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 Friday, Jan 08, 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 0.60%, and the MSCI Emerging Market index is up 0.43%

• Trends on SGX Nifty indicate a gap-up opening for Nifty 50 in India. The Nifty futures are trading 59 points, or 0.42% higher at 14,269 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 Friday morning trade with gains seen in Japan, Australia, China and South Korea while Hong Kong markets dropped, a positive MSCI Asia-Pacific ex-Japan index, U.S. Dollar Index holding on to its overnight gains at 90.01 with 10-Year Treasury Yield climbing past 1.09 and Gold futures sliding to $1,913 on the day indicate a stable-to-positive outlook for Nifty 50 India

• Indian equity markets looked set to follow their U.S. peers higher on Friday trade

India Markets

NIFTY 50	OPEN	HIGH	LOW	CLOSE
Thursday	14,253	14,256	14,123	14,137

India’s mid and small-cap gauges rose on Thursday trade, while the benchmark index reversed earlier gains in the last hour trading on profit booking

Stocks in most Asian markets rose on the prospects for increased U.S. government spending to help revive global economic growth after Democrats won control of the U.S. Senate

The blue-chip NSE Nifty 50 index dropped 09 points, or -0.06%, to 14,137 and the benchmark S&P BSE Sensex lost 80 points, or -0.17%, to 48,093

Nifty formed a a bearish candle similar to a Bearish Belt Hold pattern on the daily scale

Among individual stocks, Infosys Ltd. contributed the most to the Sensex decline, decreasing 1.5%, while Titan Co Ltd. had the largest drop, falling 2%

Lenders Yes Bank, HDFC Bank and Bandhan Bank this week reported higher loans and advances as of Dec. 31, 2020

Broader markets out-performed their headline peers — Midcap 100 index added 1.4% ; Smallcap 250 index added 1.13% and Nifty 500 added 0.24%

Strategy based indices out-performed benchmark indices — Nifty Alpha 50 added 0.66% and Nifty Alpha Low Volatility 30 dropped -0.27%

Nifty P/E for Jan 07, 2020 declined to 38.88 from 38.90, while Nifty P/B remained unchanged at 4.01, as recorded by NSE India

Bank Nifty opened with a gap up, and saw a slight dip in the initial hour of trade followed by an escalated move above the 32,150 level. However, a correction occurred in the second half of the session. It formed a bearish candle on the daily scale as it closed below the opening level. The index added 158 points, or 0.50%, to 31,956

India VIX moved down -1.81% to 20.61 from 20.99 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 3.16% as per RBI data. It moved in a range of 1.90 — 3.50% for Jan 06

Yield on the benchmark 10-year government bond slipped to 5.896%, while rupee declined to 73.3170 against the U.S. dollar

Prime Minister Narendra Modi has approved an incentive program worth 284 billion rupees ($3.8 billion) to bring investments to India’s federally-controlled territory of Jammu and Kashmir. The aim of the program is to create jobs and attract investment to the region, the government said in a statement

Homes prices may fall in Mumbai, India’s costliest housing market, after the local administration slashed levies by as much as 50% until December 2021. The move will likely bring down development costs for most builders and result in lower home prices for buyers in addition to boosting stocks of realty developers

India’s GDP will shrink -7.7% in the financial year ending March 2021, the statistics ministry said in its first advance estimate published on Thursday. That’s steeper than a -7.5% contraction forecast by the Reserve Bank of India. Gross value added, a key input of GDP that strips out the impact of taxes on products, is seen shrinking -7.2%. Manufacturing output is estimated to decline -9.4%, mining sector seen contracting -12.4% while Agriculture sector output is expected to grow 3.4%. Despite this, economists forecast India to bounce back strongly in the next financial year 2021, helped by a string of fiscal and monetary steps

India sees biggest GDP contraction on record this year

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

“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.”

“While weak global growth and a sudden volteface on domestic pandemic control are key short term risks, over the medium term, easier financial conditions, stronger global demand and accelerated vaccinations could lead to an economic upcycle in 2021,” Sonal Varma and Aurodeep Nandi, economists at Nomura Holdings Inc. in Singapore, wrote.

