Market Wrap: 04/07/2017 (17:00)
NSE-NF (July): 9620 (-2; -0.02%) (TTM PE: 24.34; Near 2 SD of 25; TTM
EPS: 395; NS: 9613)
NSE-BNF (July): 23246 (-66; -0.28%) (TTM PE: 29.24; Near 3 SD of 30; TTM
EPS: 795; BNS: 23246)
For 05/07/2017:
*Key support for NF: 9620-9560/9535*
*Key resistance for NF: 9670-9725*
*Key support for BNF: 23100-23000*
*Key resistance for BNF: 23450-23650*
*Time & Price action suggests that, NF has to sustain over 9670 area for
further rally towards 9725-9775 & 9835-9875 in the short term (under
bullish case scenario).*
*On the flip side, sustaining below 9650 area, NF may fall towards
9560/9535 & 9495-9440 & area in the short term (under bear case scenario).*
*Similarly, BNF has to sustain over 23450 area for further rally towards
23550-23650 & 23800-23900 area in the near term (under bullish case
scenario).*
*On the flip side, sustaining below 23400-23350 area, BNF may fall
towards 23240-23100 & 23000-22800 area in the near term (under bear case
scenario).*
Nifty Fut (July) today closed around 9620, almost flat & at the opening
level and made a technical “Doji” (indecisive) after making an opening
session high of 9644 and day low of 9595. Indian market today opened in
subdued note tracking tepid global/Asian cues after NK test fired
another ballistic missile (ICBM) early in the morning today and sudden
plunge of the US techshares including Amazon (?) due to a Nasdaq data error.
Indian market may have focused on RBI’s action of raising bond limit for
the FPIS yesterday, which may be in response to China’s bond market
reform (link with HKG exchange to facilitate more FPIS investments).
Also, the domestic market may be continued try to gauge the impact of
GST on earnings & economy in the near term as initial euphoria is begun
to fade. Govt may be also itself concerned for short term disruptions,
shortage of products & consequent black marketing.
But, the good news may be that almost 22 states has already dismantled
their state border check posts, which may facilitate hassle free & quick
movements of goods between different states; rest of the states may also
follow soon; but E-Way bill’s complex mechanism may be also a concern in
the coming days.
As par US rating agency Fitch, Indian economy may have benefited in the
long term due to GST, but there may be short term impact on growth &
earnings due to the present complex format of GST having multiple slabs
of taxes on the same product/service category.
Govt may have sacrifice the original concept of GST (one tax one nation)
by its political compulsions and looking ahead, we may see some
medications our of the current format; this may be just a beginning to
track all the business transaction in India, where tax compliance is
ridiculously low due to high compliance costs. But this may also be a
great challenge for the Govt as 80% of Indian economy may be still
informal despite recent DeMo.
As par some reports, Indian Public Sector Banks (PSBS), which are
heavily stressed itself due to huge NPA may require additional Rs.25000
cr to cover for the latest IBC/RBI/NPA provisions; Govt may provide
around Rs.10000 cr in FY-18 and they have to tap the market for the
remaining amount apart from selling non-core assets (deleveraging). But,
going by their weak B/S most of the PSBS except SBI/BOB/PNB may face
considerable hurdles to raise adequate fund from the market.
Some private sector Banks in India may also need to raise additional
capitals to cover for the additional NPA/IBC provisions as directed by
the RBI. This may further dilute their equity & EPS and may also be
negative for their valuations in the short term.
Talking about NPA/IBC process, today most of the so called “dirty dozen”
including Essar Steel has approached the Gujarat HC against RBI, SBI &
other lenders for the IBC process at NCLT challenging the validity of
the RBI directive terming it as arbitrary.
Now, it’s almost sure that such IBC cases will be ultimately dragged to
the SC and it may take years to settle the legal position of IBC at HC &
SC. Thus, hopes of a quick NPA resolution through this IBC process may
also take longer than sooner and market may be also deeply disappointed.
Technically, Nifty Fut (July need to sustain over 9560-9535 area;
otherwise 9440 zone may come soon. Looking ahead, Indian market may
focus on Q2FY18 earnings to gauge the impact of any GST disruptions due
to de-stocking at various levels. Also, talk of increasing border
tensions at Ind-China LOC at Sikkim may keep the market in some risk-off
mode.
Today Nifty was supported immensely by RIL and dragged most by ITC after
yesterday’s blockbuster rally. In addition, other banking stocks, FMCG,
auto & infra were also under pressure today. But HDFC, INFY ( buzz of
Singapore JV to offer IT solutions to Banks) saved the day along with
RIL (R-Jio optimism and favourable Oil price) today.
On the broader market, debt laden stocks were also under heavy selling
pressure as Banks has initiated IBC against them with no visible signs
of eligible buyers for their stressed assets. As par some reports, Banks
may have to sacrifice (waive off) around 60% of their loan exposure in
large stressed accounts having unviable projects.
*Globally*, most of the Asian markets were in red from early green
except Australia following reports of suspected FX (USDCNY)
interventions by PBOC to support Yuan; today’s action by PBOC may be the
effort of its ongoing war against Yuan bears and to support the Chinese
corporates against USD appreciation and protecting them against higher
USD outflows in terms of debt & dividend payments.
Overnight, US market (DJ-30) closed in positive (+0.61%) in a holiday
shortened session with another record high supported by Banks/Financials
& oil related energy shares & upbeat Mfg PMI data; but dragged by
ongoing rotational slump in Tech/FAANG shares due to concerns of
stretched valuations and pessimistic outlook as easy money policy of the
global central banks may end soon.
Financials were in demand on Fed’s nod for higher dividend pay outs &
buy backs in addition to optimism about higher interest rates due to
high probable QT by the global central banks and subsequent higher NIM.
Oil was being supported by sudden fall in US oil rigs count last week
and talk of tensions in the GCC/Qatar issues.
Although US market is closed today, looking ahead SPX-500, which is now
trading around 2423, need to sustain above 2415 area; otherwise
2400-2385 zone may be in the card.
Elsewhere, Australian stocks (ASX-200) surged today (+1.50%) after RBA
keeps the rate on hold as expected; but the statement may be termed as
quite dovish against earlier market expectations of a hawkish tune,
keeping in view the ongoing QT chorus of the global central banks. As a
result, AUDUSD falls from the cliff and ASX-200 surged, AU economy being
a commodity & natural resources export oriented economy; ASX-200 today
was supported by financials, energy stocks.
Japan (Nikkei-225) was trading in slight positive earlier in the day
amid some fall in Yen; but news of another NK missile game (test) made
the Yen stronger for safe heaven demands and thus Nikkei-225 was closed
in slight red (-0.12%). But, South Korean stocks (Kospi-200) saw a
modest pull back after news of NK missile test.
Gold is now slightly up at around 1225 (+0.11%) on safe heaven demand &
some fall in USD after yesterday’s plunge as a result of upbeat US
economic data and ongoing bandwagons by global central banks for a QT.
Crude Oil (WTI) is also down today around 46.85 (-0.50%) after hitting
hurdle of 47 yesterday on favourable US oil rig counts; looking ahead
Oil need to break above 47.25 today for 47.95; otherwise may retrace to
46.25 area today.
Meanwhile, NK confirms that they have tested an ICBM quite successfully
by hitting the precise target with a flight of 39 mins and altitude of
2800 km & a capability of hitting target anywhere in the world;
certainly this is not a missile game anymore, if the NK claim is true
and thus there is some risk-off mood in the global/EU market and
European & Indian market also came into pressure.
All eyes may be now on Trump’s tweets for his reaction after NK missile
test; any adverse reaction from US may make the risk trade more
difficult from here.
Apart from geo-political concerns, market may also focus on FOMC minutes
tomorrow and US NFP data on Friday to gauge Fed’s appetite for a global
chorus of QT (Quantitative Tightening).
Meanwhile, *European/Global stocks* has recovered to some extent after
early jitters from NK led ICBM test, which may land as far as USA
(Alaska) according to the claim made by the NK authority. Incidentally,
NK has done similar tests on the same day as today in 2006 & 2009;
looking ahead, G-20 meeting may be an interesting forum to see the
reaction for NK.
Overall economic data from EZ today was mixed with tepid PPI & UK
construction PMI; but some upbeat jobless data from Spain. As a result,
EURUSD lost some strength today (-0.25%), bund yields were down and that
helped the EU stock market recovered from early losses helping the
Indian market also to some extent; financials has also supported the EU
market today amid a holiday thinned trade (US market is closed today).
*AUDUSD *is plunged today below 0.76 level (LOD: 0.7597) from session
high of 0.7688; thus at one point fall more than 1% after RBA sounded
more dovish contrary to market expectations of a hawkish tune in tandem
with the G-10 central bankers. RBA today hold the AU repo rate at 1.5%
as expected; but commented that a rising AUD would complicate the
economic adjustment; with today’s low at 0.7597, AUDUSD has corrected by
more than 1.5% from its recent top of 0.7715.
Apart from a strong AUD, RBA also raised some concerns on subdued AU
employment growth, tepid wage inflation and subsequent slow consumption
along with increasing leverage of housing loan. But, RBA was quite
optimistic on overall AU business conditions & growth and increasing
reflationary strength of global economy.
Before RBA today, AU retail sales for May printed quite upbeat at 0.6%
(MOM) against estimate of 0.2% (prior:1%), although it came lower than
April. Also, ANZ Roy Morgan weekly consumer confidence came quite
spirited at 114.5 against prior 111.8; but a dovish RBA has spoilt the
day for the AUD bull today.
Overall, recent AU economic data may be quite upbeat except pockets of
concerns and rebound of iron ore prices along with import growth from
China & attractive AUD yield may be some of the primary reasons behind
AUD strength. Today, sudden appreciation of Chinese Yuan (CNY/CNH) by
suspected PBOC intervention and yesterday’s upbeat US economic data may
have also affected the AUD.
Looking ahead, 0.75492-0.75330 zone may be a big technical support for
the AUDUSD and only sustaining below that it may further fall towards
0.7370-0.7330 area in the coming days with a defined top of around
0.7716-0.7745 before reaching 0.80 on the appeal of a carry trade
commodity currency despite dovish but neutral RBA.
Overall, increasing noise about global QT (Fed/ECB/BOE/BOC) may be a
coordinated effort by the G-10 central banks to signal the market well
in advance that era of easy money may end sooner rather than later and
along with that, ongoing geo-political jitters may have affecting the
risk-on sentiment; EM may be most affected in the days ahead.
Although, RBAwas sounded dovish today, going ahead they may be forced to
join the global QT chorus to simply maintain their policy parity with
USD everything being equal, if Fed actually starts the B/S tapering from
Sep’17 with an hike in Dec’17.
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SGX-NF
<https://1.bp.blogspot.com/-kEcG8iMqQpw/WVvJSTbJnII/AAAAAAAAMQU/GBUsCCqZd6wHiIXkLLVeBfKKURC0RxPhgCLcBGAs/s1600/BNF-PATTERN-04-07-2017.png>
BNF
<https://1.bp.blogspot.com/-JempiggqAck/WVvJVsFQs6I/AAAAAAAAMQY/q9bYBOK89DIiDwfn1x1canK1BsOTowR-QCLcBGAs/s1600/AUDUSD-PATTERN-04-07-2017.png>
AUDUSD
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