Nifty Fut(Sep):Sustaining Above 8190 Expect 8355-8525, Otherwise Think About 7600-7300---Dovish Fed/Stable Global Market & GST/Land Bill/Rate Cut Hope May Help

Nifty Fut: 8015 (LTP)

SGX NF: 7994 (LTP)

Trading Levels :

		Gap Up/Dw	(Indicative)
SGX NIFTY	7994	-21
				NF-SEP	LTP			8015
	SL (+/-) 10 POINTS	FROM SLR
	Intraday Swing	Trader
			T1	T2	T3	T4	T5	SLR
Strong >	8030		8065-80	8125-65	8190-220*	8253-90	8325-55	<8010
Weak <	8010		7980-30	7905-880	7840-15*	7770-50	7710-660	>8030
FOR	Conservative	Positional	Trader
			T1	T2	T3	T4	T5	SLR
Strong >	8030		8080	8165	8220*	8290	8355-85	<8010
Weak <	8010		7930	7880	7815*	7750	7660-10	>8030

Rationale:

S&P Future (US market) retraced from key resistance zone (1990-2020) on Friday after Fischer & Lockhart (FOMC member) was sounded more like hawkish and put Sep rate hike probability back on the table. This type of continuous verbal intervention by different FOMC members in a cyclical manner (dovish & hawkish-Fed drama) for the last few months is perhaps designed carefully to control of the USD movement (as par preferred range of Fed) without any real action. But having said that, low inflation, tepid global growth and specially China jitters may be some of the excuses for Fed to hold in the days ahead and will keep the suspense on towards Dec'15. Again, there will be US presidential election in Nov'16 and Fed might not choose to risk the US/global market in turmoil (for rate hike fear) and they may unleash another form of QE designed to stimulate real street by keeping stable the wall street. Ultimately, at the end of the day, no Govt will like to face the election on the back drop of a disorderly financial market and thus probability of Fed, being too much hawkish looks remote even in 2016 (maximum 0.25-0.50% rate hike from record low level of Fed rate-0.00-0.25% with lots of caveats !!).

Back home, we may see official announcement of GST parliament session and confirmation of Land bill issue. It appears that the Govt will accept the UPA version of the Land bill with some modifications and in turn UPA/Cong will support the GST bill (also with some modifications) for a win-win situation for both.

Also there will be rate cut hope and this time Rajan may choose for Pre Dewali gift in the last week of Sep (after seeing real Fed action on 17-th Sep) and might cut deeper @0.50% at one shot.

Technical Analysis & Charts:

EW analysis on daily chart suggests that we might be in B wave currently after extended/impulsive wave A and the projected target of B may be around 8165 (if not extended) and thereafter C wave target might be around 7660-7540 & 6500 (extended). 

We need a strong news flow like GST/Land Bill/RBI rate cut along with dovish Fed & stable China to break & sustain over 8190-8220 for 8355-8525 and higher.

Indusind Bank: 830-820 Might Be Very Good Buying Zone for 911-995 In The Near Term--Strong Earnings Could Help Despite EQ Dilution For QIP

Technical Analysis:

CMP:848

For Investment Purpose:

Buy>830: TGT: 911-995-1025 (1-6M) & 1150 (12M); Trading SL<820

Note: Sustain below 820, IIB might fall to 784 zone, where fresh buying can be initiated again for good average.

Trading Levels (Positional):

For Trading Purpose:

	SL</>5	FROM SLR
		Indusind	CMP	848
			T1	T2	T3	T4	T5	T6	T7	SLR
Strong >	830		850	872	890	911*	940	972	995	<820
Weak <	820		802	784*	778-40	726	715	699	650	>830

Rationale

IIB corrected for the last few days by almost 16% from its recent cyclical high against overall market correction of around 12%. Apart from general market meltdown, other reasons may be IIB's intention of acquiring loan portfolio of RBS (around Rs.6000 cr) and recent QIP issue of similar amount (Rs.5081 cr @857.20 par share).

The other reason may be grant of payment bank license by RBI to certain corporate groups, which might pose some competition to the private banking space. But having said that, a small payment bank can not be the true replacement of a full fledged bank in its true sense.

The QIP proceeds will help the bank to support future growth and to maintain capital adequacy ratio. But, six cr new share issued in QIP mode & to promoters on preferential basis, which may dilute net EPS by around 10% unless supported by sequentially higher income. The bank is actively scrutinizing the loan portfolio of RBS to take a final call shortly.

IIB also recently acquired diamond & jewelry financing business of RBS and is quite confident of  growth in retail financing and CV business along with other fees income (3-rd party product sale).

The bank is also proving digital platform very rapidly in order to enhance the net banking & POS experience.

