*Market Wrap: 22/05/2017 (17:00)*
*NSE-NF (May): 9445 (-0.75; -0.01%) (TTM PE: 23.95; Near 2 SD of 25; TTM
EPS: 394; NS-9438)*
*NSE-BNF (May): 22685 (-114; -0.50%) (TTM PE: 31.12; Above 3 SD of 30;
TTM EPS: 728; BNS-22653)*
*For 23/05/2017:*
*Key support for NF: 9420-9395/9375*
*Key resistance for NF: 9500-9535/9600*
*Key support for BNF: 22590-22450*
*Key resistance for BNF: 22800-22900/23000*
*Time & Price action suggests that, Nifty Fut (May) has to sustain over
9535-9560 area for further rally towards 9600-9640 & 9680-9770 in the
short term (under bullish case scenario).*
*On flip side, sustaining below 9515-9470 area, NF may fall towards
9420-9395/9375 & 9320-9280/9240 area in the short term (under bear case
scenario).*
*Similarly, BNF has to sustain over 22900 area for further rally towards
23000/23075-23200 & 23325-23450 area in the near term (under bullish
case scenario).*
*On the flip side, sustaining below 22850-22750 area, BNF may fall
towards 22650-22590 & 22450-22300 area in the near term (under bear case
scenario).*
Nifty Fut(May) today closed around 9445, almost flat after making an
opening minutes high of 9492 & session low of 9427 in another day of
consolidation. Although Nifty was flat in an overall day of range bound
trading, broader market (Midcaps) were under visible stress today along
with Bank Nifty due to concerns of stretched valuations, mixed Q4 report
cards (so far) and renewed apprehensions about stressed assets in the
Indian banking system (PSBS & some private banks).
Q4FY17 report card of SBI shows that, although on standalone basis, NPL
has moderated for the country’s largest lender, on consolidated basis,
the NPL situation is quite grim due to very high level of stressed
assets in the recently merged other banking entities of SBI. On the
other side, divergence of NPA issues with the RBI continues to drag on
some of the selected private banks (Yes, Axis, ICICI etc) and overall, a
sense of mistrust may be there as far issues of NPL and market may be
concerned for more “hidden” stressed assets in the system, which may got
exposed as a result of ongoing NPA ordinance/policy by the RBI (mini AQR).
Also, report card of BOI, which has shown quite elevated level of
NPA/NPL, may have affected the overall sentiment in the PSBS space,
which has run quite a lot in the recent time on the hopes of an
effective NPA resolution policy by the Govt/RBI and improvement in the
stressed assets. As par reports, RBI may come out with more NPA
resolution policy (hair cut) by next two weeks and market may be
concerned over various rules & regulations (various oversight
committees) and forced hair cuts by the banks; the process may take
another 1-2 year to yield some result/actual resolution.
Today Nifty was supported well today by ITC (+6.08%), HUL (+1.05%); i.e.
FMCG counters due to favourable GST rates; although the same may be in
the expected line. Along with GST boost, prospect of a good monsoon this
year may be also helping the FMCG stocks in the recent times.
Nifty was also supported by IT stocks (HCL Tech, TCS, Infy) to some
extent today. For the last few days, since Trump’s political crisis and
high probability of an impeachment, IT stocks are rallying to some
extent, may be Trump’s absence in WH (if impeached) is good for IT
companies (H1B Visa issues by Trump). Also, Indian Govt officials &
NASCOM are closely co-coordinating (lobbying) with the concerned high US
authorities to look after the interests of the Indian outsource
companies (IT) and thus, market may be expecting some “relief” from
these H1B Visa concerns.
Liquor stocks were in demand today after analysts found that it may not
be under GST sin tax as of now. But airline stocks were affected for
some concerns over high GST rate in business class travel and also for
the surge in crude oil prices.
Indian market today opened around 9480; gap up by 24 points following
mixed global cues and GST & earnings optimism. Overnight, US market
closed in positive (+0.69%) primarily on the strength in oil (energy
related shares) & defence sectors (big deal with Saudi Arabia during
Trump’s visit). Oil is trading higher around $51 after OPEC indication
of not only production cut extension date till March’18, but also for
some deeper production cut (quantity). But, supply glut and talk of 6
months cut against present buzz of 9 months may also limit any
blockbuster rally from here. For India, higher oil above $55-60 may pose
serious concerns for overall economy (macro headwinds).
