Friday 30 June 2017

Nifty Closed Almost Flat After Last Hour Rebound Ahead Of GST & QLY Rebalancing Tracking Similar Global Trends



Banks Rebound On Hopes Of RBI Cut In Aug, After Govt Cuts Small Savings Interest Rate By 0.10%

Nifty Finished Almost 1% Lower In June, The First Monthly Drop In 2017 Amid Concern Of GST, NPA & QT

Market Wrap: 30/06/2017 (17:00)

NSE-NF (July): 9515 (-4; -0.04%) (TTM PE: 24.10; Near 2 SD of 25; TTM EPS: 395; NS: 9521)

NSE-BNF (July): 23210 (-21; -0.09%) (TTM PE: 29.20; Near 3 SD of 30; TTM EPS: 795; BNS: 23211)

For 03/07/2017:

Key support for NF: 9495/9440-9395/9335

Key resistance for NF: 9540/9600-9670/9725

Key support for BNF: 23000-22800

Key resistance for BNF: 23350-23550


Time & Price action suggests that, NF has to sustain over 9615 area for further rally towards 9670-9725 & 9775-9865 in the short term (under bullish case scenario).

On the flip side, sustaining below 9600-9560 area, NF may fall towards 9495/9440-9395/9335 area in the short term (under bear case scenario).

Similarly, BNF has to sustain over 23350 area for further rally towards 23550-23750 & 23850-24000 area in the near term (under bullish case scenario).

On the flip side, sustaining below 23300 area, BNF may fall towards 23100/23000-22800 & 22450-22300 area in the near term (under bear case scenario).

Nifty Fut (July) today closed around 9515, almost flat after making an opening session low of 9451 and late day high of 9529 led by late recovery tracking some rebound in European markets and possibly by quarter end portfolio/fund rebalancing in a cautious tone ahead of GST roll out tomorrow.

Indian market today opened around 9493, almost 27 points down following negative global cues. Overnight US market (DJ-30) also closed in deep red (-0.78%) on concern of central bankers tightening (QT) and subsequent surge in global bond yields; tech shares/start ups were also in huge pressure as era of easy money may end soon. Although, Q1 US GDP headline came upbeat on 3rd revision, fine prints of the same may not be so much rosy.

Financials has supported the US market yesterday following Fed’s approval of higher dividends & buy backs after successful stress tests.

Indian market also opened lower following negative global cues & ongoing GST jitters and market continues under stress on earnings concern for Q1-Q2FY18 due to GST disruptions and NPA blues despite great thrust on deleveraging for stressed corporate India.

Almost all the major sectors in India from steel, power and cement to telecom are in stress; but telecom sector may got some boost as Govt help/bail out them by lowering interest rate & extending debt tenure.

Overall, market participants are concerned that due to hurried implementation of GST from tomorrow in so much complex form may cause economic activity contraction, at least in the short term. The present form of GST is not a “one tax, one nation” as originally thought; but it’s a multi tax dual system with a huge challenge of full compliances, especially for the small traders (SMES).

Going forward, Nifty-Fut (July), which is closed around 9515 area today, need to sustain above 9440-9395 area; otherwise expect more corrections for 9335-9285 area in the coming days amid concern of GST, NPA & QT by global central bankers.

Today banks supported the market to some extent after Govt cut interest rate on most of the small savings instruments by around 0.10%. RBI has some reservation about higher small savings interest rate in India, being not aligned with the 10Y GSEC bond yield and may be one of the major obstructions for the banks in their transmissions of the full benefit of the lower RBI repo rate cuts. Thus, cut in small savings rate by even 0.10%, may encourage banks to transmit more as they may have also cut their FD/deposit rates and RBI may follow suit in Aug’17.

Govt/FM also assured the industry/market today that if the GST compliance is good, then Govt may reconsider aligning some GST rates, such as 12 & 19% into a single 15% for a simple GST structure of 3-4 rates against present system of 6-7 rates. This may have also calmed the nerves of the market today.

Today Nifty was supported by BOB (Nomura upgraded it after recent steep fall), ITC (favourable GST rate optimism), Pharma, Metals (Tata Steel for buzz of Essar steel M&A), IT (TCE/INFY), Private Banks (Yes/Indusind/Kotak/Axis).

Nifty was dragged by Tata Motors, TECHM, ICICI Bank, HDFC, RIL & LT; out 51 components, 31 were in red today.

Asian Market Update:

Elsewhere, Australia (ASX-200) was closed in deep red (-1.50%) amid concern of a hawkish RBA next week in the changing global central banks bandwagon of hawkish tunes despite some rebound in iron ore prices after upbeat China PMI data today.

