*Nifty Closed The July Exp Above 10k & Up By Almost 5% On Q1 Earning
Optimism, Smooth GST Roll Out, Good Monsoon, RBI Rate Cut Hopes, Forced
P-Note FNO Short Covering & Supportive Global Cues (Fed); What’s Next?*
Market Wrap
<https://www.iforex.in/news/nifty-tumbled-more-100-points-record-intra-high-last-hour-fno-exp-close-almost-flat-concern-stretched-valuation-mixed-global-cues-39375>:
27/07/2017 (17:00)
NSE-NF (Aug): 10070 (+5; +0.05%) (TTM PE: 25.39; Abv 2 SD of 25; Avg PE:
20; TTM EPS: 395; NS: 10021)
NSE-BNF (Aug): 24975 (+233; +0.94%) (TTM PE: 31.35; Abv 3 SD of 30; Avg
PE: 20 TTM EPS: 795; BNS: 24922)
For 28/07/2017:
*Key support for NF: 10050-10000*
*Key resistance for NF: 10115-10205*
*Key support for BNF: 25000-24800*
*Key resistance for BNF: 25150-25275*
*Hints for positional trading:*
*Time & Price action suggests that, NF has to sustain over 10205 area
for further rally towards 10275-10325 & 10380-10455 in the short term
(under bullish case scenario).*
*On the flip side, sustaining below 10175-10150 area, NF may fall
towards 10100/10050-10000 & 9930-9860 area in the short term (under bear
case scenario).*
*Similarly, BNF has to sustain over 25150 area for further rally towards
25275-25485 & 25695-25865 area in the near term (under bullish case
scenario).*
*On the flip side, sustaining below 25100-25050 area, BNF may fall
towards 24800-24600 & 24400-24200 area in the near term (under bear case
scenario).*
Nifty Fut (Aug)/India-50 today closed around 10070, almost flat (+0.05%)
after making a day high of 10150 and closing session low of 10049, thus
erasing nearly all the intra gains fuelled by NAMO’s back door entry
into Bihar (more political stability for India), earning optimism and an
apparent dovish FOMC statement yesterday.
Indian market may have succumbed today in the last hour of trade because
of concern of stretched valuation & weak European market amid fear of an
imminent QE tapering in the months ahead by Fed (Sep/Dec’17) & also ECB
(Jan’18).
Also, strength in INR (weak USDINR) may have prompted selling in export
heavy IT, Pharma, RIL & Tata Motors (cross currency headwinds) coupled
with subdued earnings from some of the blue chips; so far private Banks
are reporting a robust set of earnings in line with market estimates.
Almost 60% of Nifty scrips are export heavy counters. Thus a weak USDINR
may not be good for them & the overall market.
Indian market (Nifty-Fut-Aug) today opened around 10088
<https://www.iforex.in/news/asia-trading-upbeat-despite-fall-usd-amid-fed-dilemma-dovish-tilt-39339>;
at another record high leveltracking domestic earnings & political
optimism coupled with mixed global cues after FOMC statement looked
somewhat dovish yesterday.
Overall it seems that Fed is hawkish on QE tapering (from Sep/Dec’17?),
but dovish/soft on next rate hike in Dec’17; thus Fed’s dilemma about US
inflation may be preventing it for the 3^rd rate hike in 2017 and to
some extent contrary to the earlier market expectations or Fed’s own dot
plots projection and its credibility may be at stake; subsequently USD
is slammed across the board; although apart from inflation aspect, Fed
may be optimistic about other aspects of the US economy, including
employment.
USD plunged yesterday
<https://www.iforex.in/news/usdjpy-recovered-almost-half-its-post-fomc-decline-hopes-upbeat-us-gdp-data-tomorrow-39379>
after FOMC statement sounded like more dovish than market expected as
Fed appeared concerned over the US core inflation trajectory, ongoing
political drama & poor visibility of Trumponomics. Thus, Fed has put
some caveats for the QE tapering even from Sep/Dec’17 subjected to
smooth sailing of US debt limit and no probability of any terrible
political events like Trump impeachment.
Thus, Fed may wait for Sep’17 meeting to announce a definitive plan for
the QE tapering from Dec’17 instead of another rate hike and may hike
thrice in 2018 (1^st hike may be in March’18), if everything from
politics & economics (growth, inflation & employment) has gone well for US.
Previously, market may be expecting some kind of definitive signal for
the QE tapering from Sep’17 itself, but yesterday’s FOMC statement has
not indicated such perception with phrasing like “relatively soon,
provided that the economy evolves broadly as anticipated”. The word
“relatively soon” rather than only “soon” may be an indication that it
may be deferred further to Dec’17, if such condition warrants. FFR is
now showing around 45% of a Dec’17 rate hike, down from 50% before FOMC.
Thus, lack of an ultra hawkish, confident & transparent Fed may have
disappointed the USD bulls yesterday; but a central bank will never
announce any major policy action prematurely; market has to wait for
Sep’17 for a definitive action plan by Fed; more signals may come out
from the Aug Jackson Hall meet and various forthcoming Fed speakers
along with next batch of US economic data like GDP, NFP, retail sales &
inflation.
USD also sold off on some other minor tinkering of words like core
inflation is running below 2% instead of previous phrase of running
somewhat below 2%; but all these may be an act of overreaction and long
unwinding/fresh shorts as USD has already rallied a bit even before the
FOMC.
