Market Wrap
<https://www.iforex.in/news/nifty-plunged-amid-subdued-global-cues-after-nk-missile-panic-coupled-strong-eur-41001>:
29/08/2017 (17:00)
NSE-NF (Aug):9792 (-125; -1.26%) (TTM PE: 24.99; Nr. 2 SD of 25; Avg PE:
20; TTM/FY-17 EPS: 392; NS: 9796)
NSE-BNF (Aug):24100 (-277; -1.14%) (TTM PE: 30.35; Abv 3 SD of 30; Avg
PE: 20 TTM/FY-17 EPS: 795; BNS: 24129)
For 30/08/2017:
*Key support for NF: 9750-9700*
*Key resistance for NF: 9860-9905*
*Key support for BNF: 24000-23850*
*Key resistance for BNF: 24375-24575*
*Hints for positional trading:*
*Time & Price action suggests that, NF has to sustain over 9860 area for
further rally towards 9905-9950 & 10030-10075 area in the short term
(under bullish case scenario).*
*On the flip side, sustaining below 9840 area, NF may fall towards
9790-9750 & 9700-9660 area in the short term (under bear case scenario).*
*Similarly, BNF has to sustain over 24375 area for further rally towards
24475-24575 & 24675- 24775 area in the near term (under bullish case
scenario).*
*On the flip side, sustaining below 24325 area, BNF may fall towards
24200-24000 & 23850-23700 area in the near term (under bear case scenario).*
*Indian market *(Nifty Fut-Aug) today closed around 9792, plunged by
almost 125 points (-1.25%) after making an opening high of 9879 and
closing session low of 9783 tracking subdued global cues amid escalated
Korean tensions and subsequent strength in EURUSD over 1.20 due to risk
aversions & an “Un-Dovish” Draghi at Jackson Hole. A higher EUR is not
good for EU stocks and similarly a lower USD may not be supportive for
export heavy Asian markets.
Apart from geo-political factors, fresh list of around 40 cos released
by RBI today for the NCLT/IBC cases may have also dampened the mood of
the market/banks and SBI also came under renewed pressure as out of
those 40 stressed cos, SBI has good exposure to around 26 cos. Thus,
today’s NK tensions may have act as a trigger for selling in the Indian
market as valuations may be quite stretched amid muted Q1FY18 earnings
coupled with concern of NPA & Govt’s war on black money (shell cos).
Indian market (Nifty Fut-Aug) today opened around 9879, almost 38 points
down tracking NK’s missile tests over JP airspace and soon after opening
weak, it dropped further and a weak EU market because of higher EUR/EU
bund yields have caused more selling for the domestic market coupled
with a fresh list of 40 corporate defaulters by RBI under NCLT.
Looking ahead, Indian market may come under further pressure if this NK
missile games further escalates into serious events as FIIS may turn
into risk aversion mode and may use this as a trigger for selling,
considering stretched valuations, muted Q1 earnings & NPA woes; they
have already sold Indian equities worth Rs.13500 cr till yesterday in
Aug alone, the highest monthly sell after Nov’16 caused by DeMo blues.
Although, Govt/RBI/Banks are trying their best for a meaningful
resolution through various available means, actual NPA resolution figure
may not be improving as expected and may be also facing various
controversies including large haircuts by Banks & other legal challenges.
Indian market may also focus on cabinet restructuring & macro data
coupled with the proposed PSBS merger & consolidations. Some auto cos
are upbeat today after news that, Govt may issue a tender to buy 50000
e-3W by Nov’17.
Govt is also optimistic to enhance country’s domestic steel consumption
to at least 230 MT by 2030 against earlier narrative of 300 MT by 2025!!
A higher domestic steel supply coupled with muted consumption may not be
good for the steel sector, most of which are significantly leveraged &
stressed borrowers and under RBI/NCLT lists.
Indian Govt has also assured that they will not change the FY in 2017,
but may advance the budget presentation; a much below expected GST
return filling figure till yesterday may be also worrisome for the Govt.
Meanwhile, Mumbai, the financial capital of India is experiencing one of
the heaviest rains, causing widespread semi-flood like situations in the
City, which is another reminder for India’s poor age old infrastructure
& water logging. Normal trading operations at brokerage offices may also
be affected today, causing some market disruptions.
