Market Wrap: 01/02/2018 (17:00)
NSE-NF (Feb):11034 (-21; -0.19%)
(NS: 11017; Q2FY18 EPS: 391; Q2FY18 PE: 28.18; Abv
2-SD of 25; Avg FWD PE: 20; Proj FY-18 EPS: 418; Proj Fair Value: 8360)
NSE-BNF (Jan):27219 (-247; -0.90%)
(BNS: 27221; Q2FY18 EPS: 867; Q2FY18 PE: 31.40; Abv
3-SD of 30; Avg FWD PE: 20; Proj FY-18 EPS: 961; Proj Fair Value: 19220)
For 02/02/2018: Feb-Fut (Key Technical Levels)
Support for NF: 10870/10840-10800/10760
Resistance for NF: 10965/10995-11055/11105
Support for BNF: 27040/26840-26640/26350
Resistance for BNF: 27350/27500-27650/27850
Trading Idea (Positional):
Technically, Nifty
Fut-Jan (NF) has to sustain over 10995 area for further rally towards 11055/11105-11155/11195*
& 11255/11285-11305/11350 zone in the short term (under bullish case
scenario).
On the flip
side, sustaining below 10965 area, NF may fall towards 10870/10840-10800/10760
& 10715-10660/10630 zone in the short term (under bear case scenario).
Technically, Bank
Nifty-Fut (BNF) has to sustain over 27500-27650 area for further rally towards
27750-27850 & 28075-28405 zone in the near term (under bullish case
scenario).
On the flip
side, sustaining below 27450-27350 area, BNF may fall towards 27040-26840
& 26640-26350 area in the near term (under bear case scenario).
Indian market (Nifty Fut-Feb/India-50) today (1st Feb)
closed around 11034, edged down by almost 21
points (-0.19%) after a volatile day of trading on the budget day as government
breached the fiscal deficit target and also imposed LTCGT
(long term capital gain tax) as apprehended earlier; but solid DII support may
have supported the market today from a plunge apart from “grandfathering”
clause of the LTCGT till 31st Jan’2018.
Overallbudget may be termed as politically populist & rural savvy, eying for the
next series of state as well as general election. Indian 10YGSEC bond yield today soared by 2.46% and
closed around 7.614% after a volatile day of trading on the after government
presents a budget, which projects FY-18 fiscal deficit at 3.5% of GDP vs
earlier estimate of 3.2%; FY-19 fiscal deficit at 3.3% vs market estimate of
3.2%.
Moreover, government has proposed 1.5 times higher
MSP (minimum support price) of production cost for all agri crops and increase
in import tax for a number of electronic items such as mobile phones/certain
accessories, LCD/TV; all these may help inflation to go higher along with
surging oil and thus RBI may be prompted to take a more hawkish stance or even
hike rates in H2FY19 in line with its global peers (Fed). Thus Indian bond
yield may go even higher to 7.85-8.00% in the coming days.
Higher bond yield; i.e. higher borrowing costs may
be not good for the Indian corporates, most of whose balance sheets are already
stressed, everything being equal.
Government
Presents An “Aam Admi” Populist Rural Savvy Budget Eyeing For The Next Election:
Indian budget may be termed as politically
populist focused on rural economy ahead of elections; government said it
expected GDP to surge above 8% as it announced its FY-19 budget that allocated
billions of dollars for rural infrastructure and unveiled a health insurance
programme (“Modicare”) for around 500 million people at/below poverty line
(APL/BPL).
In its last full year budget before a national
election that must be held by May 2019, government spoke of massive spending on
rural infrastructure, to win over voters in the rural India, where two-thirds
of India’s 1.3 billion people live.
Indian market today opened around 11064 in a
spirited mood amid mixed global cues ahead of budget presentation and soon made
an opening high of around 11123 on hopes of a market friendly budget; but it
soon slips to 11040 level on muted Mfg PMI for Jan, which came at 52.4 vs est
54.5; prior: 54.7 and plunged further to day low of 10881 on reports of fiscal
deficit breach & imposition of LTCGT before jumping again to the session
high of 11139 on short covering as these were already expected. Overall Asian cues were also mixed.
LTCGC: Government Proposes bringing in LTCGC on listed
equities on long-term capital gains exceeding Rs.100,000 to be taxed at 10
percent (above 1 year holding period; no change in LTCGC definition);
grandfathered till 31/01/2018; No LTCGT on sale of stocks in FY'18; LTCG tax applicable only FY-19 (April’18)
onwards.
The “grandfathering” clause till 31st
Jan’18 for the LTCGT may have helped to revive the sentiment, but market eventually
slipped from the “dead cat bounce” on overall concern about macro/fiscal
deficit and taxation; more than LTCGT, breach of fiscal deficit even for the
sake of growth may not amuse global rating agencies and thus bond market is
adversely reacting.
Overall, market is hopeful that increasing rural
capex will eventually translate into increasing economic activity and benefit
both rural as well as real economy; but there is also some concern about
adequate quality job creations in the economy to support incremental consumer
spending after all these rural thrust (Rs.14.34 tln).
Over the last decade, although India is growing at
a mind-blowing rate of 7% on an average, overall employment situation is still
muted and that is the main concern of policy makers & politicians apart
from DeMo & GST blues. BJP has suffered huge defeat in some by-elections
few days ago in Rajasthan & WB, which is an indication that “all is not
well” for BJP in the rural/small town areas, even if there is no alternative
for NAMO in the opposition till now, despite “hard work” by RAGA (INC).
Overall, Indian market today was supported by
selected automakers (rural thrust in the budget & mixed auto sales for
Jan), FMCG (led by ITC on no fresh tax on cigarettes), metals (supportive
global cues), consumption, infra (thrust on rural & railway infra in
budget), while dragged by banks & financials (higher bond yields &
fresh concern for MSME NPA), techs, media, pharma (US jitters as well Indian
concern over “Modicare”), reality (higher borrowing costs) and energies.
Nifty was supported by L&T (infra story &
upbeat report card), ITC, while dragged by RIL, ICICI & HDFC Bank.
SGX-NF
BNF
WTI
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