Market Wrap
<https://www.iforex.in/news/nifty-soared-another-079-closed-five-months-high-korean-irma-relief-rally-41715>:
12/09/2017 (17:00)
NSE-NF (Sep):10105 (+79; +0.79%)
(TTM PE: 26.28; Abv 2-SD of 25; TTM Q1FY18 EPS: 384; NS: 10093; Avg PE:
20; Proj FY-18 EPS: 418; Proj Fair Value: 8360)
NSE-BNF (Sep):24780 (+120; +0.49%)
(TTM PE: 27.94; Abv 2-SD of 25; TTM Q1FY18 EPS: 887; BNS: 24785; Avg PE:
20; Proj FY-18 EPS: 961; Proj Fair Value: 19220)
For 13/09/2017:
*Key support for NF: 10045-10000/9980*
*Key resistance for NF: 10115-10160*
*Key support for BNF: 24725-24500*
*Key resistance for BNF: 24875-24950/25050*
*Hints for positional trading:*
*Time & Price action suggests that, NF has to sustain over 10115 area
for further rally towards 10160-10205 & 10250-10325 area in the short
term (under bullish case scenario).*
*On the flip side, sustaining below 10095 area, NF may fall towards
10045-10000/9980 & 9940-9850 area in the short term (under bear case
scenario).*
*Similarly, BNF has to sustain over 24875 area for further rally towards
24950-25050 & 25150-25250 area in the near term (under bullish case
scenario).*
*On the flip side, sustaining below 24825 area, BNF may fall towards
24725-24600 & 24500 -24350 area in the near term (under bear case
scenario).*
*Indian market*(Nifty Fut) today closed around 10105, soared by another
79 points (+0.79%) after making an opening session low of 10037 and
closing hours high of 10114 on positive global cues boosted by NK & Irma
risk-on global relief rally in USD/US bond yields.
Indian market today opened in positive tone around 31 points gap up
tracking upbeat global cues on relief from Irma & NK dooms day like
scenario and coupled with that, a strong opening of *EU market* amid
some weakness in EUR has also boosted the domestic market sentiment.
Thus, subsequent short covering & some bargain hunting ahead of CPI &
IIP data may have also helped the market today to close at five months high.
Before EU market opening today, Indian market wastrading in a narrow
range on lack of any meaningful domestic triggers. Also, stretched
valuation & muted Q1FY18 earnings and ongoing NK-US geo-political
tensions may be some of the primary reasons for lack of follow-up buying
& firm conviction and thus market is hovering within a defined range
(9650/9700-10150/10200) for the last few months.
Meanwhile, India’s CPI for Aug just flashed as 3.36% against estimate of
3.20%; prior: 2.36%; may be little disappointing for the market
sentiment as inflation hawk Patel/RBI now may not be obliged for a Oct
rate cut definitely. Core inflation came as 4.5% for Aug against 3.9%
recorded for July may be also on the higher side, being sticky in nature
as par earlier comments of Patel (RBI Guv) and thus an Oct rate cut hope
may be further diminished.
IIP for July flashed as 1.2% as expected against -0.1% for June;
improved significantly after Pre-GST disruptions as par earlier Mfg PMI
data; thus GDP may also see some surge in the days ahead and a
combination of higher growth & higher inflation may not be favourable
for another imminent RBI rate cut; it may be a new normal for the Indian
economy after DeMo & GST (GDP around 5.5-6% & CPI around 3.5-4%).
Today Nifty was supported by ITC, Tata Motors, IOC, HDFC, HDFC Bk, HUL,
RIL, TCS, BPCL & LT (collective contribution by around +55 points).
Today, Nifty was dragged by Indusind Bk, Wipro, Hero Motor, IBULLS HSG &
ONGC (collective contribution by -10 points).
*BPCL & GAIL*were up by around 4% on favourable LNG price renegotiation;
additionally BPCL was awarded “Maharatna” (special privilege PSU) status
by the Govt.
Tata Motors was up by over 3.5% on upbeat global sales (+9%), optimistic
outlook of JLR, new domestic model launch, management effort of cost
cutting and resolve of a small labour problem in its Jamshedpur plant.
*Tata steel*was up by around 3% on resolve of its British pension scheme
(BSPS) woes coupled with buzz of an imminent JV with a German steel
major (ThyssenKrupp-TKR). This BSPS was a huge liability for Tata
Steel-UK (TSU) of around 15 bln Pound.
As par arrangement, the British Pension Regulator has approved a
regulated apportionment arrangement (RAA) under which TSU has made a
payment of 550 mln Pound to BSPS and shares of TSU, equivalent to 33%
stake has issued to the BSPS trustee, thus separating this legacy issues
of BSPS from TSU; it has now agreed to sponsor a new pension scheme for
its UK business subject to meeting certain qualifying conditions.
