*Market Wrap <https://www.iforex.in/news>*:
<https://www.iforex.in/news>*27/04/2018*
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*
*NSE-NF (May):10724 (+91; +0.86%)*
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*NSE-BNF (May):25468 (+446; +1.78%)*
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*SPX-500: 2670 (+3; +0.11%)*
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*Market Mantra: 30/04/2018*
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*Updated: 08:30*
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*SGX-NF: 10765 (+41; +0.38%)*
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*Expected BNF opening: 25570 (+0.40%)*
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*SPX-500: 2677 (+6; +0.22%)*
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*
*(Gap-up opening on positive global cues amid some fall in US bond
yields and USD coupled with upbeat earnings and increasing prospect of
North Korean truce)*
*
*
*Fut-I (Key Technical Levels)*
*Support for NF:***
*10715*/10690-10640/10590-10550/10490*
*Resistance to NF:***
*10780/10800-10840*/10860-10900/10930***
*Support for BNF:***
*25400/25250-25050/24900-24700/24450***
*Resistance to BNF:***
*25675*/25775-25850/25915-26050/26150*
*Support for SPX-500:*
*2660/2645-2630/2610-2595/2575*
*Resistance to SPX-500:*
*2685/2705-2730/2750-2765/2785*
*Technical View (Positional-Nifty, Bank Nifty, SPX-500):*
*Technically, Nifty Fut-I (NF) has to sustain over 10800 for a further
rally towards 10840/10860-10900/10930 in the short term (under bullish
case scenario). ***
*On the flip side, sustaining below 10780 NF may fall towards
10715/10690-10640/10590 in the short term (under bear case scenario).***
*Technically, Bank Nifty-Fut (BNF) has to sustain over 25675 for a
further rally towards 25775/25850-25915/26050 in the near term (under
bullish case scenario).***
*On the flip side, sustaining below 25625, BNF may fall towards
25450/25250-25050/24900 in the near term (under bear case scenario).*
*Technically, SPX-500 now has to sustain over 2685 for a further rally
towards 2705/2730-2750/2765 in the near term (under bullish case scenario).*
*On the flip side, sustaining below 2675, SPX-500 may fall towards
2660/2645-2630/2610 in the near term (under bear case scenario).*
*
*
*Valuation metrics:*
*
*
*Nifty-50: 10692; Q3FY18 EPS: 410; Q3FY18 PE: 26.08; Avg FWD PE: 20;
Proj FY-18 EPS: 418; Proj Fair Value: 8360*
*
*
*Bank Nifty: 25395; Q3FY18 EPS: 820; Q3FY18 PE: 30.97; Avg FWD PE: 20;
Proj FY-18 EPS: 961; Proj Fair Value: 19220*
*
*
The Indian market (Nifty Fut/India-50) is currently trading around
10770, soared by almost 0.44% on Monday (so far) amid positive global
cues on some fall in US/EU bond yields coupled with upbeat earnings and
increasing prospect of a North Korean truce. There was also a report
that from the month of May, RBI will increase purchase limit of Indian
government bonds gradually, which may bring the surging Indian bond
yields lower. RBI is also considering increasing ECB borrowing limit for
certain sectors such as real estate.
The Indian stock market may trade lightly on Monday as currency and bond
market is closed for a public bank holiday and on Tuesday all the Indian
market will be also closed for May-day/Maharastra day.
Although on Friday, the Indian market was boosted by hopes of a solid
report card from RIL, it reported a slightly subdued number in
comparison to the sky-high expectation of the market with some confusion
about R-Jio accounting principle and stress on RIL’s petrochemical
business margin. Thus, RIL is under stress on Monday, while HDFC duo is
helping the market right now.
*The Indian market soared on Friday
<https://www.iforex.in/analysis/nifty-jumped-mixed-global-cues-and-increase-fii-bond-purchase-limit-rbi-51459>amid
mixed global cues and hopes of a solid report card from RIL:*
*
*
The Indian marketclosed around 10724 on Friday, soared by almost 0.86%
on*mixed global cues
<https://www.iforex.in/news/global-cues-were-mixed-friday-during-indianeu-market-hours-51461>*amid
fall in bond yields and hopes of blockbuster earnings from the Index
heavyweight RIL. Nifty Fut made a late day high of 10744 after making am
opening session low of 10640 on the first day of the May FNO series and
it made a strong opening.
