Finance - Stock Market Forecast

Index Trend & Conditions – 07:30 a.m. I.S.T.

• Resistance for Nifty 50 is seen at 14,195 — 14,275 — 14,300 zone. For Thursday, Jan 07, Support area is seen at 13,950 — 13,960 and 13,775

• Support levels for Bank Nifty are at 31,500 31,375 and 30,850 with Resistance at 32,400

• The MSCI Asia Pacific ex-Japan is trading higher at 0.49%, and the MSCI Emerging Market index is up 0.08%

• Trends on SGX Nifty indicate a gap-up opening for Nifty 50 in India. The Nifty futures are trading 82 points, or 0.62% higher at 14,265 on the Singaporean Exchange at 07:30 a.m. I.S.T.

• Contracts tied to U.S. futures edged higher in early trade, with Nasdaq, S&P 500 and Dow Jones futures trading in green, alongside a positive start to Asia-Pacific early Thursday morning trade with gains in Japan, Australia and South Korea while Chinese equities were slightly changed at a 13-year high, a negative MSCI Asia-Pacific ex-Japan index, U.S. Dollar Index trading its lowest since Feb 2018 at 89.36 with 10-Year Treasury Yield climbing to 1.04 and Gold futures retreating to $1,917 on the day indicate a stable-to-positive outlook for Nifty 50 India

• The main indexes will remain volatile, but steady buying by foreign investors will help see gains for the week for Indian equity markets

India Markets

NIFTY 50	OPEN	HIGH	LOW	CLOSE
Wednesday	14,240	14,244	14,039	14,146

India stocks fell after ten consecutive sessions of gains on Wednesday trade, as investors awaited vaccine deployment in the world’s second-largest coronavirus hotspot and ahead of the quarterly earnings season that begins Friday

The blue-chip NSE Nifty 50 index dropped 53 points, or -0.38%, to 14,146 and the benchmark S&P BSE Sensex lost 263 points, or -0.54%, to 48,174. Both gauges swung through gains and losses several times

Among individual stocks, Reliance Industries was the biggest drag, decreasing 2.6%, while ITC had the largest drop, falling 2.9%

Shares of major cement companies like Shree Cement, Ambuja Cements, Dalmia Bharat and JK Cements rose 3-5 per cent on hope that increased government capital expenditure will boost domestic demand for cement

Shares of base metal producers rallied on bets that higher government spending at home and the possibility of larger stimulus in the US will help recovery in domestic and export demand, respectively

Broader markets out-performed their headline peers — Midcap 100 index added 0.55% ; Smallcap 250 index dropped -0.25% and Nifty 500 lost -0.25%

Strategy based indices out-performed benchmark indices — Nifty Alpha 50 added 0.17% and Nifty Alpha Low Volatility 30 added 0.12%

Nifty P/E for Jan 05, 2020 declined to 38.90 from 39.05, while Nifty P/B edged lower to 4.01 from 4.02, as recorded by NSE India

Bank Nifty opened positive, but failed to surpass the 32,000 mark and moved in a broader range with support at 31,500 level. It formed a small-bodied Doji candle on the daily scale. The index added 75 points, or 0.24%, to 31,797

India VIX moved up 2.61% to 20.99 from 20.46 levels

Volatility needs to sustain below 20 level to support the bullish market setup and fuel the bulls with a higher market base

Overnight Call Money rate weighted average stood at 3.15% as per RBI data. It moved in a range of 1.90 — 3.75% for Jan 05

Yield on the benchmark 10-year government bond increased to 5.92%, while rupee appreciated to 73.0700 against the U.S. dollar

India has granted emergency approvals for two vaccines ahead of inking pricing deals

Asia’s largest software exporter Tata Consultancy Services Ltd. is scheduled to announce results on Friday

Separately, a private survey on Wednesday showed growth in India’s dominant services industry continued to lose momentum in December

India’s biggest lender to the power sector, Power Finance Corp., plans to sell bonds to individual investors worth 100-billion-rupee or $1.4 billion and plans to raise the entire sum this quarter. Previously, Power Finance had sold tax-free infrastructure bonds but this planned offering would be the company’s maiden taxable issuance. It plans to issue the AAA rated notes in one or more tranches

“Most earnings are expected to be in line with expectations, and that is getting factored into share prices now,” said Umesh Mehta, head of research at Mumbai-based Samco Securities Ltd. “A rollout of the vaccination plan will be a positive for normalizing business activity in the economy.”

“Market is already at all-time highs with rich valuations, hence investors must play cautiously at these levels,” said Binod Modi, head of strategy at Reliance Securities Ltd. “Focus should be on quality stocks with strong earnings potential and margins of safety.”

