*Nifty closed the eventful week almost 2% higher marked by P-Notes FNO
forced short covering and an apparent dovish Fed; what’s next?*
Market Wrap: 14/07/2017 (17:00)
NSE-NF (July): 9903 (+16; +0.16%) (TTM PE: 25.03; Near 2 SD of 25; Avg
PE: 18; TTM EPS: 395; NS: 9886)
NSE-BNF (July): 23970 (+91; +0.38%) (TTM PE: 30.11; Near 3 SD of 30; Avg
PE: 20 TTM EPS: 795; BNS: 23938)
For 17/07/2017:
*Key support for NF: 9855-9790*
*Key resistance for NF: 9930-9975*
*Key support for BNF: 23950-23750*
*Key resistance for BNF: 24000-24115*
*Time & Price action suggests that, NF has to sustain over 9930 area for
further rally towards 9975-10050 & 10100-10195 in the short term (under
bullish case scenario).*
*On the flip side, sustaining below 9910 area, NF may fall towards
9855-9790 & 9715-9670 area in the short term (under bear case scenario).*
*Similarly, BNF has to sustain over 24000 area for further rally towards
24115-24250 & 24250-24450 area in the near term (under bullish case
scenario).*
*On the flip side, sustaining below 23950 area, BNF may fall towards
23750-23600 & 23500-23300 area in the near term (under bear case scenario).*
Nifty Fut (July) today closed around 9903, almost flat (+0.15%) after
making an opening minutes high of around 9907 and day low of 9858.Indian
market today opened around 9907, almost 22 points up tracking mixed
global cues and in line with estimate but surprise in guidance report
card from Infy. But, it could not hold the opening gains as long
unwinding soon kicked on as Nifty conquered the 9900 milestone and
valuations are also quite stretched at Nifty TTM PE around 25.
But the Indian market today also rebounded from the day low after plunge
in WPI, which may again spur the rate cut hopes by the RBI and it gained
more momentum after some reports of Govt extending more sops to the
export sector amid ongoing strength in INR and some report of optimism
over Indian economy, political stability and Govt’s ongoing effort of
incremental reform may have boosted the sentiment, prompting for more
forced P-Note FNO short covering and some value buying.
A recent survey showed that almost 73% of Indian public trust their
Govt, which is highest in the world now; i.e. India may be the most
politically stable democracy as of now.
Also, some report that ECB may not inclined to specify its QE tapering
date may have boosted the EM market sentiment, including India towards
closing session.
Most of the Asian markets were trading almost flat today tracking
subdued global/Asian cues after tepid GDP forecast of China by Fitch in
the morning today. Although, Fitch has affirmed China’s rating at A+
with stable outlook, it has downgraded the GDP to 6.5% in 2017 & 5.9% in
2018, citing tighter monetary conditions. Overall, China is stable due
to the strength of its external fiancés and macroeconomic track record.
Overnight US market (DJ-30) also closed almost flat (+0.10%) amid mixed
PPI data and QT & valuation concern by ECB & Fed.; but supported by
Banks & Financials and also retails (consumption) stocks amid optimistic
sales figures ahead of key earnings today.
As par reports, Draghi may appear in the Aug Jackson Hall meet and
signal the QE tapering of ECB in 2018; thus it may be a co-ordinated QT
move by Fed & ECB and subsequently all the other major G-10 central
Banks including BOJ & BOE may also join; BOC has already hiked by 0.25%
day before yesterday after 2010 and may further hikes in 2017-18.
Also, as par some reports, BOJ may downgrade its inflation target in its
forthcoming meet on 20^th July and thus it may also be preparing for an
eventual QT just to follow the Fed to keep the parity between JPY & USD
at present ideal level.
US market yesterday also came under some stress after Yellen sounded
less dovish in her 2^nd day of testimony and another influential Fed
member (Brainerd) again commented about stretched valuation of US equity
assets. All eyes now may be on the US CPI report today after mixed PPI
report yesterday as subdued inflation may be the prime concern for Fed
now to hike further in 2017; although it may start the QE tapering from
Sep’17 itself.
Back to home, although Indian market (Nifty/India-50) is now eyeing for
the 10k Mt’ Everest, valuations may be already quite stretched and the
Q1FY18 earnings may not help much this time also. There are various
disturbing signs that Indian/Global bull market cycle may be at its peak
and going forward subdued earnings, QT chorus by global central banks
and growing US political jitters (high probability of a Trump
impeachment) & poor visibility of Trumponomics might be some of the
triggers for downside.
After yesterday’s tepid earnings from TCS, today’s report card from INFY
may also be termed as subdued or just in line with market expectations
except some surprised upgrade guidance of 1-2%; but Infy could not hold
its initial gain and closed in negative (-0.51%) after fine prints of
the report card shows some red flags despite a an apparent relaxed
management.
