Market Wrap
<https://www.iforex.in/news/nifty-snapped-5-days-slump-roared-back-short-covering-amid-positive-global-cues-nk-tension-eases-40229>:
14/08/2017 (17:00)
NSE-NF (Aug):9809 (+68; +0.70%) (TTM PE: 24.79; Nr. 2 SD of 25; Avg PE:
20; TTM EPS: 395; NS: 9794)
NSE-BNF (Aug):24183 (+98; +0.41%) (TTM PE: 30.33; Abv 3 SD of 30; Avg
PE: 20 TTM EPS: 795; BNS: 24116)
For 16/08/2017:
*Key support for NF: 9775-9705*
*Key resistance for NF: 9860-9930*
*Key support for BNF: 24000-23800*
*Key resistance for BNF: 24350-24600*
*Hints for positional trading:*
*Time & Price action suggests that, NF has to sustain over 9860 area for
further rally towards 9895/9930-9980 & 10030-10095 area in the short
term (under bullish case scenario).*
*On the flip side, sustaining below 9840 area, NF may fall towards
9775/9760-9705 & 9660-9605 area in the short term (under bear case
scenario).*
*Similarly, BNF has to sustain over 24350 area for further rally towards
24500-24600 & 24700-24900 area in the near term (under bullish case
scenario).*
*On the flip side, sustaining below 24300 area, BNF may fall towards
24000-23800 & 23600-23300 area in the near term (under bear case scenario).*
Nifty Fut (Aug) today closed around 9809, rallied by almost 0.70% (68
points), thus snapping the 5 days fall, in which it has lost almost 3.5%
as geo-political worries fade over NK-US issues to some extent with no
fresh disturbing news also from the Doklam (Ind-China) border stand off;
Nifty Fut made a late day high of 9838 and opening minutes low of 9777
amid a day of short covering & also some value buying in banking &
financials, automobiles, metals, Pharma coupled with RIL.
A higher USD because of ease of NK geo-political issues and tepid US CPI
may be also positive for the export heavy Asian, European or even US
indexes.
Indian market (Nifty Fut) today opened around 9778, almost 40 points up
tracking positive global cues. Most of major Asian markets except Japan
were trading in green amidsupportive global cues after NK-US tensions
fades to some extent following reports that both the Govts were engaged
in back-channel diplomacy talk for months despite the ongoing “war of
words” and NK’s missile game and a bunch of senior US intelligence
officials had also played down any imminent conventional or nuke war
between the two countries.
*Indian market*has also opened & traded in positive mood amid supporting
global cues after 5 days of relentless selling caused by geo-political
tensions from NK to Doklam, coupled with SEBI “Shelling” and muted
report card from some of the frontline blue chips, the domestic market
has seen some short covering today & selective value buying.
Looking ahead, Indian market may come under renewed pressure after
reports of cartelization by various suspected well known Shell cos, big
brokerage houses, Bollywood stars & developers; almost all the prime
Govt investigative agencies like ED, CBI, IT. SIFO are investigating
these cases as a part of surgical strike by the Govt on black
money/corruptions & money laundering.
After terrible IIP data on Friday, all eyes may be also on the WPI/CPI
today, to gauze RBI’s concern and the Govt’s complacency over India’s
inflation trajectory, which is flashed at 1.88% for July against
estimate of 1.30% (prior: 0.90%) as YOY; i.e. WPI increased by more than
100% in July on the back of surging food inflation, while manufacturing
inflation is almost flat. Thus, Govt may be now in pressure in its lower
inflation rhetoric for the last few months, which might be a function of
favourable base effect and slump in food inflation
After higher trajectory of WPI at 1.88%, Indian CPI for July came as
2.36% against estimate of 1.87% (prior: 1.46%, revised from 1.54%
earlier) on surge in food inflation, specially some vegetables like
onion (+150% in recent weeks), tomatoes (+500% in the last few weeks)
etc on production & supply disruptions due to extensive flooding in
various parts of the country and Pre-GST disruptions coupled with cease
of favourable of base effects & HRA effect (7-CPC).