All sectors excluding techs (IT) were upbeat and banks outperformed as
the benchmark 10Y Indian bond yields failed to cross the previous
milestone high of 7.80% and closed almost flat around 7.767% after
making a low of 7.740% in line with its global/US peers. Indian Rupee
also gained some strength as USDINR slumped by 0.26% on Friday and
closed around 66.62, slips from the recent high of around 67.05. Thus
exporters (techs) came under some pressure.
As there were some earlier reports that RBI may ease the FII limit for
the Indian government bonds from May gradually (@0.50%) for 2018-19,
market may be assuming that bond yields will come under some stress as
FII will jump in for buying Indian debts at yields of around 7.75%,
which is the highest among its comparable peers with the highest level
of safety also. But the stress on Indian macros and surging oil may be
some of the factors that could also discourage the FIIs to jump in for
the Indian debts amid higher US bond yields.
Apart from ease on bond yields, banks were in demand amid another report
that government may ask the CBIC (central board of indirect taxes &
customs) to withdraw the case for imposition of service taxes for
providing some free services by the banks, that includes a retrospective
demand for the last five years.
The Indian market sentiment was also boosted on Friday by another report
that the government has collected around Rs.7.19 trillion as GST from
Aug’17 to March’18 with an average collection figure of around Rs.0.90
trillion over this eight months period. Although this may be much less
than the required /targeted amount of Rs.1-1.15 trillion/month, still
it's upbeat considering that the GST is in initial phase with lots of
disruptions, being the most complex, and costly indirect taxation system
in the world with the highest tax rate.
The Indian market is also worried about the increasing litigations in
the NPA/NCLT resolution process and growing incidences of corporate loan
frauds in collusion with some crony promoters and bankers. Thus the
government is in the cleaning process of the rotten banking system
(corporate loan) before committing any further recaps to the PSU banks;
otherwise, the same thing will happen again and again.
On Friday, Indian market was helped by Axis Bank, RIL (earnings
optimism), ICICI Bank, L&T, SBI, Infy, HPCL, ITC, Sun Pharma, Tata
Motors and others by around 119 points (89+30), while it was dragged by
TCS, Maruti (subdued report card), HCL Tech, HDFC Bank, Tech-M, HUL, Yes
Bank (upbeat report card), Hero Motor, Wipro, Coal India and others by
almost 37 points (35+2) altogether.
Overall on Friday, the Indian market was helped by PSU Banks, selected
private banks and financials, selected automakers, FMCG, media, metals,
Pharma, reality (buzz of increasing ECB borrowing limits by RBI),
consumption, energies (higher crude oil), and infra, while dragged by
exporters (techs) and MNC on lower USD.
Axis bank surged despite a terrible report card on hopes that the NPA
cycle is at its peak and the banks may be also an imminent takeover
target by a new generation private bank such as Kotak, Indusind or Yes Bank.
*Fitch has retained India’s rating at BBB- with a stable outlook:*
*
*
Meanwhile, the global rating agency Fitch has retained India’s rating at
BBB- with stable outlook without any upgrade as being sought by the
government desperately. Fitch has cited the weak fiscal balance as one
of the primary constraints for a rating upgrade of India and kept the
status-co for the 12^th consecutive years at BBB-, which is the lowest
investment grade rating by Fitch.
But Fitch said India’s relatively strong external buffers and the
comparatively closed nature (local economy rather than global) of its
economy make the country less vulnerable to external shocks as compared
to many of its peers.
Apart from weak fiscal balance and concern of fiscal discipline, Fitch
pointed out some lagging structural factors, including corporate
governance standards and a still difficult, but improving the business
environment for its rating action, although it noted India’s strong
medium-term growth outlook and favorable external balance.
As par Fitch: Weak fiscal balances, the Achilles’ heel in India’s credit
profile, continue to constrain its ratings. General government debt
amounted to 69% of GDP in FY18, while fiscal slippage of 0.3% of GDP in
both FY18 and FY19 relative to the government’s own budget targets of
last year, and implies a general (combined state and central) government
deficit of 7.1% of GDP.