America Markets

U.S. stocks scaled new highs on Dow Jones and S&P 500 on Wednesday trade, as investors dumped big technology stocks and U.S. Treasuries, betting on a big boost in government spending under a Democratic-controlled Senate

Trading volume in the benchmark gauge of U.S. equities was 40% higher than the average of the past 30 days

The S&P 500 rose 21 points, or 0.6%, to 3,748

All major S&P sectors were higher, with energy stocks surging about 2% on the back of higher oil prices. The dividend-paying defensive sectors – consumer staples, utilities and real estate – were the laggards

The Dow Jones Industrial Average, composed mostly of cyclical stocks, climbed 437 points, or 1.4%, to 30,829

It was led by shares of banks and manufacturers that have been beaten down during the pandemic

The tech-heavy Nasdaq Composite Index lost 78 points, or -0.6%, to 12,740

Big tech stocks, including Apple, Microsoft and Amazon.com declined more than 2% as investors worried that a Democratic-controlled Congress would lead to higher taxes and tighter regulations

Contracts tied to U.S. futures retreated in early Wednesday trade. S&P500 futures is up 0.57%, Dow Jones futures is up 0.38%, and Nasdaq futures is up 0.85%

U.S. Treasury yields topped to 1.042% on the day, for the first time in 9-1/2 months with dollar declining -13% since March in anticipation of a larger stimulus package

The Cboe Volatility Index, known as Wall Street’s “fear gauge,” on Wednesday dropped -1.0% to 25.07

Markets remained relatively calm, despite the storming of the U.S. Capitol by supporters of President Trump who were protesting Joe Biden’s Electoral College win

Democrats claimed both of the two Senate seats contested in Georgia. Two wins would give President-elect Joe Biden’s party control of Congress and smooth the path for some of his spending policies. That’s fueled speculation of a torrent of spending to revive growth and reignite the so-called reflation trade

Private businesses in the US unexpectedly laid off 123K workers in December of 2020, compared to market forecasts of an increase of 88K. It is the first decline in private-sector employment since April, amid a rise in COVID-19 infections and further lockdowns

Minutes of the Federal Reserve’s Dec. 15-16 policy meeting are due on Wednesday and should offer more details on discussions about making the U.S. central bank’s forward policy guidance more explicit and the chance of a further increase in asset purchases this year

Friday brings the U.S. employment report for December

“The risk is that too much inflation is expected and yields move aggressively higher at a time when high valuations across bonds and equities have heightened market sensitivity,” Kerry Craig, global market strategist at JPMorgan Asset Management, said in a note on the outcome of the Georgia Senate race

“U.S. 10 year Treasuries have tipped over 1% yield for the first time in nine months – correctly identifying the potential for greater stimulus which could buoy markets even from their current highs and as a result we have seen inflation expectations start to tick up also,” said Stuart Clark, portfolio manager at Quilter Investors

“Progress against the pandemic, combined with pent-up demand, a very high savings rate, and strong fiscal support should deliver a solid economic performance this year,” Cornerstone Macro analysts wrote this week. “Even so the Fed won’t be swayed away from its very dovish stance.”

“There is still really bad news on the virus, but the market is looking through that because of the vaccines,” said Fahad Kamal, chief investment officer at Kleinwort Hambros. “We are certainly positively tilted, given the expected economic recovery, historically low interest rates, a lot of fiscal spending and monetary policy to come: all of that positivity remains.”

Asia-Pacific Markets

Asian shares advanced in early Thursday trade, after Democrats took control of the Senate following key elections, paving the way for President-elect Joe Biden to implement his agenda

Stocks rose in Japan, Australia and South Korea

Japan’s Nikkei 225 added 2.05% to 27,608 and Topix 500 added 2.15% to 1,425

South Korea’s Kospi added 2.16% to 3,032

In Hong Kong, Hang Seng dropped -0.01% to 27,689 while Hang Seng China Enterprises dropped -0.93% to 10,796

In China, CSI 300 added 0.28% to 5,433 and Shanghai Composite added 0.18% to 3,557

Australia’s S&P/ASX 200 added 1.80% to 6,725

Overall, MSCI Asia-Pacific, is down -0.52%

EU Markets

The Paternoster Square Column stands in an empty square outside the London Stock Exchange

European stocks edged higher on Wednesday trade, as investors braced for a Democratic win in pivotal U.S. Senate elections that could spur a bigger fiscal stimulus

The pan-European Stoxx Europe 600 added 1.63% to 405 and Stoxx 50 added 1.78% to close at 3,610

Rally was led by economically sensitive sectors such as banks and energy. Oil majors BP, Royal Dutch Shell and Total rose between 1.6% and 3.3% as crude prices hit their highest since February 2020 following Saudi Arabia’s pledge to cut output in a meeting with allied producers. Pullback in healthcare and tech shares capped gains in major bourses

