Nifty
closed the GST week almost 1.5% higher on smooth roll out and earnings recovery
optimism for the PSBS; what’s next?
Market
Wrap: 07/07/2017 (17:00)
NSE-NF
(July): 9668 (-5; -0.05%) (TTM PE: 24.47; Near 2 SD of 25; Avg PE: 18; TTM EPS:
395; NS: 9666)
NSE-BNF
(July): 23460 (-21; -0.09%) (TTM PE: 29.50; Near 3 SD of 30; Avg PE: 20 TTM
EPS: 795; BNS: 23449)
For
10/07/2017:
Key
support for NF: 9615-9580
Key resistance for NF:
9725-9775
Key support for BNF: 23300-23100
Key resistance for
BNF: 23575-23800
Time & Price action suggests that,
NF has to sustain over 9725 area for further rally towards 9775-9835 & 9875-9915
in the short term (under bullish case scenario).
On the flip side, sustaining below 9705-9675
area, NF may fall towards 9615-9580 & 9535-9485 & area in the short
term (under bear case scenario).
Similarly, BNF has to sustain over 23575
area for further rally towards 23650-23800 & 23900-24050 area in the near
term (under bullish case scenario).
On the flip side, sustaining below
23525-23400 area, BNF may fall towards 23300-23100 & 23000-22800 area in
the near term (under bear case scenario).
Nifty
Fut (July) today closed around 9668, almost flat (-0.06%) after making a day
high of 9682 and opening session low of 9644.Nifty Fut (July) today opened around 9654,
almost 13 points down following tepid global cues even after panic buying of
JGB bonds by BOJ at 0.11% yield in a desperate attempt to keep the JGB yield
lower around 0.00% in its effort under YCC, after ECB minutes yesterday shows
about hints of QE tapering, which resulted in a global bond rout and slump of
global stock market; Era of easy money may be over!!
Overnight US market (DJ-30) also closed lower (-0.74%) tracking
global chorus of QT and subdued US economic data (ADP pay roll /ISM-Non MFG
PMI) coupled with plunge in tech shares; but supported by banks &
financials to some extent in a story of sector rotation on prospect of higher
interest rate regime.
After opening lower,
Indian market made a smart recovery shrugging off the worries of global central
bank tightening amid GST optimism and supported by Pharma due to
series of approvals of some key drugs molecule by US FDA recently and bargain
hunting after recent sell-off.
FMCG
counters were also in the limelight with some PSBS due to buzz of further
consolidation in the Indian Public Sector Banks space (PSBS); but private banks
& auto stocks were in pressure.
Indian
market yesterday also got some support from the FMO comment that despite farm
loan waivers, states will be not allowed to deviate from their path of fiscal
discipline; i.e. they may not be permitted to borrow more than their scheduled
limit this year.
Although,
this may be great step in the right direction, various states may be also
facing severe revenue crunch after GST kicks in and they lost various other
avenues of revenue collections. Some of the states which are waiving off farm
loans may be also under significant stress and even resorting to austerity and
we may see huge fall in Govt capex in those states.
Today,
Indian market faced some sharp selling in the last half an hour of trade after
Govt warned that Manufacturers may go to Jail if they failed to reprint the
revised MRP on the old stocks after GST. Also, logistics (Trucks) may be facing
some disruptions for the e-way bill issues.
PSBS
were also came under huge selling pressure in the closing session after FMO
indicated that Govt may not be able to provide additional capitalization for
them in excess of FY-18 budget estimate and they have to arrange for their own
capitals from the market and by deleveraging various available non-core assets.
Most
of the PSBS and also some Private Banks may require additional capital in
excess of Rs.25000 cr by FY-18 for requirement of regulatory provisions in the
IBC NPA cases as directed by the RBI.
Looking ahead, Indian market may focus on global chorus Of QT
(Quantitative Tightening), further development of GST implementation despite an
apparent smooth roll out so far. Also, all eyes may be on the Q1FY18 earnings
trajectory, which is expected to be again subdued this time, NPA resolution
& progress of monsoon, which is so far above 5% LPA and may be good for the
rural economy.
Technically, Nifty-Fut (July) may be now facing good hurdles
around 9725 area with immediate support placed around 9615-9580 zone. Indian
market may be also under some stress as EM may be vulnerable to global
bandwagon of QT in the days ahead.
