*Market Wrap* <https://www.iforex.in/news>: 16/01/2018 (17:00)
NSE-NF (Jan):10723 (-20; -0.19%)
(NS: 10700; TTM Q2FY18 EPS: 391 TTM Q2FY18 PE: 27.37; Abv 2-SD of 25;
Avg FWD PE: 20; Proj FY-18 EPS: 418; Proj Fair Value: 8360)
NSE-BNF (Jan):25990 (-55; -0.21%)
(BNS: 25975; TTM Q2FY18 EPS: 867; TTM Q2FY18 PE: 29.96; Ard 3-SD of 30;
Avg FWD PE: 20; Proj FY-18 EPS: 961; Proj Fair Value: 19220)
*For 17/01/2018: Jan-Fut*
*Key support for NF: 10690/10635-10575/10500*
*Key resistance for NF: 10755/10785-10805/10860*
*Key support for BNF: 25775/25575-25400/25200*
*Key resistance for BNF: 26200/26250-26325/26415*
*Trading Idea (Positional):*
*Technically,*Nifty Fut-Jan (NF) has to sustain over 10805 area for
further rally towards 10860-10905 & 10955-11095 zone in the short term
(under bullish case scenario).
*On the flip side,*sustaining below 10785-10755 area, NF may fall
towards 10690-10635 & 10575-10500 zone in the short term (under bear
case scenario).
*Technically,*Bank Nifty-Fut (BNF) has to sustain over 26250 area for
further rally towards 26325-26415 & 26580-26615 zone in the near term
(under bullish case scenario).
*On the flip side,*sustaining below 26200-26150 area, BNF may fall
towards 25775-25575 & 25400-25200 area in the near term (under bear case
scenario).
*Indian market*
<https://www.iforex.in/analysis/nifty-skids-higher-bond-yields-trade-deficit-surges-rbi-speaks-47939>(Nifty
Fut-Jan/India-50) today (16^th Jan) closed around 10723, slips by almost
20 points (-0.19%) on *mixed global cues*
<https://www.iforex.in/news/europe-seen-higher-usd-recovers-47895> and
concern of fiscal slippages & higher oil after surging trade deficit
data released yesterday; *Asian cues*
<https://www.iforex.in/news/asia-jumped-higher-usd-ipo-optimism-47919>
was largely upbeat.
10YGSEC bond yields soared to 7.557% and INR slumped to almost 3 months
low; USDINR-I surged to around 64.21, almost 1% higher. Nifty-Fut made
an opening session high of 10759 and late day low of 10691 after Dec’17
trade deficits soared by almost 41% on YOY basis.
Indian bond yields also surged after RBI Dy Gov rapped Indian banks for
poor management of interest rate risks, which cannot be managed by the
regulator (RBI) over & over again.
RBI Dy Gov had observed late on Monday that large holdings of GSECS and
state development loans by banks exposes them to “re-pricing of
governments’ borrowing costs which could rise due to inflationary,
fiscal or other domestic as well as global macroeconomic developments”.
RBI Dy Gov asserted that “the trend of regular use of ex-post regulatory
dispensation to ease the interest rate risk of banks was not desirable
from the point of view of efficient price discovery in the GSEC market
and effective market discipline on the GSEC issuer; it also does not
augur well for developing a sound risk management culture at banks”.
RBI Dy Gov also stressed that Banks must understand the risks of bond
market and does not expect that RBI will bail out the Banks from adverse
interest rate (bond prices) movements. Thus it’s clear that RBI may not
allow the Banks to report its bond loses provisions (MTM) over next few
quarters; Banks has to report it on concurrent basis; subsequently banks
(PSBS) plunged today.
Indian Banks are expected to report bond portfolio MTM loses of around
Rs.0.15-0.20 tln in Q3FY18 alone as bond yields surged 67 basis points
in this quarter.
A higher bond yield & higher borrowing costs are not good for Indian
economy and business. But Indian Banks (PSBS) has also limited options
as they have to finance Govt’s fiscal deficit & maintain the SLR by
buying GSECS, but they have to “manage” that bond portfolio efficiently
& in a professional manner in this era of globalization & market economy.
Bond-inflows from FII may have also slowed due to increasing tune of
global QT and hardening of bond yields (rates) in developed market (DM).