India’s benchmark Nifty 50 index will go back to being a gauge of 50
stocks from tomorrow, when the next set of periodic changes kick in;
ACC, BOB, Tata Power and Tata Motors DVR will be excluded from the
index, while Bajaj Finance, HPCL and UPL will become part of the index;
financials, energy & automobiles will have most weightage in Nifty after
the rejig.
Nifty was today dragged most by HDFC, RIL, HDFC Bank, IOC, INFY, ITC,
Yes Bank, Bharti Airtel & Axis bank by around 62 points altogether,
while it was supported by TECHM, M&M, Wipro marginally. Almost 47 scrips
out of 51 Nifty components were in red today.
*Globally*, almost all the major Asian markets has plunged into moderate
to deep red amid tepid global cues after NK fired three missiles (?)
over JP early this morning. As par confirmed reports, at least one
missile was successful and flew over JP airspace to land at a remote sea
location, triggering widespread caution & emergency over Japan.
This is a serious geo-political event as after 2009, NK fired missiles
into JP airspace, covering around 2700 km over its 90 mins flight path,
attaining a max 550 km height. Market is being gradually habituated over
regular & normal NK missile tests, but this being a JP airspace
violation, reaction from the market may be quite different this time.
JP has termed the latest NK missiles tests, flying over JP airspace a
“new serious development” and “unprecedented” & “grave threat”. Although
JP didn’t attempt to shoot down the NK missiles, it may be considering
installing some “THAAD” types of US missile defence system too in the
days ahead!!
Subsequently, JP and also SK has taken appropriate measures against such
future NK “provocations” and Korean tension has again triggered a risk
aversion sentiment across the global market, prompting safe heavens flow
to Yen, Gold, CHF, BTC and EUR is also getting stronger, causing more
pressure on global equities. SK has also undertaken a “live bomb
dropping” exercise near NK border in its show of “war readiness”.
So far Trump has not tweeted his “fire & fury” rhetoric for NK, he may
be busy with the devastating & tragic Harvey cyclone & flood, but
Pentagon has commented that the NK missiles has no threat for North
America (as NK fired its missiles towards JP instead of US/Guam!!). All
eyes may be now on Trump’s twitter feed!!
From the overall NK related geo-political tensions & US’s stance, it
now seems that US is more interested to sell their missile defence
system & other military hardware to both JP & SK, using NK warmongering
& tensions. Basically, the ongoing NK tension may be good for US economy
for its iconic defence industry and weak USD, which is ideal for Trump
to make “America great again” by exporting!!
*Overnight US market*(DJ-30/S&P-500) closed almost flat, but NASDAQ
gained by 0.30% tracking catastrophic Harvey flood & damages and NK
tensions. Overall insurance, property/home developers, travelers,
airlines, energies were in pressure due to Harvey along with retail
stocks (fear of Amazon led price cut in grocery/FMCG items); but
strength in healthcare (demand for medicines after flood), biotech (M&A
buzz) and some blue chip techs may have contained the damage yesterday.
*US stock future*(SPX-500) is now trading around 2425, down by almost
0.65% on risk aversion flows; looking ahead, 2415 area may be an vital
support for SPX-500 and below that 2395-2375 may be clearly visible;
apart from geo-political issues, US GDP may be also affected due to this
Harvey flood; although subsequent Govt capex may also act as a fiscal
stimulus later.
Elsewhere, *Australia (ASX-200)* closed around 5669, down by almost
0.70% amid some rebound in AUDUSD ahead of some key AU economic data and
further dragged by financials, consumer discretionary; a risk aversion
mode caused by the hermit state of NK missile game may be not good for
AUD; it got some strength today after upbeat ANZ-ROY consumer confidence
data.
*Japan (Nikkei-225)*closed around 19363, down by almost 0.45%, but off
the low tracking some rebound in USDJPY, which is now flirting below 109
and so far made a low of 108.41 after the NK missile tests over JP
airspace. A strong Yen caused by risk aversion (global repatriation by
JP investors) flows is not good for JP economy & the market, being
heavily export oriented. Today, JP economy minister sounds quite
optimistic about consumer spending.