America Markets

U.S. stocks set new highs on Thurday trade, as investors shifted focus on what the shift of political power from Republicans to Democrats means for the market

The S&P 500 rose 55 points, or 1.5%, to 3,803

The Dow Jones Industrial Average, composed mostly of cyclical stocks, climbed 211 points, or 0.7%, to 31,041, its second record close of the year

Cyclical stocks usually do well in an inflationary environment, something investors banked on Thursday by pushing up share prices of semiconductor, bank and consumer discretionary stocks

The tech-heavy Nasdaq Composite Index jumped 326 points, or 2.6%, to 13,067

Tech stocks led the stock market’s gains, with chip companies notching some of the biggest climbs. Nvidia rose $29.18, or 5.8%, to $533.76, while Advanced Micro Devices added $4.83, or 5.3%, to $95.16. Shares of banks broadly rose, with JPMorgan Chase notching the biggest gain of the major banks, up $4.32, or 3.3%, to $135.87. Tesla jumped $60.06, or 7.9%, to $816.04, pushing the electric-car maker’s valuation to $773 billion

Russell 2000 Index of small caps also has extended a three-day advance to almost 8%

Contracts tied to U.S. futures edged higher in early Friday trade. S&P500 futures is up 0.21%, Dow Jones futures is up 0.15%, and Nasdaq futures is up 0.16%

U.S. Treasury yields topped to 1.10% on the day, in anticipation of a larger stimulus package

The Cboe Volatility Index, known as Wall Street’s “fear gauge,” on Friday dropped -10.77% to 22.37

U.S. initial claims for state unemployment benefits totaled a seasonally adjusted 787,000 for the week ending Jan. 2, compared to 790,000 in the prior week, the Labor Department said on Thursday

A report on Wednesday showed private companies shed workers in December for the first time in eight months

The trade deficit in the US widened to $68.1 billion in November 2020 from $63.1 billion in October, well above market expectations of $65.2 billion. Exports rose 1.2% to $184.2 billion and imports increased 2.9% to $252.3 billion

The Dow Jones Transportation Average – a proxy for economic activity – hit an all-time high

“Markets (rightly, in our view) see the U.S. government as ultimately a stable-enough set of institutions even if things occasionally go pear-shaped,” Nick Colas, co-founder of DataTrek Research, wrote in a note to clients. “Politics play second fiddle to economic and corporate fundamentals when it comes to setting asset prices. The country’s economic future coming out of the pandemic remains promising.”

“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

Asia-Pacific Markets

Asian stocks opened higher in early Friday trade, as investors focused on the prospect of more stimulus and the likelihood that calm will prevail as Joe Biden takes the presidency

Stocks saw gains in Japan, South Korea, China and Australia

Japan’s Nikkei 225 added 1.38% to 27,868 and Topix 500 added 0.69% to 1,430

South Korea’s Kospi added 1.79% to 3,086

In Hong Kong, Hang Seng dropped -0.52% to 27,548 while Hang Seng China Enterprises dropped -0.95% to 10,796

Weighing on the Hong Kong market, shares of Alibaba Group lost 3.9% and Tencent fell 4.7%. The losses came after a report showed the U.S. officials are considering prohibiting Americans from investing in the two technology giants

In China, CSI 300 added 1.77% to 5,513 and Shanghai Composite added 0.71% to 3,576

Australia’s S&P/ASX 200 added 0.33% to 6,734

Overall, MSCI Asia-Pacific, is up 0.82%

Global demand for Chinese goods has been so strong recently it’s creating a shortage of containers and driving up shipping costs. That’s pushing up shipping costs and raising the price of Chinese goods in overseas markets, which could hurt export demand

Japanese Prime Minister Yoshihide Suga is set to declare a state of emergency Thursday for Tokyo and adjacent areas, trying to stem Covid-19 infections that hit a daily record in the capital

Japanese wages fell in November for an eighth straight month, dropping at more than double the pace expected by economists, as employers continued to be cautious about the profit outlook

