Market Wrap
<https://www.iforex.in/news/nifty-closed-almost-flat-amid-nk-celebration-day-suspense-coupled-concern-stretched-valuations-41565>:
08/09/2017 (17:00)
NSE-NF (Sep):9946 (-8; -0.09%)
(TTM PE: 25.87; Nr. 2-SD of 25; TTM Q1FY18 EPS: 384; NS: 9935; Avg PE:
20; Proj FY-18 EPS: 418; Proj Fair Value: 8360)
NSE-BNF (Sep):24370 (+16; +0.06%)
(TTM PE: 27.48; Abv 2-SD of 25; TTM Q1FY18 EPS: 887; BNS: 24371; Avg PE:
20; Proj FY-18 EPS: 961; Proj Fair Value: 19220)
For 08/09/2017:
*Key support for NF: 9900-9830*
*Key resistance for NF: 10000-10050*
*Key support for BNF: 24300-24200*
*Key resistance for BNF: 24525-24675*
*Hints for positional trading:*
*Time & Price action suggests that, NF has to sustain over 10000 area
for further rally towards 10050-10090 & 10160-10205 area in the short
term (under bullish case scenario).*
*On the flip side, sustaining below 9980 area, NF may fall towards
9940-9900 & 9830-9750 area in the short term (under bear case scenario).*
*Similarly, BNF has to sustain over 24525 area for further rally towards
24575-24675 & 24775-24875 area in the near term (under bullish case
scenario).*
*On the flip side, sustaining below 24475 area, BNF may fall towards
24300/24200-24000 & 23850-23700 area in the near term (under bear case
scenario).*
*Indian market*(Nifty Fut) today closed around 9946, almost flat
(-0.09%) after a moderate day of volatility, in which it made an opening
high of 9978 & mid-session low of 9921 ahead of NK celebration day
tomorrow with an ICBM launch; Nifty recovered to some extent in the last
hour of trade tracking similar movements in the global market after
another ECB trail balloon of a very gradual QE tapering proposal in 2018
and reports that looming IRMA hurricane in US has lost some strength.
Indian market today opened in positive tone by almost 38 points, but
soon after opening, it came into selling spree and by mid-session
plunges to day low tracking tumble of USD after a massive earthquake in
Mexico. Apart from adverse global cues & higher EUR, concern of
stretched valuation & Govt’s war on black money/shell cos, subdued
private investments may have continued to haunt the Indian market
sentiment today.
Metals were upbeat today amid concern of China supply tightening coupled
with Harvey related damage issues in US (rebuilding demand) coupled with
domestic optimism; but Pharma was in pressure following renewed concern
about GMP issues of the Indian generic drug manufacturers.
Nifty was supported today by L&T, HDFC Bank, ITC, Kotak Bank, VEDL,
Bharti Airtel, Maruti, TCS, Ultratech Cem & TECHM, while it was dragged
by Infy, M&M, IOC, BPCL, SBI, Sun Pharma, DRL, Tata Motors, Bajaj Auto &
Eicher Motors.
Overall, Nifty fell by 0.4% for the week and banks, FMCG & metal stocks
has helped the market today, while Pharma, PSBS and select auto stocks
dragged it.
L&T surged by almost 3.77% after on news of big defence contracts worth
Rs.40000 cr coupled with renewed optimism by analysts. M&M plunged by
around 3.30% over renewed concern of GST cess on SUV models; DRL tumbled
by 2.87% on adverse audit report by German drug regulator.
*Globally*, Asian-Pacific Stocks were trading mixed today amid slump in
USD & US policy squabbling coupled with a good China trade (solid
import) data. USD is being hammered down after Trump proposed to repel
the US debt ceiling regulations itself; i.e. as par Trump’s proposal, WH
may not need senate approval (voting) for extension of US debt limit in
future. Without any legislative approval of US debt limit may be
equivalent to unlimited Federal debt, which is negative for US fiscal
math and USD/US bond yields.
*US bond yields*again plummeted to almost 2% on this US debt limit
fiasco, poor economic data yesterday (surge in initial jobless claims
for Harvey), dovish Fed talks, renewed NK tensions after Trump indicated
“war is not out of options” despite intense effort of diplomacy and an
ongoing Russian probe against Trump & co coupled with an uncertain Fed.
Although Trump administration is trying its best to rejuvenate the tax
reform proposal, there are too many political & economical headwinds
against USD and a lower USD may not be good for export heavy Asian
markets; similarly a higher EUR may not be good for EU economy & the
market, considering their export & tourism.