Apart from jolt from NK missile, JP market may be also affecting today
by energy related shares as a fall out from Harvey in US oil-hub (Texas
& Houston).
*China (SSE)*was closed in slight green around 3365 (+0.08%), off the
low ahead of some key earnings despite the NK tensions & US threat of
trade sanctions; China market may be helped by some techs & upbeat
copper today.
PBOC today fixed USDCNY at 6.6293 vs 6.6353 and injected a net 10 bln
Yuan by OMO; it seems that PBOC may bring down the USDCNY towards 6.55
area just before China party congress, aiming for deleveraging &
stability with modest growth above 6-6.5% of its economy coupled with an
upbeat & vibrant stock market.
All eyes may be on the China PMI & other forthcoming macro data, but
early indicators may be suggesting a steady but mixed economic data from
China this time.
Meanwhile, China has called for restraint & patience over NK’s latest
missile games over JP as only pressure & sanctions on NK may not resolve
these issues, a proper environment of dialogues may be necessary.
*Hong-Kong (HKG-33)*is also trading in moderate red around 27740, down
by almost 0.60% dragged by NK related risk-off mode and US Harvey effect
on energy shares.
*SK market (Kospi)*was also down by around 0.76% amid NK geo-political
tensions and further dragged down by techs & automobiles; but being
supported by forecast of an upbeat earnings & defence stocks following
NK warmongering.
*Crude Oil (WTI)*is now trading in green around 46.65, up by almost
0.25% on news that Russia & Saudi Arabia may be considering further
production cuts; earlier yesterday it was down on concern of glut as
refineries in the US Harvey affected areas will be unable to function
for some time amid serious oil infra damages.
Meanwhile, *Gold* is now trading around 1324, up by almost 0.50% and
almost at months high as smart money is now running for the safety of
the yellow metal amid NK risk aversion & missile games. Technically,
Gold now need to sustain over 1330-1340 area for 1355-1375; otherwise it
may again came down towards 1300-1260 zone in the coming days, depending
upon the next “war of words” between Trump & Kim.
Elsewhere, *EU market* WAS trading in deep red around 1.50% lower in
Stoxx-600 tracking NK missile panic over JP airspace and subsequent
strength in EURUSD above 1.20 mark coupled with an “un-dovish” Draghi at
Jackson Hole and impact of Harvey typhoon on US economy (GDP) and Fed’s
dovish stance. A strong EUR may not be good for export heavy EU economy
& the market.
Market may be also concerned that in this NK game of chicken, even if
there is no immediate chance of a full fledged war with US, considering
NK’s nuke insurance, it remains a risk for the market (risk assets).
Trump tweeted that “all options are on the table for NK” and further
commented that “the world has received NK’s latest message loud &
clear”. Both Trump & Abe has agreed for more diplomatic pressure on NK
from the international community (China & also Russia) to convince the
hermit kingdom.
DAX-30 is trading around 1.30% down, while FTSE-100 is around 1% in red
and CAC-40 is down by almost 1.25%.
Asian market update
<https://www.iforex.in/news/asian-market-plunged-amid-risk-aversion-after-nks-missile-game-over-japan-airspace-40955>:
FX market update
<https://www.iforex.in/news/usdjpy-recovered-ahead-trumps-tax-reform-campaign-rally-scheduled-tomorrow-41013>:
<https://4.bp.blogspot.com/-lSnzZb6zNbk/WaWu9IaQVZI/AAAAAAAAM40/_k1MEwyLKQsYI13C2Hsyxlv0Ym8UrjrFgCLcBGAs/s1600/NF-PATTERN-29-08-2017.png>
NF
<https://1.bp.blogspot.com/-WL6t5vwOOng/WaWvCRBXyYI/AAAAAAAAM44/dXSYLMrzBok1-WEWHapLIwxFpI2koDg8ACLcBGAs/s1600/BNF-PATTERN-29-08-2017.png>
BNF
<https://1.bp.blogspot.com/-krHnpucRbeo/WaWv_55-LxI/AAAAAAAAM5A/JCuWIuSP0Nsmfv3US9AdU-1x1b--SQxiQCLcBGAs/s1600/EURUSD-FIBB-29-08-2017.png>
EURUSD
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Thanks & Regards,
Asis Ghosh
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