*Market Wrap: 28/04/2017 (19:00)*
*NSE-NF (May): 9331 (-26 points; -0.27%)*
*NSE-BNF (May): 22370 (+76 points; +0.34%)*
*For 02/05/2017:*
*Key support for NF: 9305-9225*
*Key resistance for NF: 9425-9505*
*Key support for BNF: 22200-22100*
*Key resistance for BNF: 22450-22525*
*Time & Price action suggests that, Nifty Fut (May) has to sustain over
9425 area for further rally towards 9475-9505 & 9550-9600 in the short
term (under bullish case scenario).*
*On flip side, sustaining below 9405-9385 area, NF may fall towards
9305-9270 & 9225-9175 area in the short term (under bear case scenario).*
*Similarly, BNF has to sustain over 22450 area for further rally towards
22525-22675 & 22800-23000 area in the near term (under bullish case
scenario).*
*On the flip side, sustaining below 22400 area, BNF may fall towards
22200-22100 & 22000-21700 area in the near term (under bear case scenario).*
Nifty Fut (May) today closed around 9331, down by 0.27% in a day of
consolidation after making an opening session high of 9359 & day low of
9313. Indian market today opened almost flat following tepid global cues
amid mixed US economic data & corporate earnings and renewed concern
over NK geopolitical issues following some of Trump’s aggressive
comments. Also, Trump’s trade protection rhetoric for SK in exchange of
the “Thaad” missile defence system, which US is installing there to
counter any threat from NK have deteriorated the Asian market sentiment
today. But, in the EU session, better than expected EU CPI at 1.9% & an
upbeat core CPI at 1.2% (estimate: 1%; prior: 0.8%) has made the global
market sentiment strong and thus Indian market also followed the suit by
closing almost flat in a day of consolidation & some long winding after
the recent rally ahead of the long weekend.
An upbeat core CPI for EU is good news for Draghi, who lamented just
yesterday about tepid pace of inflation and thus pledged to continue or
even add some extra QQE in the coming months. Thus, if today’s upward
trajectory of core inflation is continued for next few months, Draghi
may be compelled to think about some hawkish steps (rate tightening) in
order to stay ahead of the inflation curve. A depreciated currency (EUR)
and a higher energy/oil prices may be primarily responsible for the
higher inflation in EU.
Meanwhile, US have just flashed its Q1 GDP and it came terrible, though
not at all unexpected by some analysts. Q1 US GDP came as 0.7%
(QOQ-Preliminary) against estimate of 1.2% (prior: 2.1%); real consumer
spending also flashed poor at 0.3% against estimate of 0.9% (prior:
3.5%). But GDP price index came as upbeat at 2.2% (QOQ) against estimate
of 2% (prior: 2.1%). Thus, the better than expected GDP deflator (price
index) may be indicating an upbeat inflation and thus despite poor GDP
headline data & tepid consumer spending, USD is gaining strength across
the board for the time being and reflation / risk trade is on. FFR is
now showing 57% probability of another two rate hikes by Fed this year
against 52% prior to the GDP data. All eyes may be now on the US
politics in the weekend for the Govt shut down probability (although
very low) and “war of words” between US & NK & 100 days of Trump at the
WH. But, overall a 0.7% Q1 GDP data (preliminary) may also be not good
for Trump’s first 100 days at WH, where as US GDP growth was around 1.5%
on an average under Obama; this poor GDP coupled with high probable
fiscal deficits because of Trump’s tax reform plan may not be good for
the US economy and Fed may be also in the sideline for rest of the 2017;
reflation trade may also be on the dock.
Back to home, Indian market (Nifty) today gyrated in a narrow range in
absence of any meaningful domestic cues. So far Q4 report cards are
mixed; but some of the PSBS has reported quite upbeat numbers with some
improvement in the NPA resolution front. Market is also expecting some
consolidation among the PSBS after some meaningful resolution of the
stressed assets issues & an effective NPA resolution policy by the
Govt/RBI. Thus Bank Nifty is trading very strong, although valuation may
be quite stretched.
Today Govt indicated that it will recapitalize the PSBS by the remaining
Rs.10000 cr of the Indradhanush plan by three tranches. Also Govt is
working on a plan for takeover of stressed assets by the PSBS; i.e. role
of an ARC itself (?) and consolidation of the PSBS to 4-6 large entities
only. These are all helping the PSBS; but we have to also keep in mind
that being a financial year end (March’17), traditionally Q4 is always a
better quarter for NPA recoveries. This year, DeMo in Q3 may have also
helped the banks to prune some of its NPA as many borrowers had repaid
in old DeMo notes. Thus, market may look forward further in Q1 & Q2FY18
for the actual NPA resolution trend.
Today IMF predicted that India’s GDP may accelerate towards 8% in the
mid-term on the back of GST implementation along with UID based targeted
subsidy distribution. But, IMF also cautioned about India’s bad loan
(NPA), stressed corporate balance sheet and lack of labour reforms.
Although, GST is still now scheduled to be implemented from July’17, it
may be delayed to Sep’17 or even to April’18 due to lack of preparations
and clarity about rate structures and issues about input tax credit
(ITC) Incidentally, Govt may be also thinking actively to change the
Indian FY system from March-April to Jan-Dec in keeping with trends for
most of the global economies. Thus, if Govt go ahead to change the FY
system this year, then GST may be also implemented from Jan’18 instead
of July/Sep’17. But this ongoing confusion about actual implementation
date may be also causing uncertainties among the traders
(retailers/distributors) and also the manufacturers as they are hesitant
to stock or produce heavily, keeping in mind the ITC issues. Thus GST
disruption may also affect the H1FY18 earnings of the street to some
extent and we may see again some earning expectation adjustment
(downgrade) in the middle of the year.
<https://1.bp.blogspot.com/-yZdpKH304E4/WQNTcRd_CKI/AAAAAAAALg0/4WAA-RTqugw0ruTrRZ1beuiNktEhPgsaACLcB/s1600/SGX-NF-PATTERN-28-04-2017.png>
SGX-NF
<https://4.bp.blogspot.com/-qd07RfxwLo4/WQNTfD3M-cI/AAAAAAAALg4/3R7H5PL_1zQMw_XNuZjJ3j1LnfSioW2LQCLcB/s1600/BNF-PATTERN-28-04-2017.png>
BNF
--
Thanks & Regards,
Asis Ghosh
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