EU Markets

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

European stocks climbed for a second session on Thursday trade, as construction stocks gained on upbeat sales forecast from Saint Gobain and commodity-linked shares rose on hopes of larger U.S. stimulus after Democrats won Senate control

Sentiment was also boosted by an unexpected rise in German factory orders pre-lockdown in November

The pan-European Stoxx Europe 600 added 0.30% to 407 and Stoxx 50 added 0.31% to close at 3,622

Germany’s DAX30 added 0.38% to 13,944

London’s blue-chip FTSE 100 added 0.22% to 6,857

France’s CAC40 added 0.40% to 5,653

Denmark’s OMX Copenhagen 20 added 1.20% to 1,474

Spain’s IBEX 35 added 0.43% to 8,385

Italy’s FTSE MIB added 0.05% to 22,746

In the U.K., Ryanair Holdings Plc declined -1.3% after the budget airline operator cut its full-year traffic forecast, citing new coronavirus restrictions, while grocer Sainsbury Plc shares rallied 4.1% after seeing its strongest Christmas on record

Consumer prices in the Euro Area are seen falling -0.3% year-on-year in December 2020. Preliminary estimates showed energy prices continue to fall the most (-6.9% vs -8.3%), followed by non-energy industrial goods (-0.5% vs -0.3%)

The Economic Sentiment Indicator in the Euro Area rose by 2.7 points from the previous month to 90.4 in December 2020, easily beating market consensus of 90.0

“We highlight that Basic Resources, Construction & Materials have under-performed since the beginning of December and, given their sensitivity to fiscal policy in general through infrastructure investment, they have catch up potential,” Unicredit analysts said in a note.

Oil & Natural Gas Markets

Crude-oil extended gains in early Friday trade as U.S. crude stockpiles fell and Democrat victories in Senate elections in Georgia buoyed a rally spurred by Saudi Arabian output cuts

WTI Crude is trading higher at $50.98 per barrel

Brent Crude is trading higher at $54.52 per barrel

Natural Gas futures increased to $2.709/MMBtu

On MCX-India, Crude oil futures rose to 3,738 on Thursday trade

On MCX-India, Natural gas futures rose to 201/MMBtu on Thursday trade

Commodities Markets

Gold retreated in early Friday trade, on the back of prospects for increased U.S. government spending

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 $1,913 an ounce

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

Copper futures (Comex) is trading higher at $3.7000 per pound

In India, Spot Gold weakened to INR 50,137 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 down -0.37% trading at 1,183.60 ; with top gains for Mustardseed futures and losses for Soy Bean futures on Thursday trade

Currency Markets

The U.S. dollar index, DXY held an overnight advance in early Friday trade at 90.014

INR weakened with USD / INR at 73.3170

JPY weakened with USD / JPY at 103.7800

CNY weakened with USD / CNY at 6.4705

EUR weakened with EUR / USD at 1.2255

GBP strengthened with EUR / GBP at 0.9033

GBP weakened with GBP / USD at 1.3566

*3-Month LIBOR Rate*	*As on 07 Jan 2021*
US DOLLAR	0.24 per cent
Euro	– 0.56 per cent
British Pound	0.03 per cent
Swiss Franc	– 0.76 per cent
Japanese Yen	– 0.08 per cent

Bitcoin

Bitcoin / U.S. Dollar pared gains on Friday after topping $40,000, currently at $38,293 as of 07:15 a.m. I.S.T.

The total market value of cryptocurrencies surpassed $1 trillion for the first time on Thursday amid a frenzied and volatile rally in Bitcoin to yet another record

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

“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 : 1.09%
Canada : 0.78%

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

Germany : -0.53%
United Kingdom : 0.28%
France : -0.32%
Italy : 0.55%
Netherlands : -0.48%

Asia Pacific : 10 – Year Govt Bond Yields

India : 5.95%
Japan : 0.03%
Australia : 1.08%
Hong Kong : 0.47%
Singapore : 0.94%
South Korea : 1.71

Fund Flows on NSE, BSE and MSEI — 07 Jan 2021

FII/FPI Net Buy Rs 382.30 Crore in Capital Market

DII Net Sell Rs (989.50) Crore in Capital Market

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