China (SSE) also closed almost flat in slight red (-0.15%) after PBOC further strengthen the Yuan (CNY) and sucked out more liquidity (CNY 60 bln) today by reverse repo; there are talks that PBOC may cut RRR for some small lenders (Banks) targeting the SME sector (real economy) and continue its deleveraging effort for the big ones.

Although, today’s official China PMI was upbeat and above market expectations, fine print reveals that PPP & Mfg PMI may be contracting, which may have some negative impact on its GDP going ahead.

Japan (Nikkei-225) closed almost 0.90% lower around 20000 level, following strength in Yen after mixed economic data today and overall weakness of USD. In Japan, although headline CPI for May came at 0.4%, core CPI continues to be at 0% against BOJ’s target of 2% and that may be a big disappointment despite decades of QQE.

Subdued core CPI & wage inflation in Japan may be a structural issue which monetary policy may not solve alone; thus Abenomics need to undertake some changes in order to address this decade old issue properly. In that perspective, Sunday’s Tokyo regional election may be an acid test for the Japanese PM (Abe) & his policy of Abenomics. Technically, for Nikkei-225, the area of 19800-19700 may be a big support as of now.

Hong Kong (HSI) also closed lower (-0.60%) tracking negative global cues ahead of “Hand Over” day tomorrow, when Chinese premier may announce some sops for the market/economy; looking ahead HSI, which is trading around 25600 now, need to stay over 25300 area for any rebound; otherwise may correct more.

In commodities, Crude Oil is now trading around 45.20, stabilizing to some extent after recent slump on concern of supply glut & OPEC squabbling; surprised fall in US supply & better drawdown of gasoline may be supporting the Oil right now, although that may be seasonal in nature.

Another point may be that stock of Crude Oil may be converting into gasoline stock piles considering the recent spate of refinery expansion. All eyes may be on today’s Baker Hughes Oil rigs data to gauze the underlying supply sentiment.

European market update:

Elsewhere, in Europe stocks recovered slightly after upbeat EU economic data; specially inflation. Headline CPI for June flashed as 1.3% against estimate of 1.2% (prior: 1.4%). Similarly core CPI came as 1.1% against estimate of 1% (prior: 0.9%).
But EURUSD did not react too much even after upbeat EU core CPI data as bund yields fall; although, core CPI came around 1.1% from earlier 0.9% and quite encouraging, it may be far below ECB’s target of 2% (unless ECB officially lower its inflation target).

European market was also under some pressure today following overnight slump in US market; Banks are supporting, but healthcare & commodity related stocks are dragging. Bayer is under huge selling pressure after its guidance warning citing some headwinds from its Brazil business.

In UK, although Q1 GDP came as expected at 2% (YOY) & 0.2% (QOQ), the underlying details may be less impressive with 1.4% fall in real disposable income; as a result BOE may not run for an immediate hike despite its recent hawkish script. Subsequently GBPUSD dropped by some extent.

DAX is now trading around 12390 area, down by 0.17%; looking ahead, it need to stay over 12300 area; otherwise expect more fall towards 12170-11970 area in the coming days.
FTSE is now trading around 7350,almost flat (+0.03%) amid some fall in GBP; technically it now need to sustain over 7240 area for any bounce; otherwise it may fall further towards 7125-7030 zone in the days ahead amid increasing QT coordination among G-10 Central Banks.

US market update:

SPX-500 (US-500) is now trading around 2420 after making a session high of 2428 following mixed US economic data; core PCE, a favourite indicator of Fed to gauze underlying inflation pressure on US economy came in line for May as 0.1% (MOM) & 1.4% (YOY) against prior 1.5%.

Although US personal income for May came as upbeat at 0.4% against prior 0.3% (MOM-May), personal spending came disappointed at 0.1% against prior 0.4%.

Chicago PMI (June) came upbeat at 65.7 against estimate of 58 (prior: 59.4); U-Mich consumer sentiment for June also flashed well at 95.1 against estimate of 94.5 (prior: 94.5).

Overall data may be good but may not be block buster enough to move the Fed above the side line in the coming days and may have also failed to lift the sentiment of USDJPY & SPX-500; both are down to some extent after the data.

Although, U-Mich consumer sentiment data has beat the estimate, it’s at 7 month low, which may be also indicating that consumers are fast losing hopes in “Trumponomics” after the election amid increasing uncertainty about US economic prospect and political jitters. Trump’s election rhetoric now need to be transformed fast into real action; otherwise US consumers may soon lose all the hopes on Trump to make “America great again”.


