Market Wrap <https://www.iforex.in/news/nifty-%E2%80%9Cshell-shocked%E2%80%9D-amid-sebi-crackdown-suspected-%E2%80%9Cshell-cos%E2%80%9D-39949>: 08/08/2017 (17:00)


NSE-NF (Aug):10004 (-87; -0.87%) (TTM PE: 25.26; Abv 2 SD of 25; Avg PE: 20; TTM EPS: 395; NS: 9979)

NSE-BNF (Aug):24705 (-293; +0.61%) (TTM PE: 30.94; Abv 3 SD of 30; Avg PE: 20 TTM EPS: 795; BNS: 24599)

For 09/08/2017:

*Key support for NF: 9940-9890*

*Key resistance for NF: 10065-10115*

*Key support for BNF: 24500-24250*

*Key resistance for BNF: 24900-25150*

*Hints for positional trading:*

*Time & Price action suggests that, NF has to sustain over 10065 area for further rally towards 10115-10155 & 10205-10275 in the short term (under bullish case scenario).*

*On the flip side, sustaining below 10045 area, NF may fall towards 10000-9940 & 9890-9825 area in the short term (under bear case scenario).*

*Similarly, BNF has to sustain over 24950 area for further rally towards 25050-25150 & 25250-25500 area in the near term (under bullish case scenario).*

*On the flip side, sustaining below 24900 area, BNF may fall towards 24700-24500 & 24250-23900 area in the near term (under bear case scenario).*

Nifty Fut (Aug) today closed around 10004, virtually “shell shocked” by yesterday’s SEBI directive about freezing of a long list of so called shell cos and slumped by almost 87 points (-0.87%) after making an opening session high of 10105 and day low of 9958; overall market sentiment got affected severely as there may be wider probes into other clean cos also and above all valuations may be quite stretched.

The surprised SEBI move may be a logical follow up by the Govt’s clampdown on black money/corruption (DeMo) suspected on illegal offshore transfers & tax evasion; although the regulator did not specify the charge details.

Indian market today opened around 10085, almost flat, tracking mixed global cues; but soon after opening it fall into severe selling pressure after SEBI decision to bar nearly 331 suspected “shell companies” from regular trading and further strict action, if allegation proves right.

Apart from various small companies, there are also so called “multi baggers” & “quality names” in that list, which may be very shocking to the investors/traders and may also, destabilize the overall market mechanism and it may be a serious question of credibility. These “shell cos” data has been compiled by MCA (Govt OF India), may be with the help of other investigating agencies in an ongoing fight against corruption by the Govt.

But, as Govt may also need a vibrant Indian capital market to keep its disinvestment target intact, one may expect some soothing clarification from the Govt/FMO soon and if there is any wrong communication, SEBI may also admit that and will hopefully rectify it soon.

Nifty was today supported by Hindalco (upbeat report card from Novelis & optimistic outlook), Tata Steel (upbeat results/guidance & optimistic outlook for the domestic industry, thanks to the huge infra spending by the Govt), Cipla (new product approval from US FDA), GAIL (OMC optimism), Bajaj-Auto (new model launch) & HUL (optimistic outlook & near normal monsoon with little probability of an EL-Lino even by 2018 Spring as projected by the IMD).

Nifty was today dragged by RIL, PSBS (tepid credit growth) & Infratel (stake sale by Bharti Airtel to reduce debt), DRL, Lupin, Sun Pharma, ITC, ICICI & Axis Bank.

Globally, most of the major Asian markets except Hong-Kong were trading in negative tracking mixed global cues after USD softened more amid subdued China export/import (trade balance) data. There is also some buzz that China may widen its USDCNY trading (fixing) band in its ongoing effort of currency reform ahead of Trump’s visit in Oct-Nov. A lower USD is generally not good for export heavy Asian indices/markets.

Today China trade data for July flashed disappointed and may have raised some question mark over the narratives of global reflation trade based on China; on YOY basis, export grew by 7.2% against estimate of 10.9% (prior: 11.3%); similarly import grew by 11% against estimate of 16.6% (prior: 17.2%), leaving the headline trade balance at $46.74 bln vs estimate of 46.08 (prior: 42.77).

Overall, global market may have great faith on the Chinese reflation, being the manufacturing power house & growth engine of the world, but a tepid export & import figure for July may be also a big disappointment, although a strong Yuan over the last few months may be also responsible for the subdued export data to some extent.

Overnight US market (DJ-30) closed almost flat, but at another record high around 22118 (+0.12%) supported by techs/semi conductor stocks & consumer staples and some M&A buzz; but energy related shares dragged the market to some extent in a relatively light day of trading amid ongoing summer holiday season.

Overall, US market may be quite complacent nowadays due to upbeat earnings (thanks to a lower USD), dovish Fed (lower interest rate) and an environment of low inflation despite lingering US political jitters & poor visibility of Trumponomics.