But, more than Fed & USD, sudden strength of EUR just before the FOMC
statement because of hawkish jawboning by ECB’s Nowotny, a known dove
may have more bearing on the European markets later on as a strong EUR
and a definitive hints of ECB QE tapering form Jan’18 along with Fed’s
QT may not be good for the risk assets (EQ).
This may be purely coincidental, but may be also a part of coordinated
action, in which ECB’s Nowotny popped up just before FOMC and commented
that he agrees with Weidmann, who said “This is time to slowly go off
gas” and he clearly indicated that ECB is discussing actively about QT;
but at the same time he also believed that negative rates were necessary
for a while; question of distortion is dangerous.
Overnight, US market (DJ-30) also closed at another record high on
Boeing & other upbeat earnings, dovish Fed, lower USD, which is helpful
for US corporates, exports and the imported inflation. A lower USD may
be also being preferred by Trump & Co to make “America Great Again”.
Thus, Fed’s current policy/strategy may be also consistent with US
administration, wishing for a lower USD to promote US growth as being
done by the other major G-10 countries. Without Boeing contribution
yesterday, US market could have ended in red!!
Back to home, Indian market (Nifty-Fut-Aug) today opened around 10088;
at another record high leveltracking domestic earnings & political
optimism coupled with mixed global cues after FOMC statement looked
somewhat dovish yesterday.
Today, RBI may have also intervened in the FX market indirectly through
two big PSU banks to buy the USD in order to stem the strength of INR
following a dovish Fed and increasing political stability of India; also
RBI may soon issue some guidelines about increase of FPI limit in the
corporate bond market due to huge demand for Indian debts and may also
allow repo lending against collaterals of eligible corporate bonds.
All these developments may have boosted the Indian market sentiment
today; but at 10100 Nifty, stretched valuation (TTM PE: 25.57) concern
may have also kept the market rally in check. Thus we have seen some
long unwinding/profit booking/fresh shorts (?) in the last hour of trade
and Nifty tumbled from the resistance zone of 10115-10150 area to close
almost flat.
Today Nifty was supported by Yes Bank, HDFC duo, Indusind Bank, SBI &
HUL, while it was dragged by DRL, TCS, INFY (buzz of CEO exit?), RIL,
BOB, ITC & Bharti Airtel. Almost 30% of the Nifty-50/51 scrips were
closed in deep to moderate red today.
But, increasing concern of central bank QT (Fed & ECB), a strong EUR and
some earnings disappointments may have kept the European market under
stress today and thus Indian market may have also came under pressure in
the last hour of trade.
Elsewhere, Australia (ASX-200) closed almost flat around 5785 (+0.10%)
on strength of AUDUSD following China optimism; but being supported by
commodities (oil & metals) & mining stocks. As par reports, some big AU
banks may be considering relocation outside AU for the tax concerns.
Japan (Nikkei-225) was also closed almost flat around 20080 (+0.15%) on
strength of Yen (lower USDJPY); but being helped by energy & tech
related stocks to some extent.
China (SSE) was in slight red around 3245 (-0.08%), but well of the day
lows amid ongoing regulatory tightening and strength in Yuan; PBOC today
fixed USDCNY a little lower at 6.7307 vs 6.7529, which is at multi month
low (Oct’16) and also injected a nominal 20 bln Yuan. Looking ahead,
China may be a big beneficiary for its bond market due to enhanced FPI
participation and ongoing financial market reform.
Hong-Kong (HKG-33) was in deep green around 27130 (+0.80%) following
optimism about commodities & techs and driving the overall regional
sentiment.
European markets are now trading in moderate red tracking subdued report
card from some of the blue chips like DB, Airbus in a day of earning
deluge today; almost 85 corporates among the Stoxx-600 will report their
earnings today; so far report card from Nokia & BASF were upbeat. Pharma
giant Astra is in severe pressure today (-15%), after one of its
potential block buster anti cancer product failed in the trial, thus
resulting in weakness among the health care stocks across the region.
FTSE-100 is now trading around 7442, almost down by 0.15% tracking
higher GBP and some earning disappointment.
Similarly DAX-30 is also down by 0.60% at around 12230, dragging the
overall EU market sentiment after DB debacle.
CAC-40 & IBEX-35 is trading almost flat around 5190, thus limiting the
overall fall in Stoxx-50 (-0.01%), with help from AEX (+0.43%), BEL-20
(+0.77%) & SMI (+0.75%).
Crude Oil (WTI) is also trading almost flat today around 48.75 despite
better than expected drawdown report for EIA yesterday; surge in
underlying production may be one of the reasons behind its flat movement
today.
<https://2.bp.blogspot.com/-fvmv2tqOpPc/WXoVhnbQBqI/AAAAAAAAMgI/zAlSKcYNMEkPvdy02-jN93UCnVSRGUq0wCLcBGAs/s1600/SGX-NF-PATTERN-27-07-2017.png>
SGX-NF
<https://4.bp.blogspot.com/-1BMc7xj-YvI/WXoVtRJkCAI/AAAAAAAAMgM/6ClzOP7Ku00isglGwE5T5Tksm1e3MV7pQCLcBGAs/s1600/BNF-PATTERN-27-07-2017.png>
BNF
--
Thanks & Regards,
Asis Ghosh
--
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