                                                               SGX-NF

                                                               BNF


 DAX-30


Nifty May Open In Red Tracking Negative Global Cues On Concern Of QT & Slide In Techs; Indian Market May Be Also Under Stress Until Market Get Some Confidence On GST



Market Mantra: 30/06/2017 (08:30)

SGX-NF: 9480 (-45 points)

For the Day:

Key support for NF: 9460/9435-9395/9335

Key resistance for NF: 9530/9565-9615/9660

Key support for BNF: 23100/23000-22700/22450

Key resistance for BNF: 23350-23550

Time & Price action suggests that, NF has to sustain over 9615 area for further rally towards 9660-9700/9735 in the short term (under bullish case scenario).

On the flip side, sustaining below 9600-9560/9530 area, NF may fall towards 9460/9435-9395/9335 area in the short term (under bear case scenario).

Similarly, BNF has to sustain over 23350 area for further rally towards 23550-23750 & 23850-24000 area in the near term (under bullish case scenario).

On the flip side, sustaining below 23300 area, BNF may fall towards 23100/23000-22700 & 22450-22300 area in the near term (under bear case scenario).

As par early SGX indication, Nifty Fut (July) may open around 9480, almost 45 points gap down following negative global cues. Overnight US market (DJ-30) also closed in deep red (-0.78%) on concern of central bankers tightening (QT) and subsequent surge in global bond yields; tech (FAANG) shares were also in huge pressure as era of easy money may end soon. Although, Q1 US GDP headline came upbeat on 3rd revision, fine prints of the same may not be so much rosy.

Back to home, Indian market may continue to be under stress on earnings concern for Q1-Q2FY18 due to GST disruptions and NPA blues despite great thrust on deleveraging for stressed corporate India. Almost all the major sectors from steel, power to telecom are in stress; but telecom sector may get some boost today as Govt may help/bail out them by lowering interest rate & extending debt tenure.



SGX-NF

Thursday 29 June 2017

Nifty Closed Almost Flat Well Off The Day High And Snapped 6 FNO Series Winning Streak Amid Concerns Of GST Disruptions & Mixed Global Cues



Nifty finished the June series also almost flat (-6 points); What’s next in the GST month with increasing concern of central banks tightening (QT)?

Market Wrap: 29/06/2017 (17:00)

NSE-NF (July): 9525 (+17; +0.18%) (TTM PE: 24.06; Near 2 SD of 25; TTM EPS: 395; NS: 9504)

NSE-BNF (July): 23231 (-25; -0.11%) (TTM PE: 29.22; Near 3 SD of 30; TTM EPS: 795; BNS: 23227)

For 30/06/2017:

Key support for NF: 9495/9465-9395/9335


Key resistance for NF: 9530/9565-9615/9660


Key support for BNF: 23100/23000-22700/22450


Key resistance for BNF: 23350-23550


Time & Price action suggests that, NF has to sustain over 9615 area for further rally towards 9660-9700/9735 in the short term (under bullish case scenario).

On the flip side, sustaining below 9600-9560 area, NF may fall towards 9495/9465-9395/9335 area in the short term (under bear case scenario).

Similarly, BNF has to sustain over 23350 area for further rally towards 23550-23750 & 23850-24000 area in the near term (under bullish case scenario).

On the flip side, sustaining below 23300 area, BNF may fall towards 23100/23000-22700 & 22450-22300 area in the near term (under bear case scenario).

Nifty Fut (July) today closed around 9525, slightly in positive (+0.18%) after making an opening session high of 9594 and late day low of 9510 in a fairly volatile session on the FNO Exp day amid ongoing concerns for GST disruption & NPA/IBC blues and mixed global cues.

Indian market (Nifty-July) today also opened around 9525 in an upbeat mood following positive global cues & firm commodity prices. Overnight US market (DJ-30) also closed in upbeat mood (+0.68%) after ECB clarified that Draghi’s comments day before yesterday was misinterpreted by the market as a signal of QT (QE bond tapering).

Also, US market sentiment was boosted by Banks after “good results” from 2nd stage of Fed stress test and Fed permitted to hike dividends and buy backs. Various big US banks, such as BOA, City, MS, JPM are scrambling to announce higher dividends & buy backs soon after the Fed announcement.

Tech/FAANG shares also supported the US market well in addition of Oil (energy related shares) after surprised gasoline draw down & reduced US oil supply report, although that may be seasonal in nature.

Fed’s approval for the hike in Bank’s dividends & buy backs may be an indication of its confidence on the overall US economy after the 2008 economic crisis led by Lehman Brothers collapse and in line with Yellen’s observation that such crisis may not come again in the foreseeable future (“in her life time”).

Thus, it may also mean that Fed will not hesitate for QT and other major central banks also have to follow Fed to maintain the policy/rate parity; easy money era of the central banks may soon end and that may not be good for the risk assets.

