports, close to China policy makers, PBOC may
continue to strengthen Yuan against USD because of relatively strong
resilience of Chinese economy coupled with country’s neutral & prudent
monetary policy.
*Hong-Kong (HKG-33)*was also trading in deep red around 27505, down by
almost 0.50%, after recovering to some extent from the day low of 27400
made so far; HK market today is also being dragged by general NK
tensions (unlike China) and banks & financials on lower US bond yields;
if US bank rates are low, then their global counterparts’ rate may be in
pressure, thus affecting the overall operating margin/NIM.
Meanwhile, *Crude Oil (WTI)* was trading around 48.77, slightly edged up
(+0.16%) on fresh concerns of IRMA cyclone in US and optimism over
resumption of refineries in the Harvey affected area; sentiment of oil
bulls may be also boosted by the Russian oil minister jawboning that
they may consider oil production cut agreement extension, if oil
continues to fall and the overall demand/supply is in imbalance;
technically the next resistance may be around 49.25 for WTI.
Elsewhere, *EU market* is trading mixed; while DAX-30 is up by almost
1%, FTSE-100 is in negative by 0.40% and CAC-40 is in green by almost
0.30%; overall Stoxx-50 is up by around 0.45%.
EU market today was being dragged by the ongoing “games of chickens
between NK & US” and also the looming US hurricane Irma as insurance cos
are in heavy loss besides banks & financials and industrials. Banks are
under pressure for fall in USTSY yields, which is negative for their
NIM/EBITDA. But techs are helping the EU market by some extent today
apart from some drops in EUR after subdued German factory data, although
German FMO is quite optimistic about level of total orders.
Also, lack of consensus between US, China & Russia over the NK issue may
have dampened the overall global & also EU market sentiment. A positive
GBPUSD coupled with weakness in banks & financials, insurers, home
builders and ongoing Brexit uncertainties may have caused the FTSE to
trade in moderate red today. DAX-30 is boosted by news of Merck
deleveraging.
You may be also interested in:
Asian Stocks Slide Amid Muted Global Cues
<https://www.iforex.in/news/asian-stocks-slide-amid-muted-global-cues-tracking-plunge-usd-offer-more-gift-packages-us-nk-41381>
Tracking Plunge In USD & Offer Of More "Gift Packages" To US By NK
USDCAD Plunging Towards 1.20
<https://www.iforex.in/news/usdcad-plunging-towards-120-after-surprise-rate-hike-boc-sudden-resignation-fischer-fed-vc-41433>
After Surprise Rate Hike By BOC & Sudden Resignation Of Fischer (Fed VC)
<https://2.bp.blogspot.com/-Eg4I94o1bvE/WbA-eZz9A8I/AAAAAAAAM_0/F11wvoTDx1YTUYYEgIVhPtacEYklm1YcQCLcBGAs/s1600/SGX-NF-PATTERN-06-09-2017.png>
SGX-NF
<https://1.bp.blogspot.com/-PGVgwfCy_K8/WbA-g_lWdeI/AAAAAAAAM_4/9Z_d1KKxz4QmWd6KiPQpFWjf_aDspSGsACLcBGAs/s1600/BNF-PATTERN-06-09-2017.png>
BNF
<https://2.bp.blogspot.com/-n4hc1iR2EBg/WbA-krZpJtI/AAAAAAAAM_8/gbdLHHWWiwwmUUliXIUGNBwZG56_a1-fQCLcBGAs/s1600/USDCAD-PATTERN-06-09-2017.png>
USDCAD
--
Thanks & Regards,
Asis Ghosh
(asisghosh.blogspot.in)
twitter.com/asisiifl
--
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