Thursday, 19 October 2017

Nifty Set To Open “Samvat 2074” In Subdued Tone On Muted Global Cues Amid China Growth Pessimism & Simmering Catalan Tensions



Market Mantra: 19/10/2017 (16:00)

SGX-NF: 10195 (-42)

For the Day: updated at 09:30

Key support for NF: 10190-10150

Key resistance for NF: 10255/10275-10325

Key support for BNF: 24400-24000

Key resistance for BNF: 24600-24950

Hints for positional trading:

Technicals indicate that, NF has to sustain over 10325 area for further rally towards 10380 -10455 & 10495-10585 area in the short term (under bullish case scenario).
 
On the flip side, sustaining below 10305-10275 area, NF may fall towards 10190-10150 & 10125/10060 -10015 area in the short term (under bear case scenario).

Similarly, BNF has to sustain over 24600 area for further rally towards 24855-24950 & 25050-25250 area in the near term (under bullish case scenario).

On the flip side, sustaining below 24550 area, BNF may fall towards 24400-24300 & 24100-24000 area in the near term (under bear case scenario).

As par early SGX indication, Nifty Fut (Oct) may start “Samvat 2074” muted around 10217, on mixed global cues on China growth pessimism and higher global bond (US/EU) yields on hopes of central banks’ QT.

Today China reported the “man-made” GDP for Q3 at 6.8% vs estimate of 6.8%; prior: 6.9%; although it was as par expectations and also very good despite ongoing China deleveraging, some market participants was also looking for 7% GDP after upbeat projection by PBOC Gov few days ago.

Although, yesterday’s China Prez’s comments about financial markets has no major negative, it has expressed great concern for Chinese housing bubble and basically stressed that housing is for “living” and not for “speculation” or “trading”; thus negative for China property developers and construction industry which is a major driver for Chinese growth. HK market may have also reacted adversely for this China property curb, affecting the overall regional market sentiment, including India/SGX-Nifty.

Another point is that China Prez Xi did not specify any GDP target for next 5-10 years yesterday, which is unusual for such party conclave. Thus market may be little disappointed as China may prefer to cool down a little bit in the coming years considering its deleveraging effort, production capacity curtailment and preference of environment over economic activity. In 2002 & 2012, China grows at 9.6% & 7.5%, whereas growth was at 14.3% in 2007; presently China may be well on track to meet its GDP/capita growth doubling target from 2010 levels by 2020 (as par 2015 projection by the Govt).

Thus, China growth pessimism for next 20-30 years may be affecting the risk-on sentiment to some extent today despite upbeat IIP, retail sales & a modest GDP data.

Overnight US market closed in another record high on upbeat guidance from IBM (+8.9%), hopes for decent earnings growth in Q3 coupled with higher US bond yields beneficial for banks and Yellen extension optimism; extension for another term of Yellen as Fed Chair may be positive for US stock market.

DJ-30 closed around 23158, up by almost 0.70%; S&P-500 has gained by 0.07% to close at 2561, while NQ-100 was closed almost unchanged (+0.01%). Overall US market is being supported by solid earnings growth, stronger GDP this year coupled with hopes of US tax reform by Trump. Also a globally synchronized recovery with decent inflation from EU to China & US along with gradual QT by central bankers is helping the overall risk trade (goldilocks rally).

US stock future (SPX-500) is now trading around 2553, down by almost 0.30% amid muted global cues on China pessimism & geo-political risk from Spain/Catalonia/NZ and renewed NK rhetoric. As par latest NK warning, “US could face unimaginable strike at an unimaginable time” due to its war-mongering navy drill at Korean Peninsula with SK.

But if this US tax cut legislation will not pass by this year, one can also expect a drastic fall of the US stock market in the coming months. Also, market may have already discounted the US tax reform initiative by Trump and thus even if it passed by Dec’17, it may not have any major impact on the market immediately until implemented in a retroactive way, effective from Jan’17.


Back to home, Indian market (Nifty Fut/India-50) is closed today & tomorrow for holiday, although a symbolic brief one hour trading will be held today in the evening to mark the auspicious start of “Samvat 2074” (Hindu new year/Diwali/Laxmi Puja). Market is set to start the new year with some disappointments as Nifty-Fut (Oct) may open around 10175, almost down by 0.62% on muted global cues.

