*Market Wrap: 03/05/2017 (19:00)*
*NSE-NF (May): 9337 (-3 points; -0.03%)*
*NSE-BNF (May): 22341 (-53 points; -0.24%)*
*For 04/05/2017:*
*Key support for NF: 9295-9235*
*Key resistance for NF: 9425-9475*
*Key support for BNF: 22200-22000*
*Key resistance for BNF: 22525-22675*
*Time & Price action suggests that, Nifty Fut (May) has to sustain over
9425 area for further rally towards 9475-9510 & 9550-9600 in the short
term (under bullish case scenario).*
*On flip side, sustaining below 9405-9385 area, NF may fall towards
9320/9295-9235 & 9175-9115 area in the short term (under bear case
scenario).*
*Similarly, BNF has to sustain over 22525 area for further rally towards
22675-22800 & 23000-23200 area in the near term (under bullish case
scenario).*
*On the flip side, sustaining below 22475 area, BNF may fall towards
22275-22200 & 22100-21950 area in the near term (under bear case scenario).*
Nifty Fut (May) today closed around 9337, almost unchanged after making
an opening minutes low of 9315 and day high of 9366 (actual day low
9330). Most of the day, NF was extremely range bound supported by IT,
Cement and PSBS to some extent apart from Infratel, Powergrid; but
dragged by Pharma, Private Banks, Telecoms & Metals.
Indian market today also opened almost flat following muted global cues
after tepid closing of overnight US market dragged by energy stocks
(lower oil) and auto scrips (below expected vehicle sales for April’17)
coupled with pressure on Tech shares (tepid report card from Apple).
EU market was also under pressure amid concern for a hard Brexit after
EU authorities reportedly asked for a Brexit fine for around $100 bln,
which UK instantly rejected. EU authorities are also seeking equal
rights of EU citizens in UK & vice versa, which may be the most
contentious point for the overall Brexit negotiation. Although, it’s too
early, contrary to earlier perception of a soft Brexit (favourable for
the market), market is now concerned about a hard Brexit or no
negotiation at all !!
All the eyes will be now on FOMC statement later in the day today for
any clues about June rate hike and tapering of Fed’s balance sheet.
Although, market is pinning great hope on the Fed for a hawkish script
today and a definitive indication about the June rate hike, recent set
of subdued US economic data may also keep Fed on the side line at least
till Sep’17. Also, market is extremely optimistic about some tax reform
plan by Trump, which may be also delayed until H2CY17 and in that
scenario; Fed may ultimately take some real action (rate hike/balance
sheet tapering) by Dec’17.
As today, there will be no economic projection or a presser (Q&A) by
Fed, market may learn more about Fed’s stance on Friday, when Yellen,
Fischer and other FOMC members are scheduled to participate in some
meeting/speeches. By, then we have also NFP job data for April’17 to
have an idea about strength of US job market after terrible figure last
month. Also, market may be eager to know more about US TSY Sec’s idea of
issuance of long term bonds from Yellen.
Amid all these ongoing global events, Indian market today was also
extremely range bound; but there were some actions on the PSBS amid
squabbling about the “Bad Bank” (super ARC) issue. Around noon, there
was some unconfirmed market buzz that Govt (PMO) has given its in
principle nod for a Bad Bank comprising of 51% Govt equity and 49%
private participation. There were also reports that CEA has convinced
the PMO for such Govt sponsored super ARC despite opposite view by NITU
Ayaog as reported yesterday. But soon after today’s report about Bad
Bank, Govt sources clarified that there is no such probability in the
near future as it may constrain Govt’s fiscal position quite seriously.
Govt/RBI is working actively on the NPA policy, which may be unveiled
after 2-3 weeks. As a result, PSBS, which were jumped initially quite
smartly, retreated to some extent. As par some latest report, Govt may
soon pass an ordinance to amend certain provisions of the banking
regulation act to put pressure on the large defaulters (NPA/NPL) by
RBI/Banks to solve the NPA crisis !!
As par some estimates, India’s NPL may be now around Rs.15 tln against
official Dec’16 figure of around Rs.6.5 tln and most of these (around
70%) is confined within 30-50 large industrial groups, involving lack of
project viability and other structural issues. So, by mere changing of
management or taking over the project itself by some ARC may not solve
the core issues of cash flow itself and thus a bad bank idea may also be
not workable here.
Today, after market hours, ICICI Bank has published its Q4Y17 report
card and at a glance, although the overall result may be in line with
estimates, NPA & provision was again surged for a common problem; i.e
JPA’s cement unit M&A issue with Ultratech and subsequent bridge loan
provided to the stressed company. For ICICI, its worth Rs.5378 cr and as
a result of recent mini AQR by RBI, the bank has to provide additional
25% more provision on it. Various private banks, such as IIB, Yes, Axis
& also ICICI has provided huge bridge loan to the stressed JPA group to
complete the proposed M&A transaction, which is pending till now. Thus,
RBI has asked to provide additional provisions for the loan to JPA and
until the propose M&A gets completed, this issue may be going on; but
banks are hopeful for the completion of the same by Q1FY18.
Deteriorating asset quality of ICICI bank may keep the stock price under
pressure tomorrow despite announcement of a bonus issue (1:10). Absolute
GNPA surged by almost 12.8% sequentially to Rs.42552 cr (net of write
offs) with fresh addition of Rs.5911 cr apart from the above JPA amount
of Rs.5378 cr. In addition, the bank wrote off Rs.5386 cr worth of NPA
in Q4FY17 alone. Thus actual GNPA may be treated as Rs.47938 cr as bank
will try to recover this write off amount too in the future either by
itself or by selling through a ARC with huge hair cut (usually 50%).
Market may be more interested about asset quality rather than
PAT/EBITDA/NII for the ICICI bank as of now.
*Although, ICICI Bank (LTP: 273) has corrected to some extent from its
recent high in anticipation of a tepid Q4 report card, technically,
sustaining below 270-260, it may fall more towards 245-235 & 220-210
area in the short to mid-term. For any strength, the stock needs to
sustain over 282-292 area for 300-320 & 350 zone in the bull case scenario.*
<https://4.bp.blogspot.com/-iTOavGaSe5E/WQnyIEpeMTI/AAAAAAAALkE/j0DRhEyN13YYkauCsbtUntCljPjJgp2hQCLcB/s1600/SGX-NF-PATTERN-03-05-2017.png>
SGX-NF
<https://3.bp.blogspot.com/-eR1znPodipY/WQnyKJ4VjDI/AAAAAAAALkI/lBSjpBl59l0cYIg5SYpwtidH2CgvZ1d8wCLcB/s1600/BNF-PATTERN-03-05-2017.png>
BNF
<https://3.bp.blogspot.com/-cVGrlXJvHaY/WQnySt1r1hI/AAAAAAAALkM/mAOSdKfoVOc7Qdq_nuvQITezPm8mXU8nACLcB/s1600/ICICI-PATTERN-03-05-2017.png>
ICICI BK
<https://3.bp.blogspot.com/-cQqhOCwL_4A/WQnyUuSAPGI/AAAAAAAALkQ/Nht9kW3Xhgs2lyzJgSTdDQ1ROUSF-KoBwCLcB/s1600/ICICI-TL-03-05-2017.png>
ICICI BK *
*
--
Thanks & Regards,
Asis Ghosh
--
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