Indian market today also opened in positive tone following supportive global cues and soon after opening, short covering led rally brought the index to almost around 9600, but ongoing concern of GST & NPA blues may have dragged the market later on despite some optimism about Air India disinvestment & 7-CPC arrears (HRA) sanctioned by the Govt.

Banks were under severe pressure today. As par some estimates, an amount of Rs.20000 cr may be required by Banks to cover incremental provisions for IBC NPA cases.

US rating agency Fitch has also expressed some concern for the ongoing farm loan waivers in different states across India, which may be a risk for its fiscal consolidation and may also hurt the public investment (Govt capex). It may be also an impediment for cutting India’s general Govt debt and upgrade of sovereign credit profile.

India’s combined fiscal deficits including states & central Govt may be also significantly high already and a growing culture of pan-India farm loan waivers due to political populism may be also not good for overall fiscal health of the country apart from the risk of credit discipline of the system.

For GST, market has clearly some confusion amid divergent views among the stakeholders, policymakers & politicians; thus market participants may be restoring to long unwinding or fresh shorting at record high level of the market with stretched valuations; earnings for Q1-Q2FY18 may be severely affected for GST disruptions.

Today Nifty was supported by Axis Bank (after it confirmed lower incremental provisions for NPA/IBC cases), Tata Steel (buzz of buying Essar steel NPA), Gail & BPCL, ICICI Bank (JPA cements deal with Ultratech helps its NPA book), ITC & other metal counters (Chinese commodities price surge & hopes of consolidation in the Indian stressed steel sector).

Nifty was dragged by Kotak Bank, Tata Motors (deal with VG may not happen), SBI, BOB, Yes Bank, Indusind Bank, TCS, TECHM & RIL (concern of stressed B/S amid incremental capex).

Asian Market update:

Elsewhere, Australia (ASX-200) was closed higher around 1% boosted by banks & commodities (metals, iron ores & coals). China has reportedly puts some restrictions on coal miners due to its ongoing deleveraging effort & environmental concern.

Hong Kong (HSI) was also closed higher (+0.80%) led by strength in banking blue chips and Japan (Nikkei-225) also gained higher (+0.50%); but of the highs following strong Yen.

China (SSE) was also positive at 0.30% higher due to upbeat commodity prices; PBOC has strengthen Yuan today below 6.80 level and effectively drained out another CNY 60 bln from the Chinese money market citing adequate liquidity amid ongoing Govt capex.

European market update:

After opening positive tracking supportive global cues, European market came under some pressure due to higher EUR despite ECB’s yesterday clarification that market has misjudged Draghi’s comments as indication of QT.

EUR goes higher on optimism about EZ economic growth prospect and weak USD despite QT clarification by ECB yesterday; market may be not convinced about unlimited QE by ECB as eligible German bonds are in scarcity. So at some point, ECB may have to admit the QT path. EUR is also now regarding as a safe haven currency like Japanese Yen amid various ongoing geo-political jitters.

Easier financial conditions across EZ may prompt ECB to switch gear from accommodative to neutral soon and it may also take the QT path as inflation may soar soon. ECB is seeing the present subdued inflation as purely transitory mainly driven by lower oil, but if it not tighten, ECB may find it soon to be behind the inflation curve.

European market came under some pressure due to higher bond yields across the spectrum amid an apparent coordinated hawkish scripts from almost all the major central bankers including Fed, BOE, BOC and also Draghi (?) despite ECB’s yesterday clarification that market has misjudged Draghi’s comments as indication of QT; it seems that market is not convinced about ECB’s clarifications.

US market update:

USDJPY rallied almost 113 (112.93 HOD so far) after US Q1 GDP (3rd revision) came better than expected at 1.4% (EST: 1.2%; PRIOR: 1.2%) on QOQ basis led by surge in private consumption.

On other data points initial jobless claims came a bit disappointing at 244k against estimate of 240k; prior: 242k. Overall US Q1 GDP data may be looking very encouraging; but some more analysis of the fine print may be showing that US consumers actually spend more on RV (recreational vehicles) and without that, Q1 US GDP may be reported below 1%.
The surprised US consumption surge in RV may be also indicating about tepid housing recovery and weak underlying strength of the US economy. Despite lower gasoline prices, there was decline of spending in automobile sector on YOY basis and that may be a big concern for US auto industry also.

USD may have also got some support today after reports that WH (RNC) is working overtime to modify the Trumpcare bill in order to pass it by this week.

After initial surge led by optimism about Banks (higher dividends & buy backs) and upbeat GDP, SPX-500 is now looking stressed and trading around 2430; technically, looking ahead 2450-2465 may be a big hurdle for it, whatever be the narrative.



SGX-NF

BNF



SPX-500