This BSPS was a major issue for TSU to form a JV with TKR and thus if
everything is fine, the JV could be announced soon, which is also good
for the overall EU steel consolidation process. But the overall process
may be also EPS dilutive for Tata Steel as TSU has issued significant
number of new shares to the BSPS to get out of the huge liability.
Notably, all the Tata group of cos are quite upbeat for the last few
trading sessions because of stake consolidation drive by Tata Sons.
*Sun Pharma*was surged by over 3.50% on reports of US FDA approval of an
anti-cholesterol drug coupled with Teva optimism.
*ITC*was in limelight on reports of venturing in new lines of
non-cigarette business like healthcare/hospitals, branded vegetables,
physical infrastructure, manufacturing capabilities and digital tech for
an expected capex of around Rs.25000 cr. *SBI* was also in focus for its
Life insurance division IPO (SBI Life).
*India’s inflation trajectory is going higher again as favourable base
effects wanes: *
Price stability is virtually non-existent in India, being a legacy
problem on account of huge devaluation of INR since independence (1947),
when it was around at par (1.00) with USD & around 8 in 1980; now around
65 in 2017. Also, high regulatory taxes and poor infrastructure across
the country may be another reason for abnormal price instability, which
is affecting real wage growth and consumer spending of the economy.
Another factor, which is affecting India’s growth, may be adverse effect
of DeMo & war against black money. DeMo & GST are basically designed to
force the informal cash economy (unaccounted) to come into the formal
(accounted) economy; this transformation may take significant time and a
small informal business may also find it very tough to continue its
operations by paying the full compliance costs of his business. Thus,
overall employment & growth may be also affecting after DeMo.
As par some estimates, almost 20-30% of India’s high value consumption
may be dependent on black/unaccounted money and Govt’s ongoing war
against such black money(DeMo) may be affecting Indian consumption story
and also private investments, which in turn also affecting the GDP
growth of the country.
Although Govt may be absolutely right in its war against black money,
the procedure of DeMo may be quite controversial, but at the end of the
day, every “shock therapy” has some “costs” also.
Technically, consecutive closing above 10095 area, Nifty Fut may scale
10160 and even 10205 area by 14-15^th Sep, when NAMO will inaugurate
India’s dream project of “Bullet Train” with Abe (JP).
Globally, almost all the major Asia-Pacific markets today extended their
gains tracking positive *global cues* on Irma & NK relief. As Irma did
not hit the US cities of Florida & Miami directly, estimated damage may
be now around $50 bln against earlier projection of $200-300 bln.
Although overall damage from Harvey & Irma is huge, it’s still
manageable for the US economy and not catastrophic scenario for US, but
may be enough for the Fed to have some excuses to stay neutral in Dec’17.
Also, yesterday’s US sponsored UN sanctions on NK may also be termed as
symbolic as it diluted significantly to accommodate China & Russia’s
concern by removing an all out oil embargo and freeze of NK’s important
foreign assets, such as Air Koryo (national airlines of NK) & Kim’s
personal financial assets out of NK.
The lighter UN/US sanction now includes a cap on crude & refined
products shipments to NK (2mpd/year), complete ban on LNG import and
NK’s export of its textile products. Notably, yesterday NK has issued a
“dire warning” to US just before the UN sanction that “US will face the
greatest pain & suffering it has ever gone through in its entire history
if the sanctions came to pass”.
US response was also measured as its UN ambassador commented that “US is
not looking for war with NK as it had not yet passed the point of no
return”.
Thus, market is on risk-on mode in this “great game of chickens” & “war
of words” between NK & US and Trump is also happy to let this game going
as NK geo-political tension is now a great instrument to keep USD lower
in times of needs in order to make “America great again”.
A weak USD may be now good for US economy (export & imported inflation)
and also for the corporate earnings & the stock market. *USDJPY *is now
trading around 109.40, almost unchanged after making an overnight high
of 109.58 on less damaging Irma & “muted” celebration by Kim.
*Overnight US market*closed above 1% on an average on strength of
insurers, financials, and tourism & power sector in a relief rally after
plunge on fears of Irma (short covering & some bargain hunting). Also,
Apple helped the market before launching of its new i-Phone model
coupled with Teva (new CEO) & Tesla on optimism about e-car & a free
software update for extending the battery life for some of its cars in
the Irma/Harvey affected areas.
DJ-30 has gained around 1.19%, while S&P-500 closed around 2488, up by
almost 1.08% to end at record high and NASDAQ was in green by almost 1.13%.
*US stock future (SPX-500)*is now trading around 2485, almost flat
(-0.07%) ahead of EU market opening. Looking ahead, USD/US stock market
may be driven by Trump’s tax reform talk, US CPI & Fed stance on 20^th
Sep apart from geo-political issues. Technically, SPX-500 now need to
sustain over 2495-2505 area for further rally; otherwise it may again
came down.