Indian market may be also concerned over stretched valuation over muted Q1 earnings and so far Q2 earnings are also mixed on surging NPA coupled with slower growth due to spillover effects of DeMo & GST. For Samvat-2073, Nifty gained by over 16% against muted EPS growth, almost flat.

 

SGX-NF


Nifty Closed Almost Flat But Well Off The Day Low On Positive EU Cues & Rally In RIL; Axis Bank Drags The Index Today On Surging Stressed Assets



Market Wrap: 18/10/2017 (17:00)

NSE-NF (Oct):10247 (-7; -0.07%) 

(TTM PE: 26.52; Abv 2-SD of 25; TTM Q1FY18 EPS: 385; NS: 10211; Avg PE: 20; Proj FY-18 EPS: 418; Proj Fair Value: 8360)

NSE-BNF (Oct):24391 (-264; -1.07%) 

(TTM PE: 27.69; Abv 2-SD of 25; TTM Q1FY18 EPS: 878; BNS: 24314; Avg PE: 20; Proj FY-18 EPS: 961; Proj Fair Value: 19220)

For 23/10/2017: 

Key support for NF: 10190-10150

Key resistance for NF: 10275-10325

Key support for BNF: 24400-24000

Key resistance for BNF: 24600-24950

Hints for positional trading:

Technicals indicate that, NF has to sustain over 10325 area for further rally towards 10380 -10455 & 10495-10585 area in the short term (under bullish case scenario).
 
On the flip side, sustaining below 10305-10275 area, NF may fall towards 10190-10150 & 10125/10060 -10015 area in the short term (under bear case scenario).

Similarly, BNF has to sustain over 24600 area for further rally towards 24855-24950 & 25050-25250 area in the near term (under bullish case scenario).

On the flip side, sustaining below 24550 area, BNF may fall towards 24400-24300 & 24100-24000 area in the near term (under bear case scenario).

Indian market (Nifty Fut/India-50) today closed around 10247, almost flat (-0.07%) in another day of consolidation after making an opening session low of 10195 and late day high of 10252.

Indian market today opened gap down around 10229 (-0.29%) on mixed global/Asian cues amid China Party Congress & Fed Chair uncertainty coupled with terrible report card from Axis Bank published yesterday, which may be indicating that India’s NPA woes is far from over.

Market was further dragged by banks on concern of bad loans, but recovered quite smartly on stable EU market amid lower EUR and supported by rally in RIL, which soared by over 4.5% and contributed to Nifty by almost 38 points today.

Oil to telecom & retail giant (RIL) today surged to life time high of almost 918 on $1.4 bln JV (with BP) investment plan for NG from KG-D6 in Bay Of Bengal (satellite gas field) after recent meeting with PMO to shore up private capex in India’s energy infra to make the nation self reliant.

Apart from this NG capex story, overall optimism about energy (higher oil prices), telecom & even retail (festive season) may have boosted the stock (RIL) today and save the overall market from plunging further in the last day of “Samvat 2073” and helped Nifty to close the “Samvat” year (Hindu Calendar) with over 16% gain.

Axis bank report card published yesterday after market hours is clearly showing that India’s NPA fiasco is far from over and it may be a structural problem in power, iron & steel; telecom sector may be also going for another sectoral stress, if not intervened by the Govt over policy front; Axis Bank today closed over 9% lower today and dragged Nifty 29 points alone.

Overall market may be also cautious about stretched valuation ahead of long weekend Diwali holiday from tomorrow (after a short evening trading session) amid various important geo-political events like Catalonian issues, JP election outcome on Sunday and ongoing NK tension.

Also, dual combination of higher USD & higher oil is not good for the import savvy Indian economy, although a higher USD may be good for export savvy Nifty index.

Today Nifty was supported by RIL, HDFC Bank, ITC, Power Grid, Kotak Bank, IBULLS HSG, ONGC, Wipro, NTPC & Tata Motors while it was dragged by Axis Bank, ICICI Bank, Bharti Infratel, SBI, Yes Bank, HUL, HDFC, Infy, HPCL & IOC.

Overall, Indian market was today supported by energies, power, mixed FMCG , while dragged by banks, telecoms, healthcare, techs, consumer durables, metals & auto.

Elsewhere, Australia (ASX-200) closed almost unchanged at 5890 after touched a five month high; it was helped by exporters, utilities, health care, industrials, financials/smaller banks while dragged by “big four” banks, telecoms, metals today.

