*Market Wrap <https://www.iforex.in/news>*:*07/03/2018 (17:00)*
*
*
*NSE-NF (March):10178 (-71; -0.89%)*
*
*
*NSE-BNF (Jan):24238 (-266; -1.09%)*
*
*
*For 08/03/2018:*
*
*
*Updated: 07:05*
*
*
*SGX-NF: 10205; (+27 points@0.26%)*
*
*
*Expected BNF opening: 24300*
*
*
*(Edged up on mixed global cues after us market pared deep losses on
Wednesday onreports that Trump may exempt NAFTA
<https://www.iforex.in/analysis/usdjpy-caught-bid-amid-no-trade-war-comments-ross-and-mixed-us-economic-data-49781>and
certain other countries from his metal tariff rhetoric for the sake of
national securities; Trump also softened his trade protectionist stance
against China)*
*
*
*Valuation metrics:*
*
*
*NS: 10154; Q2FY18 EPS: 407; Q2FY18 PE: 24.95; Avg FWD PE: 20; Proj
FY-18 EPS: 418; Proj Fair Value: 8360*
*
*
*BNS: 24134; Q3FY18 EPS: 821; Q2FY18 PE: 29.50; Avg FWD PE: 20; Proj
FY-18 EPS: 961; Proj Fair Value: 19220*
*
*
*March-Fut (Key Technical Levels)*
*Support for NF: 10170/10130-10095/10040 and 9960-9915/9815*
*Resistance for NF: 10275/10300-10350/10395 and 10435/10485*
*Support for BNF: 24140/24000-23850/23600 and 23450/23150*
*Resistance for BNF: 24550/24700-24900/25100 and 25300/25575*
*Technical View (Positional):*
*Technically, Nifty Fut-Jan (NF) has to sustain over 10300 areas for a
further rally towards 10350-10395 and 10435-10485 zones in the short
term (under bullish case scenario). ***
*On the flip side, sustaining below 10275-10240 areas, NF may fall
towards 10170/10130 -10095/10040 and 9960-9915 zones in the short term
(under bear case scenario).***
*Technically, Bank Nifty-Fut (BNF) has to sustain over 24700 areas for a
further rally towards 24900-25100 and 25300-25575 zones in the near term
(under bullish case scenario).***
*On the flip side, sustaining below 24650-24550 areas, BNF may fall
towards 24140/24000-23850/23600 and 23450-23150 zones in the near term
(under bear case scenario).***
*
***
*Market wrap:*
*The Indian market
<https://www.iforex.in/analysis/nifty-extends-its-slump-negative-global-cues-and-widening-impact-pnb-fiasco-49799>*(Nifty
Fut-March/India-50)closed around 10178 on Wednesday(7^th March),
extended its slump by another 71 points (-0.69%) on*negative global cues
<https://www.iforex.in/analysis/us-stock-future-plunged-risk-aversion-after-resignation-trumps-top-cea-cohn-49773>*and
widening impact of the PNB fiasco. Besides some old generation private
banks like ICICI & Axis in the Gitanjali jewelry scams, more high
profile stressed corporates like Adani group, Videocon industries etc
are now in bank/government scanner, having huge loan exposure to the
Indian banks.
On Wednesday, the Indian market made an opening session high of 10254
and late day low of 10155 and fast approaching a 10% correction zone
from the January’18 euphoric high of 11163 in Nifty Spot; Bank Nifty
corrected by 12%, while PSBS plunged by 24%.
*The NPA saga may be spreading to other corporate groups:*
*
*
As par some reports, the largest Indian lender SBI is not comfortable
with its huge exposure in Adani power and made a representation to the
power ministry and may also call back the loan given to the Adani group.
The market may be concerned about the far-reaching impact of these
growing loan frauds in the Indian banking system and an eventual impact
on the economy as a result of slowing corporate lending.
The fear psychosis out of recent PNB frauds & spate of FIRS, arrests of
high profile banking officials, lack of decision making process may be
reminding us an atmosphere of so-called policy paralysis of UPA era in
2013s, which may be a serious challenge for the so-called “green shoots
economic recovery”, even if it may be debt-fuelled and backed by
excessive corporate leverage.