US political concern may take more serious turn in the days ahead after
Comey confirmed about his testimony with the US congress and there was
some reports that some more WH officials (close aide of Trump) may be
involved with the alleged Russian election interference. All these may
invite an impeachment motion against Trump and as par some reports, US
constitutional experts are exploring various probabilities & working
hard for such unprecedented action in the recent US history. As Trump is
now on a 9 day tour in the ME & EU, market is calm now; but US political
drama may take ugly turn after his return next week.
Overall, USD was higher today after tepid trade data from Japan & some
UK comments about probability of a “hard Brexit” for hefty fine proposal
from EU (UK has to pay around $100 bln for Brexit)!! Thus, renewed
concern for Brexit related EU political crisis today may have affected
the EU market. Also, some dovish talks from German officials about ECB
QE mechanism may have helped the USD in the early morning Asian session
today; but another comment from Merkel & Co that “EURO is too weak” and
ECB is responsible for the weak EURO may be again putting pressure on
the USD.
*Technically, EURUSD (1.1243) has to sustain over 1.12930-1.30 area for
1.16-1.20 zone; otherwise, the pair may fall and sustaining below
1.11450-1.10 area may further fall towards 1.07-1.05 zone in the short
term.*
Apart from UK & US political risks, market may be also concerned for
Brazilian political crisis. Any serious Brazilian crisis may invite
sovereign default (?) from the nation, which was one of the highly
focused EM group among the investors and any such sovereign default may
also trigger a chain of defaults among the US banks there, which may
turn into another global crisis.
Looking ahead, apart from ongoing Q4 results, Indian market may also
give more focus on the GST as 1^st July roll out day is now a reality as
par the Govt/various stake holders. But, the Govt should come clear as
there are twin issues of IT system and awareness/lack of preparedness
among tax payers/GST stake holders with barely five weeks left for the
implementation.
But, with so many tax slabs, especially in the service sector and with
so much rules & regulations, the present GST structure may be far from
the original concept of “one tax one nation” and may be much more
complex, than being a simple GST regime. Market may take more time to
digest this GST; Q2FY18 earnings may be affected for GST related
disruptions and market may be also concerned for GST compliance costs
and its adverse effect on the SMES & overall unorganized sector of the
Indian economy, which may find it quite difficult & unviable to continue
their business by paying full compliance costs of the GST & DeMo. Thus,
the projected thrust on GDP (around 1.5%) & corporate earnings because
of implementation of GST may also be under cloud.
Apart from GST disruption, Indian market may be also concerned for any
escalated conflicts between India & Pak due to increasing domestic
compulsions from both the nations; weekend reports from the HM & the Air
Force Chief calling for preparedness ( to be ready for war & appropriate
response) at short notice may be also affecting the sentiment.
<https://4.bp.blogspot.com/-MPvcVh8jra0/WSLq6FE76HI/AAAAAAAALyg/DveFo1V0yukvexzrYAmVnBLSm77nJZh7ACLcB/s1600/SGX-NF-PATTERN-22-05-2017.png>
SGX-NF
<https://2.bp.blogspot.com/-VKxSwv-6Ja8/WSLq8dJ-0MI/AAAAAAAALyk/xDl4moJooNMGwm10C8aB0ciypv6bXzk9QCLcB/s1600/BNF-PATTERN-22-05-2017.png>
BNF
<https://3.bp.blogspot.com/-NHSnsNdCK7I/WSLq_S1sAII/AAAAAAAALyo/_bfXZTqrTVk7LVbiNXNuVrXiRCFb1XJ3QCLcB/s1600/EURUSD-PATTERN-22-05-2017.png>
EURUSD
Article Courtesy: frontiza.com
<https://1.bp.blogspot.com/-34rq5QjfN2o/WSLsza5iHGI/AAAAAAAALy0/H7IyyLV0SGM29ScVugvByRWSgVEWolqtwCLcB/s1600/Frontiza-Logo.png>
--
Thanks & Regards,
Asis Ghosh
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