As par RBI Dy Gov:"Market liberalization does not just involve the
regulator easing business processes, introducing new products and
creating new markets; it also requires participants to take initiative
to re-skill themselves for constantly evolving market conditions and
products”.
Market may be also concerned that rising twin deficits and possible
inflationary impact of *rising oil*
<https://www.iforex.in/news/crude-oil-back-foot-iran-nuke-deal-squabbling-47927>
& commodity prices may prompt RBI to hike rates in the coming months.
As Govt has already applied substantial additional duties & cess on
petro products taking advantage of lower oil around $40 to finance its
fiscal deficits, it can’t put additional duties now to do the same for
huge inflationary impact and any cut in previous duties will also result
in additional fiscal strain; thus a dual combination of rising oil & USD
may be a “double whammy” for the Govt and the Indian economy.
*Indian Trade Deficit Surges In Dec:*
Indian trade deficits for Dec’17 came as -14.88B vs est -13.00B; prior:
-13.83B; (-10.55B-YOY); Dec exports at 27.03B vs 26.20B, although grew
at 12.4% on YOY basis, it slowed down from 30.6% increase compared to
Nov’17. On the other side Dec imports grew at 41.91B vs 40.02B, almost
21.1% on account of oil ($10.3B) & gold (+71.5% YOY).
Subsequently Dec’17 trade deficits jumped by almost 41% (YOY) to $14.88
bln at 3 year high and CAD (current account deficit) is also heading
towards its worst since 2013, not a very positive sign for the Indian
macros & fiscal math, if core flows remain subdued due to teething
problem of GST & DeMo; labour intensive industries like textiles, gems &
jewellery are also not doing well.
For long, Indian exports is losing competitiveness despite a substantial
devalued currency compared to its peers like China. High imported
inflation, higher imported raw material cost due to significantly
devalued currency and substantially higher cost of funds may be some of
the reasons behind widening CAD & trade deficit; (1 USD=64 INR vs 6.50
CNY; at 1975, 1 USD=7.5 INR).
Indian market was today dragged by banks & financials, especially PSBS
(Public Sector Banks) as higher bond yields will be negative for their
bottom line; almost 50% of EBITDA came from their bond portfolio and a
lower bond prices is negative for their MTM profit. Exporters (Techs-IT
& pharma) today supported the market on higher USD and analyst upgrade (IT).
Today Nifty was supported mostly by Infy, TCS, ICICI Bank (analyst
upgrade), Wipro, HCL Tech, HUL, Tech-M, ZEEL, Adani Ports & HDFC Bank by
almost 42 points altogether.
Nifty was dragged mostly by RIL (fall in SGX GRM & subdued R-Jio
subscriber additions in Dec and analyst downgrade/higher capex), ITC,
HDFC, Tata Motors, VEDL, IOC, Bajaj Fin, SBI, HPCL & Tata Steel by
around 56 points cumulatively.
Overall, today Indian market was helped by techs, selected private banks
& media while dragged by banks & financials/PSBS, automakers (interest
rate sensitive), mixed FMCG, metals (fall in iron ore prices after surge
in stockpiles at China port), mixed pharma, reality (to be bought under
full GST), energies, infra & consumption stocks.
BTCUSD View
<https://www.iforex.in/news/bitcoin-plunged-amid-crypto-carnage-renewed-south-korean-concern-47925>:
EURUSD View
<https://www.iforex.in/news/eurusd-slips-german-political-ecb-qe-tapering-squabbling-47933>:
<https://4.bp.blogspot.com/-v4sGyRRxod8/Wl7EJOcaKmI/AAAAAAAAOig/XtqPrdtpyi4q_3tkWsRd3BcvmEgOreDSACLcBGAs/s1600/SGX-NF-PATTERN-16-01-2018.png>
SGX-NF
<https://2.bp.blogspot.com/-c-GvixI7fe8/Wl7EOUVPChI/AAAAAAAAOik/rGVudJI4wDs-4Qe1pTniHo_4-9qxl41gQCLcBGAs/s1600/BNF-PATTERN-16-01-2018.png>
BNF
<https://4.bp.blogspot.com/-JTFtr_uM2t0/Wl7EVxudg-I/AAAAAAAAOio/Pck1_WPt13MRXr2UDt38ERNG7TdJ91RywCLcBGAs/s1600/USDJPY-PATTERN-16-01-2018.png>
USDJPY
--
Thanks & Regards,
Asis Ghosh
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