Market Wrap <https://www.iforex.in/news>: 01/02/2018 (17:00)
NSE-NF (Feb):11034 (-21; -0.19%)
(NS: 11017; Q2FY18 EPS: 391; Q2FY18 PE: 28.18; Abv 2-SD of 25; Avg FWD
PE: 20; Proj FY-18 EPS: 418; Proj Fair Value: 8360)
NSE-BNF (Jan):27219 (-247; -0.90%)
(BNS: 27221; Q2FY18 EPS: 867; Q2FY18 PE: 31.40; Abv 3-SD of 30; Avg FWD
PE: 20; Proj FY-18 EPS: 961; Proj Fair Value: 19220)
*For 02/02/2018: Feb-Fut (Key Technical Levels)*
Support for NF: 10870/10840-10800/10760
Resistance for NF: 10965/10995-11055/11105
Support for BNF: 27040/26840-26640/26350
Resistance for BNF: 27350/27500-27650/27850
*Trading Idea (Positional):*
Technically, Nifty Fut-Jan (NF) has to sustain over 10995 area for
further rally towards 11055/11105-11155/11195* & 11255/11285-11305/11350
zone in the short term (under bullish case scenario).
On the flip side, sustaining below 10965 area, NF may fall towards
10870/10840-10800/10760 & 10715-10660/10630 zone in the short term
(under bear case scenario).
Technically, Bank Nifty-Fut (BNF) has to sustain over 27500-27650 area
for further rally towards 27750-27850 & 28075-28405 zone in the near
term (under bullish case scenario).
On the flip side, sustaining below 27450-27350 area, BNF may fall
towards 27040-26840 & 26640-26350 area in the near term (under bear case
scenario).
Indian market
<https://www.iforex.in/analysis/nifty-slips-breach-fiscal-deficit-imposition-ltcgt-government-presents-populist-budget-48655>(Nifty
Fut-Feb/India-50) today (1^st Feb)closed around 11034, edged down by
almost 21 points (-0.19%) after a volatile day of trading on the budget
day as government breached the fiscal deficit targetand also imposed
LTCGT (long term capital gain tax) as apprehended earlier; but solid DII
support may have supported the market today from a plunge apart from
“grandfathering” clause of the LTCGT till 31^st Jan’2018.
Overallbudget may be termed as politically populist & rural savvy
<https://www.iforex.in/news/indian-bond-yield-surged-761-breach-fiscal-deficit-amid-populist-budget-48621>,
eying for the next series of state as well as general election.Indian
10YGSEC bond yield today soared by 2.46% and closed around 7.614% after
a volatile day of trading on the after government presents a budget,
which projects FY-18 fiscal deficit at 3.5% of GDP vs earlier estimate
of 3.2%; FY-19 fiscal deficit at 3.3% vs market estimate of 3.2%.
Moreover, government has proposed 1.5 times higher MSP (minimum support
price) of production cost for all agri crops and increase in import tax
for a number of electronic items such as mobile phones/certain
accessories, LCD/TV; all these may help inflation to go higher along
withsurging oil
<https://www.iforex.in/news/oil-jumped-better-opec-compliance-mixed-eia-inventory-report-48641>and
thus RBI may be prompted to take a more hawkish stance or even hike
rates in H2FY19 in line with its global peers (Fed). Thus Indian bond
yield may go even higher to 7.85-8.00% in the coming days.
Higher bond yield; i.e. higher borrowing costs may be not good for the
Indian corporates, most of whose balance sheets are already stressed,
everything being equal.
Government Presents An “Aam Admi” Populist Rural Savvy Budget Eyeing For
The Next Election:
Indian budget may be termed as politically populist focused on rural
economy ahead of elections; government said it expected GDP to surge
above 8% as it announced its FY-19 budget that allocated billions of
dollars for rural infrastructure and unveiled a health insurance
programme (“Modicare”) for around 500 million people at/below poverty
line (APL/BPL).
In its last full year budget before a national election that must be
held by May 2019, government spoke of massive spending on rural
infrastructure, to win over voters in the rural India, where two-thirds
of India’s 1.3 billion people live.