Today
Nifty was supported by RIL (telecom & earnings optimism despite concern
about elevated capex), Lupin/Auro Pharma/DRL (bargain hunting & defensive
bet/sector rotation amid concern of QT), LT, HUL & Bharti Airtel ( buzz of consolidation/JV
with Tatacomm) and some Private Banks (Yes/Kotak/Indusind)
Nifty
was dragged by HDFC, ICICI, Axis Bank, ITC, INFY & TCS; overall only 18
scrips in Nifty were in green today out of 51 stocks.
Asia-Pacific market update:
Elsewhere, Australian stocks (ASX-200) were closed in deep red
around (-0.80%) on concern of iron ore prices slump coupled with banking
worries; recently both AU Federal & State Govt has imposed some regulatory
taxes on various big AU banks.
Japan (Nikkei-225) was also closed lower (-0.32%) despite lower
Yen after BOJ intervention today in the bond (JGB) market. Global surge in bond
yields yesterday after ECB minutes revelation about their intention for QE
tapering, although with caveats of satisfactory inflation may be responsible
for slump in equities and Japan may not be an exception of that also.
China (SSE) closed almost flat but off the day low; earlier it
was dragged by sell-off in some large cap stocks on concern over a deleveraging
related liquidity crunch amid ongoing tightening effort by PBOC.
European market update:
European stocks were also opened subdued amid QT concern; but
calm in bond market after BOJ jawboning about purchase of JGB bonds at fixed
rate in an unlimited way has sent the JGB yields lower around 0.08% from 0.10%
and thus EU stocks has also recovered to some extent. Today utilities sector is
supporting the EU market with some M&A news.
Also, upbeat US NFP job data is supporting the SPX-500 Fut and
global markets at this point of time despite subdued wage growth; EU market
also getting some support from recovery in global market sentiment after US job
data.
FTSE also staged some recovery after tepid UK economic data and
subsequent plunge in GDP, which is helpful for Britain’s export; it’s now
trading around 0.20% higher.
US market update:
Today’s
much awaited US NFP job data may be termed as mixed; although headline NFP
number beats the market estimate by a mile, wage growth is below market
expectation and may be also subdued as far as wage inflation is concerned.
US
NFP (June): 222K ; EST: 179K; Prior: 159K-R
Average
hourly earnings (MOM-June): 0.2%; EST: 0.3%; PRIOR: 0.1% -R
Average
hourly earnings (YOY-June): 2.5%; EST: 2.6%; PRIOR: 2.4%-R
Unemployment
rate: 4.4%; EST: 4.3%; PRIOR: 4.3%
Participation
rate: 62.8%; PRIOR: 62.7%
Overall,
at a glance headline NFP may be great; but US wage inflation may be still
elusive; also the fine prints of the NFP reveals that quality of jobs and payments
may not be good and number of part time workers has also increased.
Market
may not be now interested about NFP numbers, but more concerned about US wage
growth, which will ultimately fuel the US consumption and subsequent inflation
and in turn will also force Fed for further normalization of its monetary policy.
But
this mixed NFP report today may not prevent Fed for another rate hike in Dec’17
and B/S tapering from Sep’17, as the root cause of the tepid US wage growth may
be structural, which a loose monetary policy can’t rectify alone; it may require
some structural/fiscal reform also.
Another
point may be with June NFP, average headline number for the last six months
(Jan-June”17) is around 180K (179.83) against sequential (Jul’16-Dec’16) number
of around 193K (103.17); so not much fall sequentially for the last six months
considering US demographics & saturation factor and structural changes in
labour market such as automation.
Still,
US economy is producing around 186.5K jobs per month on an average for the last
12 months with an average wage growth of 2.5% (YOY) and that is not bad
considering the trajectory of US inflation & GDP growth.
Fed
may be on schedule for its path of QT, with B/S tapering from Sep’17 together
with another rate hike in Dec’17 for its goal of monetary policy normalization
in order to prepare itself for next economic crisis and ECB/BOJ may have to
also follow Fed’s QT tune.
Meanwhile,
USDJPY is blasting through 114 level towards the hurdle of 114.45 and Gold is
further plummeting below 1210 towards the zone of 1195-1185; days of easy money
may be over. Trump is again proved as correct for his “blockbuster” forecast of
US NFP after the GDP, although it may also be pure coincident.
No comments:
Post a Comment