A tepid Mfg inflation at WPI level may be also an indication of Pre-GST
disruption and lack of pricing powers by the manufacturers or subdued
consumer spending. Overall, a higher trajectory of inflation towards RBI
target of 4% in the coming months may ease some pressure on the Indian
Central Bank to be on hold at neutral mode in line with the major G-20
central banks; positive for INR, but negative for EQ market as par text
book, but in reality it may be neutral now for the market as rate cut
hopes already ebbed to significantly after hawkish cut by the RBI/MPC.
Meanwhile, India’s trade balance & export figure for July also flashed
very subdued; export grew at only 3.94% (YOY) to $22.54 bln against
June’s 4.4% rise; while import rose at 15.42% to $33.99 bln, widening
the headline trade deficit to $11.45 bln from $7.76 bln a year earlier
(YOY), but narrows to some extent from the June figure of $12.96 bln.
Overall, imports of Gold surged by almost 95.05% in July, while oil was
up by around 15.02%, constituted almost 30% of the total import and the
trade data may be an indication that the Indian economy is facing some
headwinds amid weak domestic consumption, tepid private investments &
slowing export growth due to strength in INR and high real rate of
interest in the economy.
Indian Govt may redraft its FDI policy and may also advance the 2019
general election to 2018 in order to synchronize the central
(Parliamentary) election with state elections (election reform), so that
a LS majority is automatically relevant to RS numbers, unlike the
present situation
With general election is now just 1-2 years away, NAMO may now
concentrate on the success story of the past reforms rather than
launching any fresh mega reform for India until next term and under this
policy, Govt may sharpen its attack on the black money/corruption and
may also take the help of GST & UID narratives to block various loopholes.
Thus, Govt may take the rhetoric of surgical strike on the black money
(DeMo, Shell cos crack down etc) in the next general election campaign
to tackle some of the other real issues like huge un/under employment in
the Indian economy. So, market may be under some stress for the ongoing
fight against corruptions/Shell cos money laundering angle in the days
ahead.
Technically, Nifty Fut (Aug) now need to sustain over 9860 area for more
short covering rally towards 9930-10030 zone; otherwise, sustaining
below 9775 area, it may again fall towards 9705-9605 zone in the days ahead.
Indian banking NPA/NPL may be now a serious headwinds not only for the
banks (PSBS), but for the Govt also, who is basically the owner of these
banks, saddled with almost 11% GNPA; some of the disgruntled PSBS has
even reported almost 25% GNPA; most worrying factor may be now higher
trajectory of retail NPA (SMES/Agri/Home Loans/PL) apart from the
corporate stressed assets.
Overall, average provisioning of the NPA may be now around 50%, which is
also far lower than the standard RBI requirements of 75%. FMO is now
exploiting any legal provision or scope for asset sales under RBI/IBC
cases (bankruptcy) as some of the big housing projects like J.P.
Infratech has now turned into a political controversy with scores of
retail buyers are now chasing the co, which is under IBC now with
undelivered housing projects.
A distress sale under liquidation of huge assets under such bankruptcy
may not fetch right value & eligible buyers also. Moreover, Govt
borrowers are now getting benefits of lower RBI repo rate, while for the
general retails or even corporates, it’s still significantly higher and
the overall Indian banking transaction costs are also on the higher
side, compared with the global peers.
Traditionally, Indian banks may have one of the highest NIM spread in
the G-20 economics, which may be another reason for unviable
projects/business and today’s NPA mess.
Nifty today was dragged by IT counters (TCS, INFY, WIPRO, TECH-M) Bosch,
Bharti Airtel, SBI, ITC & BPCL, while it was supported by RIL, Cipla,
Sun Pharma, Grasim, Tata Steel, Hindalco, ICICI Bank, Maruti & Yes Bank.
Elsewhere, *Australian market (ASX-200)* is closed around 5730, up by
almost 0.70% on *lower AUDUSD* (commodity currencies risk aversion,
subdued China data & USD strength following ease of NK tensions); AU
shares are also being supported by energy, IT and Banks & financials but
also dragged by some muted earnings.