There was also some unconfirmed report that SEBI may take pre-cautionary
action against the new listings (IPO), which are quite volatile in
nature and keep those stocks in the T2T segment; i.e. compulsory
delivery with no intra speculation. All such scrips today crashed and
may have also affected the overall market sentiment (AU Small Fin, CDSL,
HUDCO, Avenue Supermart, Eris & Tejas).
Meanwhile, India’s WPI inflation for June flashed as 0.90% against
estimate of 1.60% (prior: 2.17%); although this may be an effect of
favourable base effect, the subdued WPI (PPI) may be also indicating
some contraction in economic activity and tepid underlying demand.
In India, a lower CPI is good news as it may provide the central Bank to
cut the high interest rate regime, which may be a legacy issue; but
concern of deflation and lower growth (GDP) may also be looming in.
Looking ahead, Nifty Fut (July) has to sustain over 9930 for further
rally to the 10k Mt’ Everest; otherwise there may be some time & price
correction.
Today Nifty was supported by Pharma, Oil & Gas but dragged by IT & Auto
stocks.
Meanwhile, India’s Trade Balance for flashed as $12.96 bln against
estimate of 12.50 (prior: 13.84 bln) and exports growth slows in June on
MOM basis. Exports grew at 4.4% to $23.56 bln in June on YOY basis, but
the growth slows from May (+8.3% rise). Imports jumped by 19% to $36.52
bln on account of surge in import in Gold ahead of GST tax increase.
The slower export growth in June may be a result of strong INR and
subdued demand for Indian goods in the international market.
Elsewhere, Australia (ASX-200) closed around 5751, up by almost 0.20%,
but off the day highs, tracking strong AUDUSD and subdued China GDP
forecast by Fitch.
Japan (Nikkei-225) also closed almost flat (+0.09%) at around 20120 amid
some pullback in Yen after mixed US PPI data and some optimistic tones
from Yellen yesterday; USDJPY got some strength yesterday.
China (SSE) was also flat around 3215 (-0.09%) on subdued GDP forecast
by Fitch and on apprehensions of some restructuring about its financial
system. Hong Kong (HKG-233) is also almost flat around 26365.00.
Today commodity currencies (NZD/AUD) are also gaining strength after BOC
hiked after 7 years and amongst the 1^st in the G-10 central Banks apart
from Fed; market may be expecting similar rate hike action from RBA &
RBNZ in the months ahead; NZX-50 today rose by around 0.4%. South Korean
market (Kospi) today added 0.2% amid record closing highs.
Oil (WTI) is also almost flat around 46.05, tracking OPEC squabbling and
subdued forecast of demand & supply rebalancing ahead of Baker Hughes
Oil Rigs figure later today; of late Oil bulls may be concerned about
increasing crude Oil (US shale) production despite surprised drawdown.
*Technically, Oil is now required to sustain above 46.55-46.75 zone for
next leg of rally towards 47.30-47.50 & 48.30-50.00 zone; otherwise it
may fall again and sustaining below 45.40-45.00, may further fall
towards 43.70-42.00 handle in the coming days.*
Gold on the other hand is now trading around 1218, almost flat (+0.04%),
but off the recent low of 1204.62 after Yellen sounds less hawkish
(dovish) in her 1^st testimony. Although Gold is a victim central Bank
jawboning and a high probable QT along with a global environment of
subdued inflation despite unlimited QQE, it’s being supported by ongoing
geo-political jitters and appeal of a safe haven hard asset at time of
crisis. Also, eternal physical demand from India, China & other SE
countries may be supporting the Yellow metal.
In a country like India, with little financial literacy among the common
people, Gold is the most preferred mode of investments among masses.
Also, Gold is being treated here as a “family silver” and a necessity
requirements for marriage & some religious places/functions and together
with that, steady demand from the so called “black money” holders are
also supporting the physical demand from India despite Govt effort of
DeMo to curb the use of Gold.
*Looking at the chart, Gold now need to sustain above 1225-1235 zone for
any further recovery to 1245-1260 area; otherwise, sustaining below
1214, it may again fall to 1205-1195 & 1175-1160 zone in the coming days
amid increasing QT chorus by global central Banks (Fed/ECB).*
Elsewhere, European market is now trading in slight red as EUR jumped on
ECB QE tapering buzz and fall in USD after tepid CPI & Retail sales
report. Also, some adverse report about Trump’s alleged Russian
connection and his knowledge about the meeting between his son & the
Russian lawyer may have dampened the overall risk-on sentiment. Banks &
financials are in pressure after disappointed result from some big banks
like JPM.
FTSE is now trading around 7405 (-0.12%) on strength in GBP and pressure
on Pharma space (Astra).
DAX-30 is now around 12590, down by 0.38% on strength of EUR; similarly
CAC-40 & MIB-40 are also down by 0.36% & 0.55% as of now.
Meanwhile, *GBPUSD *is now blasting around 1.3060, up by almost 0.90%
after reports that UK may admit the demand of Brexit divorce fees of
$114 bln, which was a major hurdle for a meaningful Brexit negotiation
along with other issues like EU citizens, EU Court of Justice
jurisdiction and Ireland border. Thus, probability of a smooth or so
called soft Brexit has brightened and GBPUSD is getting strength apart
from the factor of tepid US economic data today (fall in USD across the
board).