Yesterday, *Draghi* was in “pain” to explain that ECB has not discussed
any QE tapering programme; but he also emphasized that ECB should be
able to present its QE plan in its next meet on 26^th Oct. Draghi also
not tried to talk down the currency and did not say either that ECB will
continue its QE through 2018. ECB actually upgraded GDP & lowered
slightly (0.1%) the inflation forecast for 2017; i.e. ECB is very much
optimistic about EZ growth, employment, consumer spending and slightly
disappointed with subdued inflation (nothing new).
Draghi has also acknowledged about the structural issues like
automation, globalization which are affecting employment to some extent
and the overall wage growth/inflation. Overall, Draghi did not try to
derail the EUR express as ECB may not have any option to continue the QE
at the same pace in 2018, simply because of acute scarcity of eligible
QE bonds.
Thus, it’s now a question of “when” rather than “what” (if) for the
inevitable ECB QE tapering; most probably ECB will taper at a monthly
pace of around 10 bln EUR/pm for H1CY17 and after that it may gradually
began to hike/normalize their ultra low interest (NRIP/ZRIP). DAX may be
in pressure today as *EURUSD* is already hovering around the five year
average mark of 1.21 even before the EU market opens.
So far, EUR is almost 15% up against USD (YTD) and this may be now
affecting overall EZ macro, imported inflation and export competitiveness.
Elsewhere, *Australia (ASX-200)* closed around 5673, down by almsot0.30%
on higher *AUDUSD* (+0.55%), now around 0.8101. A strong AUD is not good
for AU economy & the market, being a commodity exporter country. AUDUSD
is today supported by plummeting US bond yields, an upbeat AU home loan
data coupled with surge in China imports figure released today.
ASX-200 today was dragged by telecoms, energy & financials/banks after
renewed concerned about CBA related money laundering probe.
*Japan (Nikkei-225)*closed around 19275, down by almost 0.63% amid
higher Yen, negative for export oriented JP economy & market; USDJPY
slumped by almost 6% since mid-July and now trading around Pre-Trump
rally level on poor visibility of Trumponomics & US policy paralysis,
coupled with NK geo-political tensions.
Today JP economic data was subdued and more over Q2 GDP data was revised
from the preliminary 4% to 2.5% (YOY); on QOQ basis, it came as 0.6%
against estimate of 0.7%; prior: 1%. JP market was dragged by exporters,
automakers, financials, energies, while Pharma has supported it by some
extent.
*China (SSE)*closed around 3365, almost unchanged on renewed worries
about Korean tensions ahead of NK’s foundation day celebration with ICBM
(?) tomorrow & mixed China trade data for Aug; export was down by 5.5%
against estimate of 6% (prior: 7.2%), while import was up by 13.3%
against estimate of 10% (prior: 11%) in USD terms.
Although, today’s China trade data may be looked robust as par market
expectation, it’s also came on the back of a depreciated USDCNY,
resulting in higher import & lower export values. Also, export was down
by 2.2% YOY and may be an indication of adverse effect of a strong Yuan
policy of PBOC.
Some influential China policy makers today also have expressed their
concern about a strong Yuan policy by PBOC/Govt, which could hurt the
export oriented China economy. Although, PBOC may be fixing USDCNY lower
for the last few months for various reasons including deleveraging,
outflow concern and also to avoid a Trump jawboning for being a currency
manipulator, Yuan is basically stable against EUR, which may be now
China’s preferred export zone as US economy (consumer spending) is also
slowing.
A higher Yuan against USD may be also helping China in deleveraging and
also greater stock market inflow, although it may affect the US export
to some extent. Today PBOC fixed USDCNY lower at 6.5032 vs 6.5269
without any OMO; for the week, PBOC has drained out 330 bln Yuan against
280 bln Yuan last week. Today China market was dragged by consumer
stocks, while it was supported by metals to some extent.
*Hong-Kong (HKG-33)*is trading around 27660, up by almost 0.50%, bucking
the regional trend and being supported by property developers & broad
based optimism about some China based cos & banks over solid earnings &
guidance. But today HK market was also affected by a Apple related
supplier for possible shortfall in supplies of components of the latest
i-Phone.
Overall, all eyes may be now on Kim tomorrow to see his celebration
style on NK’s foundation day; if it come with another ICBM or Nuke, then
expect some risk aversion move; otherwise, if its limited only to
rhetoric, then expect some risk appetite relief rally on Monday.