*Japan (Nikkei-225)*is closed around 19537, down by almost 1% despite
*relative strength in USDJPY* (+0.49%) on general NK risk aversions
today & reverse flow of smart money from safe heaven assets
(JPY/CHY/Gold) to riskier assets (USD, EQ ); market today may have also
ignored the upbeat JP GDP data for Q2, being as exceptional & it may not
be sufficient to alter the BOJ QQE on the backdrop of a subdued
inflation, despite some change in tone by various Abe policy makers.
As JP market was closed on Friday meltdown, it may have just tried to
catch the global market level (SPX-500) today.
*China (SSE)*also trading in deep green around 3237 (+0.90%) as
geo-political worries fade to some extent over NK-US issues ignoring a
tepid set of Chinese economic data today, which may be a slight
indication of a hard-landing on various regulatory tightening &
deleveraging.
PBOC today also fixed the USDCNY little lower at 6.6601 vs 6.6642 on
Friday and remained as neutral for the daily injection of funds (OMO);
may be a subdued China data may force PBOC to relax some tightening
rules for the Chinese economy ahead of the all important Party congress
in Sep-Oct’17; Chinese leaderships now want a stable China economy
without being fuelled any excessive credit.
PBOC has also emphasized to maintain its prudent & accommodative
monetary policy on n weekend communication, which may have also boosted
the China market sentiment today.
Similarly, *Hong-Kong market* (HKG-33) also trading higher around 27220
(+1.20%).
*Oil (WTI)*is now trading around 48.55, down by almost 0.40% on subdued
demand forecast by IEA with a rise in US shale production.
*Gold*also eased a little to around 1282 on strength in USD & some ease
in NK tensions, although the hermit state has claimed on the weekend
that over 3 mln volunteers had offered to join its army and US CIA/other
intelligence officials are also expecting an imminent NK missile test
amid its independence day celebration.
A positive *EU market* supported by easing of NK-US geo-political
tensions to some extent, lower EUR and upbeat banks & metals may have
also boosted the Indian market sentiment today.
EURO Stoxx-50 is now up by around 1.25% with DAX (1.20%), FTSE (0.74%) &
CAC (1.15%) are all in deep green, thanks to a higher USD across the
board and subdued EZ IIP data. All eyes may be now on tomorrow’s NK
Liberation Day Celebration tomorrow, if they celebrate it with another
ICBM/missile, possibly being supplied by Ukraine, an ally of US in this
strange world of geo-politics. Trump may also back in tweet mode after
some setback in the weekend US racists’ incident.
Asian market update:
<https://www.iforex.in/news/asia-trading-positive-nk-us-tension-fades-some-extent-supported-strong-usd-upbeat-jp-gdp-40193>
FX Update:
<https://www.iforex.in/news/dollar-bids-nk-us-geo-political-tensions-ebb-ahead-nk%E2%80%99s-liberation-day-celebration-tomorrow-40243>
<https://2.bp.blogspot.com/-JjHOWNH3TPg/WZHjlPui2cI/AAAAAAAAMuQ/3q4xy1LsrNAsfUnxlEl4tu5eq-YsJfgfgCLcBGAs/s1600/SGX-NF-PATTERN-14-08-2017.png>
SGX-NF
<https://3.bp.blogspot.com/-DS7rTivnWpY/WZHjpYQ9gJI/AAAAAAAAMuU/Nv8qAMA8Ud4nmb3RoVpagehjyA4OmaNeQCLcBGAs/s1600/BNF-PATTERN-14-08-2017.png>
BNF
<https://2.bp.blogspot.com/-nybiHZpHyhc/WZHjsLS_L-I/AAAAAAAAMuY/3ymcYN7c7VQHPF6V3WoDB95JQb7KedUMQCLcBGAs/s1600/USDJPY-PATTERN-14-08-2017.png>
USDJPY
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Thanks & Regards,
Asis Ghosh
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