As par reports, Banks now has to report all NPA above Rs.500 mln (50 cr)
as “frauds” to the CBI, instead of above Rs.2500 mln (250 cr) reported
earlier. This may choke the normal banking (lending & borrowing)
activities of the banks in India.
The market may be concerned that due to the election, political populism
and “gallery show”, the government is distancing itself from “business”
and both BJP & INC are preparing a battleground for the 2019 general
election by politicizing the NPA and the PNB fraud. Apart from SBI, all
the other PSBS are now on their knees and at the same time, private
banks management are alarmed over the SIFO summoning of ICICI & Axis
bank CEOs amid the ongoing PNB saga.
*Valuations are still stretched at Nifty PE of around 25 despite recent
market correction:*
*
*
Apart from bank loan frauds and the resultant additional NPA out of it,
which may not be recoverable at all, the market is also under stress on
stretched valuation, higher bond yields, increasing chorus of QT by the
global central banks (Fed/ECB/BOJ), concern of higher inflation & fiscal
discipline, mixed macro data and surging oil. FPIS are also in selling
mood amid higher bond yields in the DM (developed markets, such as the
US) and deteriorating Indian macros & financial irregularities.
The Indian government is also trying its best to improve the
deteriorating market sentiment. On Wednesday, it briefed global rating
agency Fitch about the future potential of Indian economy and seeks a
rating upgrade.
The government is relying on strong macro fundamentals, the commitment
to fiscal discipline adherence (3% of GDP by FY-21), stabilization of
GST system and expectation of revenue pick up in the coming months. But
the privatization of the PSBS (public sector banks) is not on the
immediate agenda.
As par another global rating agency S&P, although government recaps plan
is sufficient for cleaning the PSBS NPA, it may be taken care of any
major loan fraud like one reported with the PNB.
*India has the 2^nd largest combined fiscal deficit among major economies:*
*
*
The combined fiscal deficit for India (state + Federal) is now at 2^nd
highest among major economies, just below Brazil and is running
consistently higher at 6.5-6.8% for years. Some of the reasons are
surging government & subdued private capex, slowing economy, muted
revenue collection out of GST and direct tax, political populism (farm
loan waiver etc), huge bank bailouts & bank loan NPA/frauds and higher
oil. The bond market may be a better reflection of India’s fiscal woes,
where yields are soaring.
On Wednesday, Indian market was helped by FMCG, while dragged by almost
all the other major sectors like banks & financials, automakers, techs,
media, metals, pharma, reality, energies, infra and consumptions to some
extent.
*USDJPY View:
<https://www.iforex.in/news/usdjpy-tumbled-trumps-most-trusted-market-friendly-cea-gary-cohn-resigns-49765>*
*EURUSD View:
<https://www.iforex.in/news/eurusd-almost-flat-some-recovery-greenback-amid-signs-trump-reconciliation-his-trade-war-rhetoric-49793>*
<https://2.bp.blogspot.com/-49ea43tDSSw/WqC7eDLYW2I/AAAAAAAAPLk/xFuZUti-fUwXNYZrn8J0t3O6V1Td2urTQCLcBGAs/s1600/SGX-NF-PATTERN-07-03-2018.png>
*SGX-NF*
<https://2.bp.blogspot.com/-LrelZunpeo8/WqC7j3rihJI/AAAAAAAAPLo/roT187sXStAto-5V4G0tFC3PhAIgYdP6gCLcBGAs/s1600/BNF-PATTERN-07-03-2018.png>
*BNF*
<https://2.bp.blogspot.com/-p95ueuYrfhU/WqC7nCHsv8I/AAAAAAAAPLs/-wRM3WbYNs0QMpnmaDI5JkCWvZOyv25cgCLcBGAs/s1600/USDJPY-PATTERN-07-03-2018.png>
*
*
*USDJPY*
--
Thanks & Regards,
Asis Ghosh
--
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