-------- Forwarded Message --------
Subject: Nifty Closed Almost Flat Amid Positive Global Cues As Dollar
Dumped Ahead Of Fed & BOJ
Date: Tue, 20 Sep 2016 06:33:01 +0530
From: Asis Ghosh <asis...@gmail.com>
Nifty Fut (Sep) today closed around 8830 (+0.25%) after trading in a
very tight range and made a day high of 8848 and opening session low of
*Looking at the chart, for tomorrow (20/09/16), NF has to sustain over
8855-8875* area for target of 8905/25-8975 & 9005/25-9075*-9125 zone.*
*On the other side, sustaining below 8805-8785* area, NF may fall
towards 8745-8705*-8665/35 zone immediately.*
As Japan is closed today, there was not so much cues in the early Asian
session. China opened today after successive holidays; although there
was no major news, HIBOR strengthen quite significantly today, which may
be an initial indication of probable Yuan devaluation by PBOC or it may
be simply a liquidity management effort by China after a long holiday.
On Friday, US market was down to some extent, after better than expected
CPI data as this may translate a Hawkish Hold stance for Fed on
Wednesday and probable rate hike in Dec.
Rather than Fed, BOJ stance may be more vital because of various
speculation about their plan.As par some reports, BOJ may cut to (-)
0.2% from the present (-) 0.1% with some modification of the present
bond buying operation in order the steepen the long end bond yields.
Another version is that, BOJ may do nothing and will wait for Fed's
stance before any actual move on Oct-Nov.
As par some market talk, ECB may be also in the side line till Dec'16 in
order to see the effect of its previous stimulus. BOE may also not move
this year as it will keenly watch the actual process of "Brexit" as UK
is ready to invoke article-50 by early 2017 and to snap the present
trade agreements with the EU nations keeping an anti-immigration stance.
Ahead of Fed & BOJ, global market dumped some long USD position and that
helped the "risk on" sentiment today.
Oil was also supportedearlier by some renewed optimism about OPEC talk
of production freeze and geo-political tension in Libya & Nigeria.
In UK, sentiment was further soured after comments by German FM that
Britain will loose its financial passporting rights if it leaves
European Economic Area (EEA). This is importantbecause these are tied to
the UK's ability to conduct business across EU and may force many
UK/London based firms to move elsewhere.
No doubt, after few months of calm, "Real Brexit" concerns are again
hitting the headlines and Brexit woes may be far from over.
Indian market was also opened in positive territory today following
supportive global cues.
There was another report yesterday that Govt may go ahead with multiple
rates of GST as of now instead of a single RNR. Although, final outcome
will be decided by the GST comm, any abbreviation of the true theme of
GST may not serve any purpose on the overall economy in the near term.
Also, there was some question about excise duty related law point in the
new GST draft and Fin Secretary is expected to clarify that tomorrow.
Market will also watch any geo-political tension between India & Pak
following yesterday's hilarious terrorist attack in Uri, where 18 Indian
soldiers has been killed. But, at this point of time, any scope of
serious retaliation by India may be very limited for various reasons.
Govt may diplomatically try to corner Pak rather than any immediate
stern military action.
Today PSBS were under some pressure for FM's comments about
recapitalization constraint and Moody's concern about stressed assets,
although it may be bottoming out.
As par latest report, Indian Banks has now stressed assets of around
Rs.8 lac cr (as on Q1FY17). As par various estimates, the same is
expected to reach to around Rs.11-15 lac cr by FY-17.
Today, Nifty was supported by RIL (telecom play & CLSA upgrade),
Indusind Bank, Auro Pharma (completion of US FDA audit in its two
plants), Infy & TCS (inorganic expansion buzz & temporary relief from
higher US HIB visa costs), cement & metal counters.
Nifty was dragged by Maruti (stronger Yen) and other Autos (profit
booking), Axis Bank (ARC stake buy from IFCI and revision of MCLR) & ITC.
As par some report, Q1FY17 EPS of Nifty grew by around 3% (YOY) and this
trend of tepid growth may continue in Q2FY17 also. Its only in the
H2FY17, we can see some modest growth in Nifty EPS supported by good
monsoon, incremental consumer demand (7-CPC), incremental policy reforms
and transmission of rate cuts (benign interest rate) and in that
scenario, FY-17 Nifty target may be around 9600.
But, at present 9000 level, TTM PE (FY-16) of Nifty may be around 24.65
(EPS:365). If we assume 18% CAGR for FY-17, then EPS may come to around
431. A historical average PE multiple of 16-20 indicate that in that
scenario, fair value of Nifty may be around 6900-8600by FY:17-18.
Its true that in a liquidity driven rally ("hunt for yields"), PE
multiple does not matter, but when the liquidity tap beginning to dry
up. it will matter and history suggests that when ever Nifty has gone
towards 24-25 PE multiple, it has undergone significant correction in
the following 2-3 years.
Sep-Dec'16 period may be double whammy for Fed as it has to hike by Dec,
if Clinton wins. If Fed does not hike in Dec despite Clinton win, then
it may also be dubbed as "lack of confidence" of Fed on the US as well
as global economy.
If Trump win, Fed has to be in the side line for 2017 also or forever
and bothmay be bad for "risk trade". It may be a real catch-22 situation
for Fed in the coming months.
Thanks & Regards,
Kindly email stock reports at
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