Nifty Jumped On Global Santa Rally & Hopes For A Convincing BJP Win In GJ

Market Wrap: 08/12/2017 (17:00)

NSE-NF (Dec):10290 (+87; +0.85%) 

(TTM PE: 26.26; Abv 2-SD of 25; TTM Q1FY18 EPS: 391; NS: 10266; Avg PE: 20; Proj FY-18 EPS: 418; Proj Fair Value: 8360)

NSE-BNF (Nov):25368 (+196; +0.78%) 

(TTM PE: 29.21; Near 3-SD of 30; TTM Q1FY18 EPS: 867; BNS: 25321; Avg PE: 20; Proj FY-18 EPS: 961; Proj Fair Value: 19220)

For 11/12/2017: Dec-Fut

Key support for NF: 10295-10240/10190

Key resistance for NF: 10325/10350-10395/10425

Key support for BNF: 25200-25100/24850

Key resistance for BNF: 25550-25750/25875

Trading Idea (Positional):

Technically, Nifty Fut-Dec (NF) has to sustain over 10350 area for further rally towards 10395/10425-10475 & 10535-10575 zone in the short term (under bullish case scenario). 

On the flip side, sustaining below 10325-10295 area, NF may fall towards 10240-10190 & 10150-10100 zone in the short term (under bear case scenario).

Technically, Bank Nifty-Fut (BNF) has to sustain over 25550 area for further rally towards 25750-25875 & 26050-26200 zone in the near term (under bullish case scenario).

On the flip side, sustaining below 25500 area, BNF may fall towards 25200-25100 & 24850 & 24750-24650 area in the near term (under bear case scenario).

Indian market (Nifty-Fut/India-50) today (8^th Dec) closed around 10290, surged by another 87 points (+0.85%) on positive global cues and better prospect of BJP/Modi in GJ after sudden change of stance by the “Patidar” community (Hardik) towards INC and change of sentiment in favour of NAMO/BJP after the “Neech” (low) political comments controversy by Ayer of INC; Nifty-Fut made an opening minutes low of 10211 and closing session high of 10298 today.

Although, BJP may not get the magic number of 150 in GJ this time, but anything above 120 may be good for BJP & the market (political stability & reform agenda/policy continuity), while anything below 100 may prove disastrous on political populism by the Govt/BJP in future, shaky on further structural reform.

An election is an “election”, full of uncertainty and thus nothing is final until the result. As par unofficial betting circle, BJP may get around 100 seats this time vs 115 prior, while INC may win in 70 seats vs 60 prior. By last two day’s smart rally, BJP’s 100 odd seats probability may have also discounted to a large extent and thus anything above 120-150 seats will cause additional market rally & vice-versa.

Fall of Oil from the recent top of $59 (WTI) to $55-56 now may be also helping Indian market sentiment to some extent as the country imports almost 80% of its oil requirement from overseas. Automakers are upbeat on prospect of price hike in 2018 and also helping the overall market.

Meanwhile, Nomura is very upbeat about prospect of Indian economy & market in 2018 (+17%) on story of solid Indian consumption, hopes of pick up in private capex cycle, double digit EPS growth, benefits of GST, IBC and Govt capex/infra spending while concerned on any derailment of current Govt policies (reform agenda on political populism ahead of 2019 general election); Nifty target is 11880 by Dec’2018.

As par Nomura, “Indian Business is on the cusp of an up cycle, which will drive strong earnings growth as corporate earnings-to-GDP ratio is at its lows, with significant contraction in margins and return on equity; This is also supported by stable macro fundamentals and clean-up in the system in terms of stressed assets and unprofitable players”.

Thus, India may be also embarking on Chinese style “mini-deleveraging” and trying to avoid a future “boom & burst” credit fuelled bubble.

Apart from positive Asian markets, an upbeat opening session of EU market because of Basel-III optimism (requirement of less than estimated provisions & capital buffer) may have also helped the Indian market sentiment today.

Domestic Retail Liquidity Support Growing For Indian Market:

Meanwhile as par reports, net investments into equity mutual funds in Nov amounted to almost Rs.0.20 tln the second highest monthly inflow ever; with the help of Nov investment figures, the net inflow into equity schemes of mutual funds for the current fiscal crossed Rs.1 tln for the first time in a financial year.

Power of liquidity by DII/MF may be the one of the primary reasons behind the huge rally in the Indian market, especially after DeMo.Net Direct tax collection also jumped almost 14% in Apr-Nov’17 to Rs.4.8 tln, almost 49% of total budget estimate of FY-18 (Rs.9.8 tln).

After market hours, Indian Bank loan growths came as encouraging at 9.6% vs 8.6% prior; although RBI’s latest report on bank loan growth may have also boosted the sentiment of the market to some extent, Indian household debts, especially unsecured debt is rising quite significantly in lieu of corporate/business loan; on the other side household income is quite stagnated over the last few years.

But various procedural hurdles, lack of sufficient & eligible bidders with various ambiguities over IBC rules may also delay the overall resolution (take over) process of the NPA/NPL.

Also, selective recaps of the PSBS with various caveats coupled with lack of eligible & quality corporate/business borrowers with a viable project, willing to borrow from Indian Banks at high real rate of interest and then face the process of IBC for default (including guarantors) may be also some of the serious headwinds for expected growth corporate lending & revival of private capex.

Today Nifty was helped mostly by ITC, IOC, HDFC Bank, HDFC, ICICI Bank, Tata Motors, HUL, HPCL, Maruti & VEDL by almost 86 points cumulatively.

Nifty was dragged mostly by RIL, Bharti Infratel, SBI, ZEEL, TCS, Gail, Bosch, Asian Paints, Hero Motors & DRL by around 22 points altogether.

Overall, Indian market was today supported by Pvt Banks & Financials, Auto, FMCG, Metals (encouraging China trade data), Pharma, Reality, Consumer Staples, OMC & Infra, while dragged by media, PSBS and energies to some extent.

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