Fitch- The central government’s aim to gradually reduce its own fiscal
deficit from 3.5% in FY18 to 3.0% of GDP by March 2021 is “well beyond
its current electoral term”. “The government has reasserted its
longer-term aim of gradual fiscal consolidation with an amendment of the
FRBM Act to set a ceiling for central government debt at 40% of GDP and
general government debt at 60% of GDP, to be reached by March 2025. This
is a positive step towards a more prudent fiscal framework if eventually
adhered to.
Fitch said, “India can expect a rating upgrade if it reduces general
government debt over the medium term to a level closer to that of rated
peers at 41% of GDP and maintains higher sustained investment and growth
rates without the creation of macro imbalances, such as from successful
implementation of structural reforms”.
“On the other hand, if public debt burden increases, which may be caused
by stalling fiscal consolidation or greater-than-expected deterioration
in the balance sheets of public sector banks as well as loose
macroeconomic policy settings that cause a return of persistently high
inflation and widening current account deficits, it could trigger a
rating downgrade”.
Fitch projected the economy to revive to grow at 7.3% in 2018-19 and
7.5% in 2019-20 from 6.6% a year ago as a “temporary drag will fade from
the withdrawal of large-denomination bank notes in November 2016 and the
introduction of a Goods and Services Tax (GST) in July 2017”.
Fitch- The GST is an important reform, however, and is likely to support
growth in the medium term once teething issues dissipate”. Fitch praised
the RBI for building a solid monetary policy record, as consumer price
inflation has been well within the target range of 4% +/- 2% since the
inception of the Monetary Policy Committee in October 2016. However, it
expects RBI to start raising its policy rates next year from 6%
currently as growth gains further traction.
Fitch- Monetary tightening could be brought forward if recent government
policies push up inflation expectations, including the decision to
increase minimum support prices (MSP) for agricultural goods to 1.5
times the cost of production and increased customs duties on certain
products, including electronics, textiles and auto parts.
Fitch said India’s relatively strong external buffers and the
comparatively closed nature of its economy make the country less
vulnerable to external shocks as compared to many of its peers. However,
it cautioned that falling net FDI inflows at $23.7 billion in the first
three-quarters of FY18 from $30.6 billion a year earlier are
“insufficient” to cover a widening current account deficit, unlike in
many of India’s peers.
Fitch said government’s efforts to liberalize the foreign investment
regime such as allowing 100% FDI in single-brand retail through the
automatic route may facilitate a recovery in FDI if combined with
further investment climate reforms.
*GBPUSD
<https://www.iforex.in/news/gbpusd-plunged-subdued-uk-gdp-and-almost-no-rate-hike-probability-may-51435>STORY:
<https://www.iforex.in/news/gbp-victim-never-ending-brexit-drama-51437>*
*USDJPY
<https://www.iforex.in/news/usdjpy-slumped-renewed-us-bond-yield-flattening-and-stress-stocks-after-upbeat-gdp-51443>STORY:
<https://www.iforex.in/news/usdjpy-under-stress-despite-upbeat-us-gdp-reduced-tensions-north-koreachina-and-dovish-boj-51451>*
*OIL/WTI STORY:
<https://www.iforex.in/analysis/oil-edged-down-amid-confusions-about-trumps-stance-iran-nuclear-deal-51455>*
<https://2.bp.blogspot.com/-ts3_uAHROaE/WubLhJODGjI/AAAAAAAAPyM/xlrXHb0T6CwoKf2MMVxzsrIrM2HOBB-tACLcBGAs/s1600/SGX-NF-PATTERN-27-04-2018.png>
*SGX-NF*
<https://2.bp.blogspot.com/-NAexZ5sh5wk/WubLrmCH-yI/AAAAAAAAPyQ/Dm8HJkzyDik8_HsFiyK1_7XFLclMT1jDQCLcBGAs/s1600/BNF-FIBB-30-04-2018.png>
*BNF*
<https://3.bp.blogspot.com/-UkIE1ynd37g/WubL0bNHI7I/AAAAAAAAPyU/sI02CG2DKWEBTpjcmkE_Cc4__RrfbtVVQCLcBGAs/s1600/SPX-500-FIBB-27-04-2018.png>
*SPX-500 *
<https://2.bp.blogspot.com/-2hGbVG0tix4/WubMDWT8Y-I/AAAAAAAAPyg/v2U5HHXkUMQr66xvpGptrNiUeaMTNmu-gCLcBGAs/s1600/EURUSD-27-04--2018.png>
*EURUSD*
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