Going ahead, with expected growth in retail/SME loan book along with sequentially higher CV & corporate loan demand and relatively stable NPA, a strong bank like IIB might be a bright spot in the private banking space.

Valuation As Par BG Metrics:(Approx)

As par current market scenario, median valuation of IIB : 805

Projected fair valuation: 915-1025-1170 (FY:16-18)

SCRIP	EPS(TTM)	BV(Act)	P/E(AVG)	LV	SV	MV	200-DEMA	10-DEMA
INDUSINDBK	32.04	173.97	23	783.78	814.17	798.97	833.61	899.52

INDUSINDBK

41.5

229.25

23

892.01

926.60

909.31

833.61

899.52

INDUSINDBK

52.31

338.15

23

1001.47

1040.31

1020.89

833.61

899.52

INDUSINDBK

68.15

498.75

23

1143.08

1187.41

1165.25

833.61

899.52

Technical Charts:

Ten Portfolio Stocks At Bargain Hunting Prices (Bottom Fishing Or Catching Falling Knives)

Technical Charts:

In stock market, when there is "blood on street", buying good business (may be in some distress) is the most easy way to create wealth, although there may be some short term pain.

For time time being, technically, 7600 may be a decent support for our market and consecutive closing below that for any reason, 7300 should be the near term base and Nifty has to sustain above 7950 area for any meaningful rally towards 8355 zone in the near term. By sustaining over 8675 zone, FY:16-17 target for Nifty may be around 9200-9700, if we see clear visible overall economic recovery by H2FY16.

Going ahead, dovish Fed, huge arsenal of PBOC (don't underestimate China) along with ever green ECB & BOJ will support the global market and be sure that these four major central banks will not allow any contagion or disorderly movement in the financial market unlike 2006-08 crisis.
Back home, we may see GST, further rate cuts (at least 0.50% in FY16) and various other reform measures (both legislative & non-legislative). Depressed commodity prices (specially crude oil) is also going to be beneficial for our economy in the long term, although its giving pain to some sectors in the short term. Bihar election may give some cues for "Modi wave", but going by various combinations & permutations, BJP will not get the required majority of its own until next term (CY:2019). So, it has to follow effective floor management and specific "opponent party" wise strategy for passage of various reform bills in RS. Govt also need to believe in its own reform agenda & we may see even one or two joint sessions of parliament for passage of important reform bills as country can't wait for "mood" of opponent political parties further.

As a safe heaven appeal, China's pain may be India's gain in the coming days as there will no dearth of liquidity globally (thanks to 24/7 money printing in different forms) and among EM/BRICS, India is certainly a bright spot (mainland China market will need time to be more mature with Russia & Brazil not in a comfortable position). Now, India's macroeconomic position is in a comfortable position given low inflation, CAD and competitive INR.

For investment idea, here are some bitten down stocks for portfolio: These are blue chip stocks having excellent debt profile, management and great brand names & business model, now available at relatively cheaper price.

Note: Investment time frame:3-12 months

Allocation: Equal @10% of total portfolio for 10 stocks

Investment mode: SIP @50% each in suggested buying zone

(Trading SL suggested as par immediate positional support zone of 7600 for Nifty)

STOCK	CMP	BUYING ZONE (IDEAL)	TGT	TRADING SL(BLW)
TATA MOTORS	338	310-305	415-530-615	299
TATA STEEL	212	200-190	350-410-580	185
SBI	247	255-245	305-335-360	240
AXIS BK	497	490-480	590-615-705	475
ICICI BK	280	280-270	325-395-530	265
RIL	865	840-820	1000-1070-1270	815/790
SUN PHARMA	889	830-810	965-1010-1200	790
TCS	2620	2540-2490	2750-2840-3150	2470
COAL INDIA	360	340-335	395-445-495	330
LT	1600	1600-1550	1760-1900-2100	1525

Nifty Fut(Aug):Watch 7700 Zone---Sustain Below That 7300 Might Be The Base Case---Otherwise It Should Rebound Again To 8325--Dovish Fed & Our Govt Could Help

Trading Levels (Positional):

		Gap Up/Dw	(Indicative)
SGX NIFTY	7751	-34
				NF-Aug	LTP			7785
	SL (+/-) 10 POINTS	FROM SLR

			T1	T2	T3	T4	T5	SLR
Strong >	7700		7825	7931	7984*	8108	8275	<7680
Weak <	7680		7612	7509	7289*	7188	7000	>7700

Rationale

After yesterday's epic 1000 points initial fall, Dow Fut recovers nearly 500 points and are now up around 200 points in the morning, although China opened around 6% down (as par matching closing level with DF yesterday). Hang Seng also recovered, now up around 1%. It seems that global market is slowly stabilizing after "Black Monday" as there is no such great reason for sustained selling from here.