Elsewhere, *Australia (ASX-200)* closed around 5746, up by almost 0.60%
on strength of Banks & financials, metals & mining and basis materials
(Irma relief). But a higher *AUDUSD *at 0.8037 (+0.18%) may have also
capped some gains today coupled with pressure on gold miners (fall in
gold after USD risk-on trade). Despite subdued AU economic data today
(NAB business confidence), AUDUSD is higher today for commodity optimism
as rebuilding effort in Harvey & Irma affected areas will gain traction.
*Japan (Nikkei-225)*closed around 19777, up by almost 1.18% on weaker
Yen, positive for export heavy JP economy & the market. Today JP market
was supported by exporters, automakers, banks & financials, energies &
steel makers. But some tech & internet stocks has also dragged the
market to some extent today.
Although most Asian markets (MSCI-Ex-JP) and global shares (MSCI-World)
consisting of 47 markets are now hovering around record high, JP is
market is far from its record high of around 20955 mapped in 2015
because of strong Yen; it was appreciated by almost 20% from 126 level
in USDJPY at 2015 to 100 in 2016, which has affected JP GDP & corporate
earnings growth significantly.
*China (SSE)*is closed around 3379, almost flat (+0.09%) as gains from
exporters, financials & energies were neutralized by loss in insurance &
property stocks.
Today PBOC fixed mid-point of *USDCNY* higher at 6.5277 vs 6.4997
yesterday with no OMO (neutral drain); USDCNH was hovering above 6.54
mark today. A weaker Yuan is good for China export after PBOC allowed
the currency to depreciate after months of appreciation to stem the USD
outflow. As par China Prez Xi, China will be not indulged in competitive
devaluation of its currency. A higher Yuan may be also one the reasons
behind recent USD weakness as PBOC controls a sizeable part of USTSY as
FX assets.
*Hong-Kong (HKG-33)*is now trading around 27945, marginally in red
(-0.10%) today, bucking the regional & global trend on pressure on
financials & property stocks for lack of any fresh drivers after recent
rally as overall valuations may be quite stretched also. All eyes may be
now on Apple’s launch of new i-Phone-8 today as a successful launch may
trigger demands from the regional components suppliers in turn.
Meanwhile, *Crude Oil (WTI)* is now trading around 47.85, down by almost
0.50% on concern of overall demand from US consumers from the hurricane
affected areas despite optimism over start of refining operations.
*EU Market Is Trading Upbeat Amid Drops In EUR & Supported By Banks:*
Elsewhere, *EU market* has extended its NK & Irma relief rally and up by
around 0.60% in *Stoxx-50* boosted mainly by banks, insurers and some
drops in EUR, positive for export heavy EU index. Banks are upbeat for
rising bond yields, favourable for their higher lending rate &
NIM/EBITDA. Also, some techs/chip makers are helping the EU market today
ahead of new i-Phone models launch by Apple today.
*DAX-30*& *CAC-40* is up by around 0.50% & 0.65%; but *FTSE-100* is down
by almost 0.20% on higher GBPUSD after a deluge of upbeat UK economic
data today ahead of BOE on Thursday. UK homebuilders are also under
pressure today after some reports of chronic housing shortage coupled
with reluctance of banks to lend to small home builders.
You may be also interested in:
Asian Stocks Extend Rally
<https://www.iforex.in/news/asian-stocks-extend-rally-amid-softer-usun-sanctions-nk-irma-relief-41673>
Amid "Softer" US/UN Sanctions On NK & Irma Relief
USDJPY Is Consolidating Around 110
<https://www.iforex.in/news/usdjpy-consolidating-around-110-after-nks-dire-warning-us-response-un-sanctions-41729>
After NK's "Dire Warning" To US In Response To UN Sanctions
<https://2.bp.blogspot.com/-ik2LVQx8fdk/Wbgt4jIZ4NI/AAAAAAAANEk/M0p4DcXVsoo9qG0e4rgkOkImfVnxnhx7wCLcBGAs/s1600/SGX-NF-PATTERN-12-09-2017.png>
SGX-NF
<https://2.bp.blogspot.com/-4bnGV8miE38/Wbgt9TiRFnI/AAAAAAAANEo/58j9iN0XHygZOP9KLgcFqH6pxY5-0HA4QCLcBGAs/s1600/BNF-PATTERN-12-09-2017.png>
BNF
<https://2.bp.blogspot.com/-6s2p_3VM3iw/WbguFKzAMYI/AAAAAAAANEs/na_K2TMWjL8b2PRNYe2p26GyeibYa1CNgCLcBGAs/s1600/USDJPY-PATTERN-12-09-2017.png>
USDJPY
--
Thanks & Regards,
Asis Ghosh
--
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