Meanwhile, *Crude Oil (WTI)* is trading in red around 48.90, down by
almost 0.25% on concern of a looming trio of Hurricanes (Irma, Katia &
Jose) running almost sequentially, which may affect oil refining
operations & shipments across the region; it seems that market has today
ignored some Russian FM jawboning about extension of oil production cut
agreement.
*Gold*has soared to almost 1353, up by 0.30% and so far made a high of
around 1358 on USD risk aversion ahead of NK’s most watched foundation
day tomorrow.
Interestingly, today Fed’s Dudley has also indicated that Fed may trim
its QE bond holding by around $1 tln over the next 10 years; i.e. it may
be also a QE/BS tapering at around $10 bln/pm, so overall effect on US
bond yields may be negligible.
Now, it’s almost certain from various Fed speaks that they will be on
hold in Dec’17 for various excuses like soft US economic data, subdued
US inflation, US political jitters, NK geo-p0olitical risks and also
Harvey & other series of hurricanes (Irma, Katia, Jose) !!
But the real reason may be that *Fed* will not take any risk for dual QT
(both QE tapering & interest hike at the same time) and thus will watch
the actual effect of QE/BS tapering on the US economy, bond yields and
financial market as this is a new experiment, never tried before; if
there is no such adverse effect, then Fed may also consider further rate
hikes in March’18 & onwards and by then, FOMC rejig may be over; most
probably Yellen may get another extension for policy continuity with
some new FOMC members as selected by Trump.
*Overnight, US market*closed almost unchanged on slump in media stocks &
insurance cos and some gains in health care despite a lower USD, which
may be good for US exporters & the economy (imported inflation). Banks &
financials were also in pressure as US bond yields tumbled, which is
negative for their interest rate hike capability (NIM).
*US stock future (SPX-500)*is now trading around 2462; down by almost
0.14% on tepid global cues after another slump in *USDJPY*, which has
just broken the 108 level to almost 107.75, the lowest since Nov’16,
Trump’s election win day.
The sudden crash in USDJPY may be for the tragic & massive Mexican
earthquake of M-8, triggering a Tsunami off Mexican coast and hopefully
not for a new NK earthquake (Nuke) or any ICBM test!!
Elsewhere, *EU market* was also under pressure waiting for Kim’s way of
celebration tomorrow coupled with concern of Hurricanes in US and a
massive earthquake in Mexico; insurance cos are under stress. EU market
was under pressure as EUR extends gains after less dovish script from
Draghi yesterday; a strong EUR is negative for EZ exporters.
But a slew of negative EU economic data today may have weakened EUR
slightly and that may have supported the overall EU market sentiment to
some extent in late trade. Miners are also dragging the market after
mixed trade data from China.
Overall, EU Stoxx-50, DAX-30 & cac-40 is now trading almost unchanged,
while FTSE-100 is down by 0.42%. UK market is under pressure as GBPUSD
get strength after upbeat economic data coupled with Brexit optimism
(?). In addition mining & consumer stocks are also dragging the UK
market today.
You may be also interested in:
USDJPY Plunged Below 108 On US Policy Squabbling
<https://www.iforex.in/news/usdjpy-plunged-below-108-us-policy-squabbling-nk-celebration-concern-coupled-dovish-fed-41575>
& NK Celebration Concern Coupled With A Dovish Fed
<https://1.bp.blogspot.com/-Ibu4-ulf9Sc/WbLoFlpMQsI/AAAAAAAANB4/HZNga7nCFDAHUYJCBDHAl8CbD-nR07_hACLcBGAs/s1600/SGX-NF-PATTERN-08-09-2017.png>
SGX-NF
<https://4.bp.blogspot.com/-ztJVQn3QRr4/WbLoIonVqHI/AAAAAAAANB8/M9bcXAtpo88t-7h9Wk0wUYbBKTZgeB0uQCLcBGAs/s1600/BNF-PATTERN-08-09-2017.png>
BNF
<https://4.bp.blogspot.com/-s_iTd0jkw58/WbLoSKslWII/AAAAAAAANCA/ehVOsi-fuKoy_nznwAW8c93zmAMjyVPHQCLcBGAs/s1600/GBPUSD-FIBB-08-09-2017.png>
GBPUSD
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Thanks & Regards,
Asis Ghosh
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