Also, from the ongoing hawkish tunes from various BOE/MPC members may be
indicating that despite significant UK political & Brexit uncertainty,
BOE may be forced to follow the QT path of Fed/BOC/ECB and thus GBP is
getting more boost.
*Looking at the chart, GBPUSD now has to sustain over 1.30905 for
further rally towards 1.3105-1.32850 & 1.34355/845-1.35295; otherwise,
sustaining below 1.30525-1.30485, it may fall again towards
1.29180-1.28310 in the coming days.*
*SPX-500 Jumped To 2450 & USDJPY Almost Slumped To 112 After Tepid US
Economic Data:*
After tepid US economic data today SPX-500 (US-500) rallied to almost
2450 and USDJPY slumped to 112.27 on the perception that Fed may not
hike even in Dec’17; thus combination of higher US growth and lower
rates may help US corporates and equities; i.e. it may be a goldilocks
situation for US stock market right now with dovish Fed.
Today’s US economic data (June):
Core CPI-MOM: 0.1 %( EST: 0.2%; PRIOR: 0.1%)
Core CPI-YOY: 1.7% (EST: 1.7%; PRIOR: 1.7%)
CPI-MOM: 0.0% (EST: 0.1%; PRIOR: -0.1%)
CPI-YOY: 1,6% (EST: 1.7%; PRIOR: 1.9%)
CORE Retail Sales-MOM: -0.2% (EST: 0.2%; PRIOR: -0.3%)
Retail Sales-MOM: -0.2% (EST: 0.1%; PRIOR: -0.1%-R)
IIP-MOM: 0.4% (EST: 0.3%; PRIOR: 0.1%)
U-MICH Cons-Sentiment: 93.1 (EST: 95; PRIOR: 95.1)
Overall, on headline basis, US CPI & Retail sales flashed very subdued
and may force Fed to stay on the side line at least till Dec’17; but
closer scrutiny may reveal that wage component (Avg. weekly & hourly
earnings) has increased (+1.1% & +0.8% against prior 0.6%) and that may
give Fed some confidence going forward.
In any way, it’s now very clear that after three hikes in the last six
months or two hikes in 2017 against original projection of three hikes
(dot-plots), Fed may not show any urgency for the 3^rd hike immediately,
even if today’s CPI data came blockbuster.
In lieu of rate hike, Fed may now focus on its QE tapering from Sep’17
and thus it may wait patiently till Dec’17 to watch both the trajectory
of US inflation and the effect of its QE tapering on the US economy &
the market and depending on that it will decide for its next rate hike
either in Dec’17 or in 2018. As of now, market may be expecting total 3
hikes in between Dec’17 to Dec’18.
Looking ahead, a definitive QE tapering plan from Fed (quantum & time)
may give support to the USD; as of now, market may be assuming $10
bln/pm QE tapering from Sep’17 onwards for the first 6 months with
another rate hike of 0.25% and thereafter tapering may be increased up
to $50 bln/pm from Q2CY18, if everything is fine until a reasonable B/S
size is achieved (total QE bond holding may be around $3.5 tln against
the overall B/S size of $4.5 tln).
*Looking ahead, for next leg of rally, SPX-500 may need to sustain above
the 2455 area for 2495-2505 zone; otherwise it may come down. For
USDJPY, 112.00-111.60/40 area may be the hopes for the USD bulls now.
*Ongoing US political jitters regarding Trump’s Russian connection may
take serious turn in the days ahead and that may be bad for both USD &
US/global stock market (risk assets).
<https://2.bp.blogspot.com/-vKgS54CefnI/WWj88k0CcHI/AAAAAAAAMXs/kr1g5kCvgRo0bbT_YMZjWG00fj2t6Ra9wCLcBGAs/s1600/SGX-NF-PATTERN-14-07-2017.png>
SGX-NF
<https://1.bp.blogspot.com/-7R5eZ211HKU/WWj8_1W-sVI/AAAAAAAAMXw/e-_-4UZn2Fsa-oHTCiMWwPxC4GmkNBiDACLcBGAs/s1600/BNF-PATTERN-14-07-2017.png>
BNF
<https://4.bp.blogspot.com/-n3VS1iXLaSg/WWj9O7YgdjI/AAAAAAAAMX8/l4RCUMOMkyol_0PUwA3x2qZrPN2LAzj-QCLcBGAs/s1600/SPX-500-PATTERN-14-07-2017.png>
SPX-500
<https://1.bp.blogspot.com/-8pkq2A3iX3A/WWj9FUElO8I/AAAAAAAAMX0/v3C1Ou9Dk6U6U8ay3jcAu4jX4PBXddsLQCLcBGAs/s1600/GBPUSD-PATTERN-14-07-2017.png>
GBPUSD
--
Thanks & Regards,
Asis Ghosh
--
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