*US market slumped after Trump Jr released e-mail trails which revealed
Trump-Russia involvement in the US election.*
Market Wrap: 11/07/2017 (17:00)
NSE-NF (July): 9793 (+16; +0.16%) (TTM PE: 24.77; Near 2 SD of 25; Avg
PE: 18; TTM EPS: 395; NS: 9786)
NSE-BNF (July): 23603 (-60; -0.25%) (TTM PE: 29.67; Near 3 SD of 30; Avg
PE: 20 TTM EPS: 795; BNS: 23585)
For 11/07/2017:
*Key support for NF: 9755-9715*
*Key resistance for NF: 9835-9875*
*Key support for BNF: 23600-23400*
*Key resistance for BNF: 23800-23900*
*Time & Price action suggests that, NF has to sustain over 9835 area for
further rally towards 9875-9915 & 9975-10050 in the short term (under
bullish case scenario).*
*On the flip side, sustaining below 9815 area, NF may fall towards
9715-9665 & 9600-9560 area in the short term (under bear case scenario).*
*Similarly, BNF has to sustain over 23800 area for further rally towards
23900-24000 & 24115-24250 area in the near term (under bullish case
scenario).*
*On the flip side, sustaining below 23750 area, BNF may fall towards
23600-23400 & 23300-23000 area in the near term (under bear case scenario).*
Nifty Fut (July) today closed around 9793, almost flat (+0.16%), but
well off the day high of 9829 and made a closing session low of 9781
amid some last minutes selling after both result of Indusind Bank &
South Indian Banks shows incremental trajectory of NPA/NPL (stressed
assets).
Today, Indian market (Nifty-Fut) opened around 9800 at another record
level & almost 26 points up tracking positive global/Asian cues and some
surge in Hong Kong market (HSI) boosted by tech stocks. Most of the
Asian markets including China were trading in positive zones today
tracking rebound in Tech shares after recent sell off as investors may
be again focusing on the sector ahead of earnings season.
Overnight US market (DJ-30) was closed absolutely flat (-0.03%)
supported by Techs, Banks amid Q2 earnings optimism, which will start
from today; market is expecting around 8% growth in SPX-500 earnings on
YOY basis this time on an average. Also energy related shares lend some
support to the US market yesterday as Oil rebounds above 44.50 mark on
buzz about some production cut requests to Libya & Nigeria.
Going forward, Indian market may also focus on Q2 earnings, which is
resumed from today with report card from Indusind & South Indian Bank;
although report card of Indusind Bank is inline of market estimates
(mixed); South Bank mat have disappointed today at a glance. Indusind
Bank closed almost flat today, but South Banks closed almost 4% lower.
Also ongoing GST implementation and its effect on the economy and
earnings on the corporate India may be in focus in addition of further
action from P-Notes FNO holders after SEBI restriction circular; for the
last two days, we have seen some short covering from them in order to
comply with the SEBI instructions. The big question is will they also
unwind their long positions amid strict regulations by the SEBI and
another probable subdued earnings quarter.
Tracking global cues, Indian market today was supported by Techs (IT),
such as INFY, TCS & TECHM and also Tata Motors initially due to P-Notes
FNO short covering; but later they also have surrendered some of the
intra gains, pushing the Nifty lower.
Regarding Q1FY18 earnings, market may be not so much enthusiastic amid
concern of Pre-GST disruptions and incremental NPA provisions (PSBS);
but expectation may be quite high from some Private Banks this time.
At present, TTM EPS for Nifty may be around 395 (FY-17) and at 9800
Nifty (Spot), TTM PE is around 24.81, just a bit lower of 2-SD bubble
zone of 25 and may be very expensive against its long term average (fair
value) of 18.
At present run rate, FY-18 projected EPS may be around 418 and in that
scenario, projected fair value of Nifty may be around 7525 at PE of 18
(average EPS growth may be around 8%; whereas TTM PE is quoting around
25 !!); clearly the Indian market is rallying on hopes of earning
recovery to 15% from 8% (i.e. almost 100% jump !!) and power of
liquidity; but the earning recovery story is elusive so far repeatedly.
Indian market today got some boost from lower CPI estimate to be
released tomorrow at around 1.70% for June against prior figure of
2.18%; IIP for May is slated to come around 1.9% against April figure of
3.1%. Thus dual combination of lower growth (GDP/IIP) and lower headline
CPI may be ideal for RBI to cut in Aug’17.
But, RBI’s Patel being an inflation hawk may take the “wait & watch”
approach to see more evidences of lower inflation and to change its
policy stance again from neutral to accommodative. Also, core CPI of
India may be quite sticky around 4.5-5% and coupled with that
apprehension of GST disruptions, de-stocking & inflations and global
chorus of QT may force RBI/MPC to be on the neutral side just to keep
the policy parity with USD at present ideal level for the central Bank.
RBI may not disrupt the attractive Indian bond market by being ultra
dovish on the back drop of a stressed corporate sector and fragile Banks
(PSBS & some private Banks) and limited transmission capabilities of the
Banks due to various structural issue.
Looking ahead, Nifty Fut (July) has to sustain above 9835-9875 area for
conquering the 10k milestone; otherwise expect some correction amid
increasing chorus of QT tunes by the global central banks (Fed/ECB) and
high probable tepid Q2 report cards.
Today, Nifty was supported by Hindalco, Bajaj-Auto, Tata Motors
(earnings optimism & P-Notes short covering), NTPC, BPCL, M&M
(optimistic outlook) and INFY/TCS (global tech rebound and P-Notes short
covering ahead of result). Nifty was today dragged by Idea, Bharti
Telecom, BOB, ITC, Lupin, SBI & ICICI/AXIS Banks.