Technically, SPX-500 (Fut) which is now trading around 2475 (-0.11%) need to stay over 2495-2505 area for further rally from here; otherwise 2445-2400 zone may come in the days ahead.

Overall, AU economic data may be quite good in the recent times, but RBA talk down effort may be also a major headwind for the currency at this moment although it may also be not working as much expected by the RBA itself.

AUDUSD is being controlled by carry trade flow in search of better & attractive yields from a stable commodity country like Australia and as long as this attractive bond yield differential remains, AUD can’t go down significantly.

ASX-200 today is being dragged by banks & financials amid lingering regulatory concern about CBA money laundering probe; also materials & commodities (energy) were in pressure today.

Japan also closed in negative around 19996, (-0.30%) tracking a stronger Yen; but it was supported by some upbeat earnings & guidance from Soft Bank.

Today another influential Ex-BOJ Dy Gov (Iwata) again called for a gradual BOJ QE tapering to JPY 40 tln from JPY 80 tln/year to contain financial bubbles as 2% BOJ inflation target is increasingly looking elusive; even 1% CPI target may be now difficult to sustain on longer term basis; JGB may be also suffering from acute scarcity amid huge BOJ buying, which may be also distorting the Japanese market. Iwta may be is also a potential next BOJ chief after Kuroda’s term expires in April’17.

China (SSE) is also trading around 3277, almost flat (-0.02%), but off the low amid subdued China trade data and a buzz that PBOC may widen the USDCNY band. Today PBOC fixed USDCNY a little lower at 6.7184 vs 6.7228 and remained neutral on the money market today. PBOC has also made the China FX reserve quite stable in the last few months amid effort of deleveraging from acquiring foreign assets apart from the general devaluation of USDCNY.

Hong-Kong (HKG-33) is trading around 27810, up by almost 0.60% amid earning optimism and tepid China trade data and is the only major Asian market, which is in green today being also helped by energy sector.

Oil (WTI) is in green now, trading around 49.55, almost up by 0.25% ahead of OPEC-NOPEC production cut compliance meeting and hopes of further boost up in the same after tepid compliance report card in July on production squabbling from Libya, Nigeria and also some other key oil producing nations.

Elsewhere, European market was also came under pressure after yesterday’s tepid German IIP & today’s subdued China & Germany trade data coupled with mixed earnings report and a stronger EUR hovering around 1.18; thus Indian market also sold off in the close after some attempt of failed short covering today.

Exports for June from EU’s economic power house Germany fell by 2.8% against estimate of -0.3% (prior: 1.5%-R); similarly imports gone down by 4.5% against estimate of 0.2% growth (prior: 1.3%-R), resulting a headline trade balance of 21.2 bln against estimate of 21 bln (prior: 20.3 bln).

Overall, subdued German IIP & trade balance data may be an adverse effect of s stronger EUR and a weaker GBP, as UK may be a prime beneficiary of devalued currency, which is aiding its export at the cost of Germany.

Gloomy China trade data has also made the EU miners & metal producers lower as China is a major consumer of industrial metals & iron ore.

Also, consumer stocks (Jewelry, Hotels, Financial services) are down today due to weak earnings & guidance/outlook.

DAX-30 is now trading around 12185, down by over 0.50%; FTSE-100 is almost flat around 7523 (-0.11%) on weak GBP, helpful for Britain’s export heavy index, but being pulled by Leisure & miners and also financials (tepid earnings), while CAC-40 is down by almost 0.20% around 5197 amid mixed earnings

Asian session update <https://www.iforex.in/news/asia-trading-mixed-amid-subdued-china-trade-data-weak-usd-39915>:

FX update <https://www.iforex.in/news/usd-got-boost-yellen%E2%80%99s-favourite-jolts-job-openings-report-39959>:


<https://2.bp.blogspot.com/-SsQR2Vw59Fs/WYnqQd5KzsI/AAAAAAAAMpY/_FjAAb4AmdYO5brU_dJdGBmdLOA8SNoOgCLcBGAs/s1600/SGX-NF-PATTERN-08-08-2017.png>

SGX-NF
<https://3.bp.blogspot.com/-IhN6_ZUWnv8/WYnqVJgmRLI/AAAAAAAAMpc/BwII7PL5gFYqCisqUE9Smz0ZhbGXfk2yQCLcBGAs/s1600/BNF-PATTERN-08-08-2017.png>

BNF

<https://2.bp.blogspot.com/-dAfv4q0FdfA/WYnrjJ2ectI/AAAAAAAAMpo/H6TTt9cmwvgoZxV4ZyDgtLwX773dfNTfgCLcBGAs/s1600/SPX-500-PATTERN-08-08-2017.png>

SPX-500

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Thanks & Regards,

Asis Ghosh

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