Fed is expected to be dovish in the next six months and market is now anticipating for any lift off only after March'16 and all the major central bankers will do what ever needed to avoid the contagion and disorderly movement of the market. As par past experience, no one will dare to fight against central bankers in this hour of crisis and there is market talk of even more QE in different forms in the coming days.

Back home, no doubt, our Govt will use all of its ammunition to stabilize our market also.

Technical Charts:

Nifty Fut (Aug):Global Meltdown---Sustained Below 8190, Are We Heading For 7900-7700 Zone ?

Technical View:

NF (LTP:8287; SGX:8172) may open around 8170-8150 on Monday morning as par Friday night closing level of SGX-NF.

Looking the chart, important support of NF should be around 8190 and sustain below that 8150-8135 might be the immediate target. Only consecutive closing below 8135, NF should fall towards 8080-8040 & 8000-7925-7860 zone and sustain below 7860, it may further fall to 7750-7700 area in the near term (bear scenario probability).

On the upside, sustaining above 8190-8220, immediate to short term target will be around 8245-8290 to 8310-8331 & 8362-8382-8405. Further sustaining above 8405, NF may face some hurdle at 8431-8455 zone and consecutive closing above 8455, it may rally towards 8485-8525 & 8555-8570 and 8610-8648-8675-8700 zone in the bullish case probability.

Trading Levels (Positional):

		Gap Up/Dw	(Indicative)
SGX NIFTY	8172	-115
				NF-Aug	LTP			8287
	SL (+/-) 10 POINTS	FROM SLR
	Intraday Swing	Trader
			T1	T2	T3	T4	T5	SLR
Strong >	8210		8245-90	8310-31	8362-82*	8405-55	8485-525	<8190
Weak <	8190		8150-35*	8080-40	8000*	7925-860*	7750-700	>8210
FOR	Conservative	Positional	Trader
			T1	T2	T3	T4	T5	SLR
Strong >	8210		8290	8362*	8455	8525	8675	<8190
Weak <	8190		8135*	8000	7925*	7860	7700	>8210

Rationale:

As we all know, there is some type of "Global Meltdown" going on currently all over the equity market amid China jitters, Yuan devaluation, so called "Currency War", EM currency turmoil and crashing crude oil prices. Adding to the woes, there is some confusion over US real economy growth and it seems that Fed is not so confident to raise rates in Sep or may be even in Dec'15, going by the US disinflation, "China slow down" and tepid EU situation (specially Greece political drama). Truly speaking, market is concerned over both US & China growth, being the two largest economy in the world now. Also, crude oil crash is destroying economic superiority of some of the oil rich countries such as Saudi Arabia, Russia etc and their fiscal situation is in turmoil. Clearly, a balancing act need to be done in the currency devaluation approach to stimulate growth and an equilibrium price for crude oil is also necessary to avoid a contagion effect.

Back to our own story, after complete wash out of monsoon Parliament session, all eyes will be on the special GST Parliament session which will start likely by Aug'30. Hopefully, this time, UPA will not oppose severely as they are (specially Cong) under immense pressure in & outside Parliament to act constructively and help either directly or indirectly (by abstain) to pass the bill in RS which will definitely help the market to pop up, at lest for short time and then actual fine print of the GST will decide next course of market movement. Theoretically, there may be a joint session of parliament to pass all the stalled bills, but practically that may be difficult for NDA, given the political compulsion.

At the end of the day. Cong will also realize that by destructive politics in Parliament, they have nothing to gain except converting itself into a "sign board" political party having no national importance. 

Regarding Land Bill, the Govt is now seems to be in the back foot before Bihar election & for its own political compulsions too and perhaps accepting the UPA version of the same for the time being with state specific issues. But BJP needs to believe in its own reform idea/agenda as far Land Bill is concerned as around 40% of stalled projects are stuck due to this contentious land issue.

Also, at this hour of crisis, Govt is accepting recommendation of Shah Committee for MAT and that means that FPI(s) will be not required to pay any taxes under MAT prior to April'15. The Govt will take similar stand in the SC for the ongoing "Castleton" case which is scheduled to be heard in Sep'15. Though, this was widely expected (as the Govt can't say no to MAT directly because of various legal & political issues here, this is an indirect way to say goodbye to MAT for the FII and that's why the Shah Panel was constituted in the first place), the same may be taken positively by the market and specially by the FPI(s), as they want simple, consistent and predictable policy. They are not here to fight cases in different legal forums.