*Asia-Pacific market update:*
Elsewhere, Australia (ASX-200) closed almost flat around 5727 (+0.10%),
paring early gains tracking movements of commodities.
Japan (Nikkei-225) is closed around 20195, up by almost 0.57% tracking
weakness in Yen ahead of Yellen’s testimony and BOJ jawboning to keep
JGB yields lower at any cost. Also, Japanese market is being supported
by some tech stocks as well as tech investor stocks such as Soft Bank today.
Hong Kong (HKG33/HSI) is trading upbeat around 25900, up by almost 1.5%
supported by blue chip Techs such as Tencent; today Hong Kong market may
be supporting the regional (Asia) equity sentiment significantly.
China (SSE) is also recovered from early losses and is now trading
around 3224, up by almost 0.33%; earlier it was down for some regulatory
tightening buzz for insider trading norms by the fund managers.
Today, PBOC has kept a neutral stance with no drainage by RR and
injection of equivalent fund through OMO after 12 consecutive days of
outflow of around 780 bln Yuan.
*European market update:**Europe Also Trading Rangebound For Lack Of Any
Meaningful Cues Ahead Of BOC & Yellen’s Testimony Tomorrow:*
Meanwhile, European market is trading in a narrow range for lack of any
meaningful cues ahead of BOC and Yellen’s testimony tomorrow. Overall,
defensive sector is dragging the EU market, while some M&A news is
supporting the market.
Germany (DAX) is trading around 14468, almost up by 0.20%; but off the
day high; France (CAC) is in negative at around 5152 (-0.25%), while
Italy (MIB) is trading in slight positive at around 21226 (+0.17%).
FTSE is trading in red around 7336 (-0.45%) after strength in GBP on the
hopes for some hawkish stuff in a change of stance from BOE’s Dy Gov
(Broadbent), a known dove. But to the utter disappointment of GBP bulls,
he has not offered any comments about UK monetary policy and the cable
slumped thereafter.
Earlier today, GBPUSD may have also got some strength from an upbeat BRC
retail sales data, which flashed as 1.2% for June against estimate of
0.5% (prior: -0.4%). Also, comments from UK’s Foreign Minister (Johnson)
that Brexit bill from EU is “extortionate” may have dampened the spirit
of GBP bulls as it may indicate more Brexit uncertainties.
*Oil on a roller coaster drive amid OPEC squabbling:*
Oil is now trading around 44.50, almost flat but off the session low of
43.82 amid ongoing OPEC squabbling for more production cuts.
In the early Asian session today, Crude Oil (WTI) has made a session
high of around 44.88, up by almost 0.50% amid optimism of some oil
production cuts by Libya & Nigeria; but still there is significant
apprehension of supply glut and even if they cut to some extent, it may
be very insignificant, considering overall supply & demand dynamics.
Recent supply glut of Gasoline & low demand of the same may be also
hurting the sentiment of Oil bulls.
Amid all these apprehensions today, Oil slumped suddenly after reports
that Saudi Arabia has breached the OPEC-NOPEC production cut agreements
by producing little more in June at 10.07 mbpd against quota of 10.058
mbpd; although it may be very negligible, the June figure is quite high
compared to May figure of 9.88 mbpd; subsequently Oil hits the LOD at
around 43.82.
Overall, this fractional deviation from Saudi may be also indicating
that they are no longer willing to take leads in production cuts and
thus other members also don’t need to follow either; the whole OPEC
production cut narratives may be also in grave danger.
Another point may be that since start of this OPEC-NOPEC production cut
agreement, Saudi Arabia has taken a lead by producing less to cover for
extra productions required from some other members due to various
geo-political & legacy issues. So, this may be an indication of a breach
of trust among OPEC producers. Before Dec’16 (OPEC-NOPEC agreement),
Saudi Arabia usually pumped around 14.75 mbpd.
Again, just minutes before a Qatar source commented that the nation is
committed to OPEC production cuts and Oil is heading towards HOD of
44.88; looking at the chart, Oil now needs to stay above
44.95/45.15-45.5 area for any further rally towards 46.70-47.60 area;
otherwise 43.70-42 zone may come soon as Qatar is not a significant
player in the Oil field.
On the broader picture, consecutive closing below 42 area, Oil may
further fall towards 37-35 zone in the near term in the ongoing Oil duet
between Sheikhs (Arab producers) & Shales (US producers) and production
cut squabbling among OPEC-NOPEC producers.
*Update:*Oil further rallied to 45.26 just now after OPEC confirmed 97%
overall production cut compliance in June. Also EIA trims down both US
crude production estimate along with slight downward revision for
2017-18 global oil demand which may be positive for Oil as it is
indicating rebalancing of oil supply & demand by 2018.
USDJPY and US stocks are slumping further as Trump Jr will testify
before US senate intelligence committee shortly.
<https://3.bp.blogspot.com/-NZmn_jwauEQ/WWUAEfng_hI/AAAAAAAAMU4/ebwPhkhxNLAn-vnvpm6HMoBTI832dbilQCLcBGAs/s1600/SGX-NF-PATTERN-11-07-2017.png>
SGX-NF
<https://4.bp.blogspot.com/-J-zzQ1tun84/WWUAJFK0WqI/AAAAAAAAMU8/IZ5Sd9Lql1Ee9cOeRPHRw4rNDgUMiX0iACLcBGAs/s1600/BNF-PATTERN-11-07-2017.png>
BNF
<https://1.bp.blogspot.com/-t-sICxPaWbI/WWUAMqFwygI/AAAAAAAAMVA/TrbXIhyKP44yMvfk_cr0kBMHNtNRFYhIQCLcBGAs/s1600/CRUDE%2BOIL-PATTERN-11-07-2017.png>
CRUDE OIL
--
Thanks & Regards,
Asis Ghosh
--
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