Germany’s DAX30 added 1.50% to 13,848

London’s blue-chip FTSE 100 added 3.62 to 6,851

France’s CAC40 added 1.39% to 5,642

Denmark’s OMX Copenhagen 20 dropped -0.09% to 1,464

Spain’s IBEX 35 added 3.38% to 8,364

Italy’s FTSE MIB added 2.52% to 22,759

Meanwhile, IHS Markit’s survey showed economic activity in the euro zone contracted more sharply than thought at the end of 2020 and could get worse as renewed lockdowns hit the bloc’s dominant service industry

European Medicines Agency has recommended Moderna’s COVID vaccine for use in the EU

“It doesn’t seem like restrictions have much of an impact as traders are fixated on the wider story that vaccines are being distributed and the world should be in a very different place in another two to four months,” said David Madden, analyst at CMC Markets

Oil & Natural Gas Markets

Crude-oil extended gains in early Thursday trade after Saudi Arabia announced a big voluntary production cut, and as an industry report showed U.S. inventories fell last week

WTI Crude is trading higher at $50.78 per barrel

Brent Crude is trading higher at $54.44 per barrel

Natural Gas futures increased to $2.709/MMBtu

On MCX-India, Crude oil futures roseto 3,664 on Tuesday trade

On MCX-India, Natural gas futures rose to 198/MMBtu on Tuesday trade

Commodities Markets

Gold was a little changed in early Thursday trade, on the back of a weak dollar

Bullion had advanced this week amid lower U.S. real yields and a weaker dollar, but failed to breach an early November high of $1,960, a key technical level

U.S. Gold futures (Comex) is trading lower at $1,920 an ounce

Silver futures (Comex) is trading lower at $27.03 an ounce

Copper futures (Comex) is trading higher at $3.6440 per pound

In India, Spot Gold weakened to INR 49,803 per 10 grams

“Gold’s main drivers – weaker U.S. dollar and low real interest rates – are likely to provide support even as vaccines are distributed around the world,” said Vasu Menon, executive director, investment strategy, at Singapore-based Oversea-Chinese Banking Corp. “With the lower-for-longer Fed, it is too early to throw in the towel on gold,” he said in an email

India — NCDEX Agridex

Agricultural futures index tracking the performance of the 10 liquid commodities was up trading at 1,187.95 ; with top gains for Mustardseed futures and losses for Dhaniya futures on Wednesday trade

Currency Markets

The U.S. dollar index, DXY retreated in early Thursday trade to 89.36

INR strengthened with USD / INR at 73.0700

JPY weakened with USD / JPY at 103.2200

CNY weakened with USD / CNY at 6.4628

EUR strengthened with EUR / USD at 1.2300

GBP weakened with EUR / GBP at 0.9046

GBP weakened with GBP / USD at 1.3598

*3-Month LIBOR Rate*	*As on 06 Jan 2021*
US DOLLAR	0.24 per cent
Euro	– 0.56 per cent
British Pound	0.03 per cent
Swiss Franc	– 0.77 per cent
Japanese Yen	– 0.08 per cent

Bitcoin

Bitcoin / U.S. Dollar rose 2.60% to $35,020, for the first time, peaking to $35,879 and extending a rally that has seen it rise more the 800% since mid-March

JP Morgan Chase & Co.’s strategists speculate that Bitcoin has the potential to reach $146,000 in the long term as it competes with gold as an asset class

Bitcoin’s market capitalization of around $575 billion would have to rise by 4.6 times — for a theoretical price of $146,000 — to match the total private sector investment in gold via exchange-traded funds or bars and coins

For now, JPMorgan sees headwinds for the largest cryptocurrency, with indicators like a buildup of speculative long positions and an increase in investment wallets holding small amounts of Bitcoin showing potential froth

“The valuation and position backdrop has become a lot more challenging for Bitcoin at the beginning of the New Year,” JPMorgan strategists wrote. “While we cannot exclude the possibility that the current speculative mania will propagate further pushing the Bitcoin price up toward the consensus region of between $50,000-$100,000, we believe that such price levels would prove unsustainable.”

Bitcoin “will be on the road to $50,000 probably in the first quarter of 2021,” said Antoni Trenchev, managing partner and co-founder of Nexo in London, which bills itself as the world’s biggest crypto lender

Bond Markets

Americas : 10 – Year Govt Bond Yields

United States : 1.04%
Canada : 0.77%

Europe, Middle East & Africa : 10 – Year Govt Bond Yields

Germany : -0.52%
United Kingdom : 0.25%
France : -0.32%
Italy : 0.57%
Netherlands : -0.49%

Asia Pacific : 10 – Year Govt Bond Yields

India : 5.92%
Japan : 0.00%
Australia : 1.06%
Hong Kong : 0.44%
Singapore : 0.92%
South Korea : 1.69%

Fund Flows on NSE, BSE and MSEI — 06 Jan 2021

FII/FPI Net Sell Rs (483.64) Crore in Capital Market

DII Net Sell Rs (380.41) Crore in Capital Market

Where We’ve Been Reading —