-------- Forwarded Message --------
Subject: Nifty Closed At Eleven Month High, Supported by Phama &
Reality Index Amid Prospect Of Good Monsoon & Passage of GST Despite IMF
Warning About Global Growth
Date: Thu, 21 Jul 2016 06:59:38 +0530
From: Asis Ghosh <asis...@gmail.com>
Reply-To: asis...@gmail.com
Nifty Fut (July) closed today at almost day high of around 8590 after an
opening low of 8542.50.
*Time & price action suggests that NF has to sustain over 8615-8665*
zone for an immediate target of 8685-8725* and 8785-8870* & 8950-9015
area in the near term.*
*On the other side, sustaining below 8585-8550 area, NF may again fall
towards 8500-8475* & 8405-8380 and 8340-8300 zone in the next few
trading sessions.*
Ahead of ECB tomorrow, there are little global cues today.
Basically, on the prospect/hopes for more central banks stimulus and
increasing geo-political risks (Brexit/Turkey etc), both equities,
bonds, gold are rallying (capital appreciation, dividend yield and
flight to safety) breaking from their respective traditional inverse
relationship mode.
Apart from FED & BOC, most of the other major G-10 central banks
including BOJ/ECB/BOE/PBOC/SNB/RBA/RNNZ are in the easing mode and ready
to launch fresh QQE/rate cuts/liquidity injection, if economic condition
deteriorates. As a result, USD is getting strong and "risk rally" (EQ)
is also "on".
FED may again return to some of their "hawkish" comedy in the days ahead
(as there is no immediate risk of "Real Brexit").
FFR is also indicating greater "rate hike" probability in Sep16, just
ahead of US presidential election. But, in reality, FED will not hike
just months before US election and may prefer to wait till Dec'16 for a
0.25% hike with lots of caveats/conditions (like Brexit/China jitters etc).
Apart from Brexit, China jitters, oil, banking crisis in Italy, surging
bond yield risk for the DB & "Hawkish FED", the global market may face
another headwinds/risks for the prospect of Trump being President of the
US, despite ever easing/supportive Central Banks.
Today Nifty got good support from pharma sectors amid news of approval
of a generic version of an anti-cholesterol drug in US by a Court there.
For the Indian market, the overall mood may be cautious today amid
strong "political battle" going on in the LS/RS and prospect of GST
passage. As par some BJP leader comments, we can expect passage of the
GST in the month of Aug, instead of July (as previously expected).
All eyes will be on the ongoing Q1FY17 results also and it seemed that
mere "above/inline estimates" results are not sufficient for renewed
buying as most of the good results may have been already discounted
going by the recent rally of over 25% in the last five months.
On the other hand, below expected result with weak guidance resulting in
some deep correction of the scrips (Infy, Wipro, TCS, RIL etc).
Similarly, Bank Nifty may also face some selling pressure as all the
"good news" (like rate cuts, good monsoon, RBI OMO, NPL resolution, PSBS
merger & recapitalization etc) may have been already discounted to a
great extent, going by nearly 44% rally in the last five months.
Similarly, passage of GST may have been already discounted by the market
to a large extent. So, even if it will pass this time, apart form some
whipsaw movement of around 100-200 points (48 hrs) in Nifty, market will
back to the reality and concentrate on the fine print & implementation
of the same.
At 8600 Nifty, TTM PE is above 23 and valuation may be quite expensive.
So, stock specific approach is necessary with a note of caution.
Technically, Nifty will rally further towards 9000-9200, only if it is
able to close consecutively (at least 3 days) above 8685-8725 zone. For
this, apart from the passage of GST, we need real earnings upgrade, so
that FWD PE will come to a more reasonable level of 20-18.
In that scenario, we need Nifty EPS of at least 450-500 in FY:17-18 from
the current level of around 365 (i.e. around 25-40% growth in EPS by
FY:17-18).
Considering the present trend of actual earnings, guidance & overall
global gloomy situation, 25-40% earnings upgrade may be quite tough
despite prospect of good monsoon, more rate cuts, 7PC induced
consumption, better macros, public investments in infra and some other
green shoots. Going forward, we need to increase private investments and
better capacity utilization and for that India's problem/legacy issues
of "Twin Balance Sheets" may be the biggest headwinds at this moment.
<https://3.bp.blogspot.com/-IhN9oob7LGQ/V4-31u7v6fI/AAAAAAAAH6k/q80uGapuhEgDcT4ZLPPMTsmG3azeBGVHQCLcB/s1600/SGX-NF-EW-20-07-2016.png>
--
Thanks & Regards,
Asis Ghosh
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