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Equity Research Report Ways2Capital 7 Aug 2017

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This Week Nifty Index made fresh all time high of 10138 and closed above a psychological level of 10000. However this rally may not sustain if nifty trades below 9988 l. FII & PRO has created a short position in last 10 days for 240908 contracts. On the fifth consecutive day, The Indian Benchmark Index Nifty closed above 10000 levels.last day the Index closed at 10,066 after making a high of 10075. The Reserve bank of India cut the repo rate by 25 bps to 6%. Nifty was down by 33.15 points and the probable Resistance as per Chart was at 10,141. The market made an opening high of approx. 10138 and corrected steadily during the day. Moreover, the support as per chart was mentioned at 10,058 and market after making a low of 10,054, recovered to close at 10081. The Indian Benchmark Index Nifty made an all time high of 10138 and closed at 10082 after making a low of 10054. The Index ended lower by 33 points after RBI trimmed repo rate by 25 bps. RBI has cut repo rate by 25 basis points in its third bi-monthly monetary policy outcome on Wednesday, as widely anticipated by the market. Now, the repo rate stands at 6%. Consequently, the reverse repo rate under the LAF stands adjusted to 5.75%, and MSF rate and the bank rate to 6.25%. Market signalled fresh up move after Friday’s close above the Monthly upward channel line at 10060. In the daily chart. Nifty continued its upward rally after taking support from upward channel line. The market surged by another 52 points and sustained above the 10000 mark. Nifty may open flat in next week trading session but continue to move up. Time and Price action Suggest that Nifty need to Sustain over 10060 levels for further up move towards 10154-10240, On the Flip Side if break this level may darg towards 9947-9902 in near-Term.

BANK NIFTY : – Bank Nifty also made an all time high of 25190 and closed at 25055 after making a low of 24926.Indusind Bank up by 1.21%, HDFC Bank by 0.72%, Yes Bank by 0.98% were among the top movers in the Banking Index. This is the first time the Index closed above the psychological level of 25000.The Index opened on week at 24881 and closed at 24827 levels. Among the Banking stocks, State Bank of India rallied 4.5% after it reduced Interest Rate on Saving account deposits by 50 basis point to 3.5%. The process of resolution of bad loans will start shortly, Finance Minister Arun Jaitley said in the Lok Sabha as it passed a bill which gives RBI the power to direct banking companies to resolve the problem of stressed assets. The Reserve Bank has already identified top 12 loan defaulters and more cases will be taken up by them for resolution. The Bank Nifty traded in a positive note for whole week on the back of rate cut by Reserve Bank of India central bank trimmed repo rate by 25 bps in its third bi-monthly monetary policy outcome on Wednesday, as widely anticipated by the market. As of Now Time and Price Action Suggest that Bank Nifty need to Sustain the 24950 level for further up move towards 25120-25278, On the Flip side Sustaining below 24950 may drag the index towards 24850-24520 In near Term.

NSE – WEEKLY NEWS LETTERS
✍ TOP NEWS OF THE WEEK

Arun Jaitley indicates scope for rationalisation of rates under GST – Finance minister Arun Jaitley on Wednesday said there is scope to rationalise goods and services tax and rolling 12 per cent and 18 per cent slabs into one as implementation of the country’s most comprehensive indirect tax reforms progresses. I do concede that as it moves forward, there will be scope for rationalising the rates. There, probably, will be scope that the two standard rates of 12% and 18 per cent, after some time, could be clubbed into one. That is a fair possibility and a suggestion,” Jaitley said replying to debate on the two bills related to GST in J&K. Central Goods and Services Tax (Extension to Jammu and Kashmir) Bill, 2017 and the Integrated Goods and Services Tax (Extension to Jammu and Kashmir) Bill, 2017 were later passed by a voice vote. The current GST has 5 per cent, 12 per cent, 18 per cent and 28 per cent rates, plus one for luxury and sin goods. There are some that are zero rated, or nil rate.

PSU banks need Rs. 1.9 lakh crore capital by March 2019: S&P – PSU banks will need at least Rs. 1.9 lakh crore additional capital by March 2019 as the lack of it will restrict their ability to write down Non-Performing loans, S&P Global Ratings said. “We estimate that Indian banks may need a minimum of about $ 29.6 billion or Rs. 1.9 trillion over the next two years,” S&P Global Ratings credit analyst Geeta Chugh said. Public sector banks will need substantial capital to make large haircuts on loans to unviable stressed projects and to meet rising Basel III requirements, S&P said. “The lack of capital restricts the ability of India’s public sector banks to write down non-performing loans to more accurate levels. Weak profitability and rising capital demands from Basel III implementation will also continue to pressure the capitalisation of many of these banks. The US-based agency said PSU banks will have to look for alternate sources to increase their capitalisation.

India’s public sector banks face three key challenges in tapping equity capital markets: – low equity valuations, overcrowding in the market, and regulations. At the same time, they may find it hard to raise money via the issuance of additional Tier-1 capital instruments because the risk of default on these instruments is rising,” S&P Global Ratings credit analyst Deepali Seth-Chhabria said.

India must guard against external financing vulnerability: IMF – India needs to remain vigilant as greater reliance on debt financing and portfolio inflows could create significant external financing vulnerabilities, a recent IMF report has said. The The International Monetary Fund in its report titled ‘The 2017 External Sector Report’ further said other risks to the Indian economy stem from global financial volatility and ‘longer-than-expected cash normalization’ following the currency exchange initiative. “Like other EMs, too great a reliance on debt financing and portfolio inflows would create significant external financing vulnerabilities. Therefore, there is need to remain vigilant to safeguard the Indian economy. India’s economic risks stem from intensified global financial volatility including from a faster-than-anticipated normalization of monetary policy in key advanced economies, longer-than-expected cash normalization following the currency exchange initiative, as well as slower global growth,” the report noted.

RBI says that there are uncertainties around its inflation trajectory – The Reserve Bank of India continues to express its concerns over the inflation outlook, even as it has eased key policy rates implying that it is comfortable with the inflation levels . The second bi-monthly statement projected quarterly average headline inflation in the range of 2.0-3.5 per cent in the first half of the year and 3.5-4.5 per cent in the second half. The actual outcome for Q1 has tracked projections. “But looking ahead, as base effects fade, the evolving momentum of inflation would be determined by the impact on the CPI of the implementation of house rent allowances under the 7th central pay commission, the impact of the price revisions withheld ahead of the GST- goods and services tax,” RBI said in its policy statement. Besides, how structural and transitory factors shaping food inflation play out will also determine the future inflation trajectory it said.

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