Indian market today opened around 11064 in a spirited moodamid mixed
global cues
<https://www.iforex.in/news/europe-may-jump-higher-usd-after-hawkish-hold-fed-48603>ahead
of budget presentation and soon made an opening high of around 11123 on
hopes of a market friendly budget; but it soon slips to 11040 level on
muted Mfg PMI for Jan, which came at 52.4 vs est 54.5; prior: 54.7 and
plunged further to day low of 10881 on reports of fiscal deficit breach
& imposition of LTCGT before jumping again to the session high of 11139
on short covering as these were already expected.Overall Asian cues
<https://www.iforex.in/news/asia-edged-higher-usd-oil-japan-surged-earnings-growth-optimism-48633>were
alsomixed
<https://www.iforex.in/news/china-slumped-regulatory-warning-muted-mfg-pmi-and-concern-about-start-ups-earnings-48635>.
LTCGC:Government Proposes bringing in LTCGC on listed equities on
long-term capital gains exceeding Rs.100,000 to be taxed at 10 percent
(above 1 year holding period; no change in LTCGC definition);
grandfathered till 31/01/2018; No LTCGT on sale of stocks in FY'18;
LTCG tax applicable only FY-19 (April’18) onwards.
The “grandfathering” clause till 31^st Jan’18 for the LTCGT may have
helped to revive the sentiment, but market eventually slipped from the
“dead cat bounce” on overall concern about macro/fiscal deficit and
taxation; more than LTCGT, breach of fiscal deficit even for the sake of
growth may not amuse global rating agencies and thus bond market is
adversely reacting.
Overall, market is hopeful that increasing rural capex will eventually
translate into increasing economic activity and benefit both rural as
well as real economy; but there is also some concern about adequate
quality job creations in the economy to support incremental consumer
spending after all these rural thrust (Rs.14.34 tln).
Over the last decade, although India is growing at a mind-blowing rate
of 7% on an average, overall employment situation is still muted and
that is the main concern of policy makers & politicians apart from DeMo
& GST blues. BJP has suffered huge defeat in some by-elections few days
ago in Rajasthan & WB, which is an indication that “all is not well” for
BJP in the rural/small town areas, even if there is no alternative for
NAMO in the opposition till now, despite “hard work” by RAGA (INC).
Overall, Indian market today was supported by selected automakers (rural
thrust in the budget & mixed auto sales for Jan), FMCG (led by ITC on no
fresh tax on cigarettes), metals (supportive global cues), consumption,
infra (thrust on rural & railway infra in budget), while dragged by
banks & financials (higher bond yields & fresh concern for MSME NPA),
techs, media, pharma (US jitters as well Indian concern over
“Modicare”), reality (higher borrowing costs) and energies.
Nifty was supported by L&T (infra story & upbeat report card), ITC,
while dragged by RIL, ICICI & HDFC Bank.
BTCUSD View
<https://www.iforex.in/news/bitcoin-tumbled-news-tax-man-chasing-south-korean-crypto-traders-48615>:
USDJPY View
<https://www.iforex.in/news/usdjpy-looking-stressed-despite-hawkish-hold-fed-surge-us-bond-yields-48643>:
<https://3.bp.blogspot.com/-5DpLzgc7bWA/WnPgxRG_jsI/AAAAAAAAOsk/Zs_KfEydS4YRdNj6o0LeMwafHzx3pv-xACLcBGAs/s1600/SGX-NF-PATTERN-01-02-2018.png>
SGX-NF
<https://3.bp.blogspot.com/--_Cb8JQaPfA/WnPg0Ytj59I/AAAAAAAAOso/ujXpuU802uo9Pgs98qXU4jlRyMXuZVDEgCLcBGAs/s1600/BNF-PATTERN-01-02-2018.png>
BNF
<https://4.bp.blogspot.com/-8Jcgaxlhslw/WnPg3qtDx_I/AAAAAAAAOss/h12kwgBPEfcwJSj3gtCzihK5IyQ3jlwtACLcBGAs/s1600/WTI-PATTERN-01-02-2018.png>
WTI
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Thanks & Regards,
Asis Ghosh
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