AUDUSD edged down today and is now trading around 0.7837 (-0.16%) on subdued Westpac Leading Index, indicating below trend momentum; overall RBA minutes were less dovish yesterday and coupled with that China optimism is also supporting the AUD broadly, although a lower AUD is helpful for AU export savvy market. But as par Fitch survey, China slowdown, global QT and domestic housing bubbles are now the main concerns for AU economy.

Japan (Nikkei-225) edged up by almost 0.13% and closed around 21363 on mixed exporters (drops in Yen), energies, health care but dragged by automakers, Kobe steel fiasco, banks & financials.

China (SSE) closed around 3382, up by almost 0.29% after a long opening address by China’s Prez Xi in the twice a decade party congress today, in which he batted for market economy by commenting that “let the market play a decisive role in resource allocation”; i.e. China will deliver further policy reforms as market is expecting.

China Prez further stressed for “one China principle”, zero tolerance for corruption within the party and for deeper reforms in financials (market oriented FX rate, interest rate & relaxation for FPI/FDI) with ongoing effort of deleveraging & cutting of overcapacity).
Today PBOC fixed mid-point of USDCNY at 6.5991 vs 6.5883 yesterday with net injection of 270 bln Yuan in order to keep liquidity at reasonable level during the party congress in order to keep the market stable. PBOC is committed to keep Yuan at stable level without much depreciation. Market is concerned about China’s debt bomb & over leveraging, industrial over capacity and all focus may be now on tomorrow’s China GDP.

Today, China market was helped by banks & financials, utilities, consumers, health care, while dragged by property developers after comments by Xi that the 1st house is for living & not for speculation and trading, which is seen as an attempt by  China to contain its housing bubble.

Hong-Kong stock future (HKG-33) is now trading around 28670, almost unchanged on China’s attempt to contain its rising housing bubble. HK market was today dragged by property developers, techs/internet stocks (Tencent), Apple suppliers, while it was helped by China based banks & financials, insurers and overall China reform optimism.

Meanwhile, Crude Oil (WTI) is now trading around 52.07, up by around 0.37% on Kurdish-Iraq conflict and some concern of lower outputs or supply disruption from that area coupled with drop in US crude stockpiles in the API report overnight (bigger than expected draw in US crude inventories). All eyes may be now on the official EIA data with concern for US oil supply glut.

European Stocks Are In Goldilocks Rally On Lower EUR, China & Earnings Optimism; German Market Surged To Record High

EU stocks are upbeat today including Spain on lower EUR and earnings & growth optimism shrugging off the simmering Catalonian tensions; it’s like a ‘goldilocks” rally with decent economic and earnings growth but not a runaway inflation, thus ensuring a modest but steady consumption. Also a well thought & balanced speech by China’s Prez today in the party congress may have boosted the overall risk-on sentiment on hopes of further financial reforms by the 2nd largest economy in the world.

EUR was lower on talks of dovish QE tapering coupled with ongoing EU political concern and a German constitutional verdict in favour of ECB QE. Stoxx-600 is up by almost 0.36%, while DAX-30 gained by also around 0.37%, CAC-40 gained by almost 0.45%, FTSE-100 is up by 0.40% and IBEX-35 rallied by almost 0.60%. Export heavy DAX-30 scaled a record high of 13087 today on lower EUR, China optimism and mixed earnings

Overall, EU market was today helped by exporters (lower EUR), consumer goods, healthcare, while dragged by banks & financials (muted earnings, Catalonian tensions and concern for Italian NPA), energies & telecoms.

All eyes may be now on Spain/Catalonia tomorrow as Spanish deadline looms amid reports of a symbolic declaration of independence by Catalonian CUP party. Catalonian based banks are on the back foot and some cos are already considering shifting their base/HQ out of the region amid simmering political tensions & uncertainty.

Overall Q3 earnings & guidance is mixed so far in EU, which is expecting a decent YOY growth of 4.5% amid recent strength of EUR.

FTSE-100 was supported by some drops in GBP on muted UK job data (real wage growth) coupled with ongoing Brexit squabbling. As par latest report, UK may prefer to exit without any deal rather than a bad deal, whereas EU is still unsure of UK’s negotiation stance!!

Overall UK market was helped today by exporters, retailers, media/publishers, while materials/miners were mixed and airlines were down along with Reckitt on muted guidance.

USDJPY Scaled Almost 113.05 On Fed Policy Continuity Optimism & Hopes For An Upbeat Beige Book:




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BNF



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