Then there may be RBI action shortly or after CPI data in Sep and condition is ripe for a rate cut (even @0.50% in one shot) as Rajan may not like to wait till Oct for a Dewali gift to the nation amid this hour of crisis. Now, CPI is low(except Onion!!) and WPI is deep in negative territory, there is normal monsoon and Fed fund rate is indicating less probability of Sep lift off, so, there should not be any excuse for RBI to hold till Oct'15. But weak INR may be a headache for RBI as rate cut may prompt more slide in INR and there will be more selling by FPI(s), specially in bond market. Again, improved inflows in equity market by FPI(s)t due to rate cut should compensate some of the bond market outflows in the short term.

Apart form possible rate cut, immediate liquidity is more important for PSBS as they are under huge stressed assets of around Rs.4 lac cr, thanks to irresponsible lending coupled with economic slowdown amid legacy policy paralysis issues. Although Govt is now helping PSBS by so called "Mission Indradhanush", but that may be too little & too late. Thus immediate CRR/SLR/MSF cut is necessary for PSBS to fund "India Growth" story, when there will be actual economic recovery in H2FY16 as widely expected and demand for corporate loans will increase substantially.

Govt is also trying hard to support our market by bringing in some policy reforms which do not require Parliamentary legislation or RS approval in this hour of crisis, because for them disinvestment is a necessity to meet fiscal deficit and various expenditure, such as creation of infrastructure, funding of stalled projects and we may see institutional support also for an orderly behavior of the market.

But the forthcoming Bihar election will be most important for BJP/NDA to gain some seats in RS. Although there are around 16 RS seats for Bihar, BJP will need much more seats in the coming state elections after Bihar in 2016-18 to gain absolute majority in 243 effective members RS. As par various combinations & permutations, BJP has now 46 seats of its own and around 65-70 seats along with NDA/other political allies against Cong's own 69 and combined oppositions strength of around 132 seats. Thus, even if BJP get 16 RS seats in Bihar (unlikely as there is no visible "Modi Wave" this time, it can get 8-10 seats as par some predictions), it will have to wait till 2019 to have absolute RS majority, but at that time its current tenure will end. So, the best scenario will be effective RS floor co-ordination and specific political party wise management, so that even if Cong do not oblige, other so called "opponent" parties such as TMC(12),SP(15),JDU(12),AIDMK(11),BJD(7),BSP(10),DMK(4), Independent & Others(7) can help directly or indirectly in RS voting as some of them has also some "obligations" towards Govt (CBI cases etc). In that sense, absolute majority/good result in Bihar will reduce such dependency on other "opposition" parties and might bring a change of sentiment about Parliament/RS logjam. Govt's Rs.1.25 lac cr package (gift) for Bihar just before election may help.

That said, ultimately, what it matters is earnings (EPS) and although there was very little expectations in Q1FY16, observing the actual trend, various analysts are downgrading it to 10-12% against 18-20% sequential YOY growth on an average. Basically, this earning downgrade and falling INR spooked the market last week. Going by pure technicals, USD is poised to scale 70-72 level against INR in the near term (if sustained over 66 and not breaking below 64), unless RBI think otherwise and intervene heavily. Fundamentally, if Fed decides to hike rate in Sep, that will make USD more strong against INR, simply for interest rate differential. Hopefully, Fed will not hike in Sep and along that, depressed commodity prices (specially crude oil) will help India in the days ahead. Also "China's pain might be India's gain" for India's "safe heaven" appeal. But falling commodity prices (metals & crude) is also affecting future earning potential of some of our blue chip companies.

Moral Of The Story:

Immediate base of Nifty: 7900-7700 (without any GST/Rate cut hope)

Bounce back will depend on news flow, like MAT/GST/Rate cut/prospect of BJP in Bihar election/Q2FY16 earnings etc and Nifty will bounce back gradually towards the upper supply zone of 8500-8675-8760 depending upon the positive news flow, otherwise it may fall to 7300 zone in the near future.


Valuations As Par BG Metrics (Techno Funda Model)

As par revised earnings estimates by various analysts: (if there is any real economic recovery as widely expected wef H2FY16)

(Under the current market parameters)

Current median valuation of Nifty may be around : 7700

Projected fair valuations might be around: 8350-9150-10300 (FY:16-18)

SCRIP	EPS(TTM)	BV(Act)	P/E(AVG)	LONG TERM	SHORT TERM	MEDIAN VALUE	200-DEMA	10-DEMA
CNXNIFTY	361	2470.22	19.5	7639.51	7706.41	7672.96	8290.67	8436.5

 

CNXNIFTY

425

2720

19.5

8289.08

8361.67

8325.38

8290.67

8436.5

 

CNXNIFTY

510

3050

19.5

9080.24

9159.75

9119.99

8290.67

8436.5

 

CNXNIFTY

650

3510

19.5

10251.06

10340.82

10295.94

8290.67

8436.5

  Technical Charts: