Finance - Stock Market Forecast

Index Trend & Conditions – 07:15 a.m. I.S.T.

• Resistance for Nifty 50 will be at 14,300 level. For Friday, Jan 11, Support area is at 14,150 — 13,950 — 13,960

• Support levels for Bank Nifty are at 31,500 31,375 and 30,850 with Resistance at 32,400 and 32,613

• The MSCI Asia Pacific ex-Japan is trading higher at 0.28%, and the MSCI Emerging Market index is up 0.49%

• Trends on SGX Nifty indicate a gap-up opening for Nifty 50 in India. The Nifty futures are trading 75 points, or 0.54% higher at 14,454 on the Singaporean Exchange at 07:15 a.m. I.S.T.

• Contracts tied to U.S. futures slipped in early trade, with Nasdaq, S&P 500 and Dow Jones futures trading in red, alongside a mostly positive start to Asia-Pacific early Monday trade with Korean equity market seen outperforming, a positive MSCI Asia-Pacific ex-Japan index, U.S. Dollar Index extending gains to 90.36 with 10-Year Treasury Yield steady near all-time peaks at 1.11 and Gold futures sliding to $1,822 on the day indicate a stable-to-positive outlook for Nifty 50 India

• Certainly, there’s a lot of retail participation in markets that’s making it a little bit more ebullient, which calls for cautious trades

India Markets

NIFTY 50	OPEN	HIGH	LOW	CLOSE
Friday	14,258	14,367	14,221	14,347

India’s stocks rose, with the benchmark index completing its longest stretch of weekly increases since 2009 on Friday trade, as coronavirus-vaccine optimism and expectations of more U.S. stimulus buoyed sentiment

Indian stocks have followed share increases across Asia as vaccination programs aimed at stemming the pandemic begin and the formal endorsement of a new U.S. president and the Democrats winning control of the Senate fueled prospects of more economic stimulus

The blue-chip NSE Nifty 50 index added 209 points, or 1.48%, to 14,347 and the benchmark S&P BSE Sensex added 689 points, or 1.43%, to 48,782. Both gauges closed at record highs

Broader markets out-performed their headline peers — Midcap 100 index added 1.05% ; Smallcap 250 index added 0.71% and Nifty 500 added 1.36%

Strategy based indices also out-performed benchmark indices — Nifty Alpha 50 added 0.25% and Nifty Alpha Low Volatility 30 added 2.32%

Nifty P/E for Jan 08, 2020 increased to 39.45 from 38.88, while Nifty P/B edged higher to 4.07 from 4.01, as recorded by NSE India

Bank Nifty opened with a gap up near the 32,300 mark, but could not sustain at higher levels and slipped thereafter. It formed a bearish candle on the daily scale as closed below its opening mark. The index added 128 points, or 0.40%, to 32,084

India VIX rose marginally by 0.10% from 20.62 to 20.64 level

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 3.20% as per RBI data. It moved in a range of 1.90 — 3.50% for Jan 07

Yield on the benchmark 10-year government bond slipped to 5.890%, while rupee appreciated to 73.3100 against the U.S. dollar

Mutual fund investors continued to withdraw massive amounts in December, extending net outflows to the sixth straight month as they booked profits instead of staying invested, even as the market continued to form record highs. Amfi data released for the month of December said investors withdrew a net Rs 10,147.12 crore, lower than previous month’s Rs 12,917.36 crore from equity oriented funds. Largecap funds saw the biggest outflow at Rs 3,876.39 crore, while multicap funds saw withdrawals of Rs 3,540.77 crore. Contra funds, midcap funds and focussed funds also saw outflows of more than Rs 1,000 crore each. On the other hand, the sectoral fund received net inflows of Rs 3,412.08 crore

India’s foreign exchange reserves surged by $4.483 billion from its record high in the previous week to $585.324 billion in the week of January 1, 2021, as per the Reserve Bank of India’s data. The surge in the reporting week was mainly on the back of an increase in the value of foreign currency assets (FCA) held by the central bank, which constitutes a major component of the overall reserves. FCA rose by $4.168 billion to $541.682 billion. The FCA reflects appreciation or depreciation of currencies like the euro, pound and yen held in the foreign exchange reserves, expressed in dollar terms. Typically, the value of FCA for a said week is a function of currency depreciation and also the intervention in the currency market by RBI. Meanwhile, gold reserves, another component of the forex kitty, rose by $529 million to $37.026 billion, as per the central bank data.

The special drawing rights (SDR) and the reserve position with the International Monetary Fund (IMF) – the other component which constitute the forex kitty – remained stable at $1.5 billion and $5.1 billion respectively. The rise in forex reserves is typically a factor of an increase in portfolio investments from offshore investors and also a growth in the foreign direct investments (FDIs) during the period

Tata Consultancy Services Ltd. reported a profit of 87 billion rupees ($1.2 billion) in the quarter ended December 2020, compared with the average estimate of 85.9 billion rupees. Sales climbed to 420.2 billion rupees. For the long term stability, TCS has recently announced acquisitions such as of the IT unit of Deutsche Bank AG and Pramerica Systems, a unit of Prudential Financial Inc., which could help it expand into new areas

India’s $181 billion tech outsourcing industry is riding a wave of digital transformation that’s expected to underpin deal signings and outlook revisions from its top players. Technology emerged as the second-best performing sector in India’s equity market last year, behind only healthcare, as the pandemic hastened a push toward digitalization and work-from-home activities spurred demand for video-conferencing, cloud services and e-commerce

India’s petroleum consumption fell for the first time in more than two decades in 2020 as the coronavirus pandemic shuttered businesses and factories, hurting demand from one of the world’s largest users of the fuel. Total petroleum demand declined -10.8% last year from 2019, and was at a five-year low of 193.4 million tons

India will kick start one of the world’s largest coronavirus inoculation campaigns, starting Jan. 16, to administer the first shots of a Covid-19 vaccine on nearly 30 million healthcare workers and other frontline staff most vulnerable to the infection

“The continuation of net outflows from equity funds could be attributed to profit booking/portfolio re-balancing as markets continue to touch new highs. In fact, the net outflow number would have been higher had it not been for the NFOs across multiple equity categories which collected Rs 7,600 crore,” said Himanshu Srivastava, Associate Director Research, Morningstar India

“Liquidity is driving the market and new retail investors continue to join forces,” said Chokkalingam G, chief investment officer at Equinomics Research & Advisory Ltd. in Mumbai. “Investors have factored in good earnings and positives from the vaccine.”

America Markets

U.S. stocks ended the first week of 2021 at record levels on Friday trade, as investors looked past political turmoil and signs of economic weakness to focus on prospects for more fiscal stimulus

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

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

For the week, the S&P 500 added 1.8%, while the Dow industrials gained 1.6%. The Nasdaq Composite climbed 2.4% in the first week of 2021

The economically-sensitive energy, materials and financial sectors were the top-performing groups in the S&P 500 for the week, suggesting investors have been raising their outlooks for the recovery

The Russell 2000 index of small-capitalization stocks also outperformed, gaining 5.9% for the week

Contracts tied to U.S. futures slipped in early Monday trade. S&P500 futures is down -0.30%, Dow Jones futures is down -0.25%, and Nasdaq futures is down -0.18%

U.S. Treasury yields were steady near all-time peaks at 1.114% on the day, in anticipation of a larger stimulus package

The Cboe Volatility Index, known as Wall Street’s “fear gauge,” on Friday dropped -3.62% to 21.56

The Labor Department said nonfarm payrolls decreased by 140K jobs in December, missing market expectations of a 71K rise. The unemployment rate was 6.7%. It was the first decline in employment levels since a record 20.787 million loss in April. Job losses in leisure and hospitality, private education, and government were partially offset by gains in professional and business services, retail trade, construction, and transportation and warehousing. The labor force participation rate, or the proportion of working-age Americans who have a job or are looking for one, remains at a depressed 61.5%. The employment-to-population ratio, seen as a measure of an economy’s ability to create jobs, held at a low 57.4%.

Some Wall Street bankers, however, expect a pullback in the near-term as exuberance from unprecedented monetary and fiscal stimulus have led to “frothy” asset prices

“So far investors continue to look beyond the weakness of the lackluster labor-market report and other economic data because they’re confident that more fiscal stimulus is coming,” said Michael Arone, chief investment strategist at State Street Global Advisors. “And that as the vaccine gets distributed, that this will only be temporary and we’ll be able to push beyond the weakness of this number hopefully in the not too distant future.”

“When you look around, there’s a lot of bad news,” said Brad McMillan, chief investment officer at Commonwealth Financial Network “You have pandemic case growth still extraordinarily high, you have political turmoil, you have the economy slowing significantly. But at the same time, there’s reason to believe if this isn’t as bad as it gets, we’re at least getting very close, and we can legitimately expect improvement over the next three to six months, big improvements. And that’s what the market is seeing.”

“What’s happening now is you’re getting an awful lot of day traders trading into it, and it continues to go higher,” said Michael Hewson, a chief markets analyst at CMC Markets. “The electric vehicle space is getting hotter and the Democrats now have a better opportunity to pass some of their green deal, it means more money will be thrown at it.”

Asia-Pacific Markets

Most Asian stocks opened higher in early Monday trade

South Korean equities outperformed on the day

Japan’s equity markets are shut for a holiday

South Korea’s Kospi added 3.44% to 3,261

In Hong Kong, Hang Seng added 0.41% to 28,004 while Hang Seng China Enterprises added 1.00% to 11,063

In China, CSI 300 dropped -0.33% to 5,495 and Shanghai Composite dropped -0.29% to 3,559

Australia’s S&P/ASX 200 dropped -0.42% to 6,729

Overall, MSCI Asia-Pacific, is up 2.15%

The IMF projects China’s economy will grow 7.9% this year and then gradually ease to 5.2% in 2025. China has set out an ambitious goal of doubling the size of gross domestic product by 2035, which would imply an annual average growth rate of 4.7% – 5% over the next 15 years

In its most recent policy statement, China’s central bank signaled it will pay more attention to risk prevention and stabilize the level of debt in the economy in 2021. The People’s Bank of China is seeking to avoid a sudden shift in monetary policy while maintaining enough support for the economy’s recovery

On the virus front, Japan said it found the new strain of the coronavirus in passengers arriving from Brazil. They said it’s difficult to immediately determine how infectious the strain is or the effectiveness of current vaccines against it

EU Markets

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

European stocks logged their strongest weekly gains since November on Friday trade, lifted by better-than-expected data on German industrial output and factory orders

The pan-European Stoxx Europe 600 added 0.39% to 408 and Stoxx 50 added 0.62% to close at 3,645

Germany’s DAX30 added 0.58% to 14,049

London’s blue-chip FTSE 100 added 0.24% to 6,873

France’s CAC40 added 0.65% to 5,706

Denmark’s OMX Copenhagen 20 added 0.83% to 1,485

Spain’s IBEX 35 added 0.26% to 8,407

Italy’s FTSE MIB added 0.21% to 22,793

The Euro Area seasonally-adjusted unemployment rate edged down to 8.3% in November 2020, from 8.4% month-over-month, and moving further away from an over two-year high of 8.7% hit back in July. The number of unemployed people decreased by 172 thousand to 13.609 million. Youth unemployment rate, measuring job-seekers under 25 years old, rose to 18.4% in November, from 18.0% month-over-month

“Germany is the powerhouse in Europe. If you get data out with value, especially at these uncertain times, that is going to push prices up and that seems to be what is happening now,” ETX Capital analyst Michael Baker said.

Oil & Natural Gas Markets

Crude-oil pared gains in early Monday trade, hitting their highest level in nearly a year, supported by Saudi Arabia’s pledge to cut output and strong gains in major equity markets

Saudi Arabia pledged extra, voluntary oil output cuts of 1 million barrels per day (bpd) in February and March as part of a deal under which most OPEC+ producers will hold production steady during new lockdowns

WTI Crude is trading higher at $52.24 per barrel

Brent Crude is trading higher at $55.79 per barrel

Natural Gas futures pared gains at $2.687/MMBtu

On MCX-India, Crude oil futures rose to 3,800 on Friday trade

On MCX-India, Natural gas futures slipped to 197/MMBtu on Friday trade

Analysts at Reuters say that oil prices could see a correction in the coming months if fuel demand remains constrained by the pandemic. Strict restrictions on travel and other activity around the world to contain a surge in COVID-19 cases are weighing on fuel sales, weakening the prospect of an energy demand recovery in the first half of 2021

Commodities Markets

Gold plunged in early Monday trade, after President-elect Joe Biden said he’ll lay out the details of trillions of dollars in further aid to revive the world’s largest economy

U.S. Gold futures (Comex) is trading lower at $1,822 an ounce

Silver futures (Comex) is trading lower at $24.56 an ounce

Copper futures (Comex) is trading lower at $3.6575 per pound

In India, Spot Gold weakened to INR 47,768 per 10 grams

India — NCDEX Agridex

Agricultural futures index tracking the performance of the 10 liquid commodities was up trading at 1,188.30 ; with top gains for Chana futures and losses for Cotton Seed Oilcake futures on Friday trade

Currency Markets

The U.S. dollar index, DXY extended gains in early Monday trade at 90.361

INR strengthened with USD / INR at 73.3110

JPY weakened with USD / JPY at 103.9400

CNY strengthened with USD / CNY at 6.4745

EUR weakened with EUR / USD at 1.2218

GBP strengthened with EUR / GBP at 0.9010

GBP weakened with GBP / USD at 1.3567

*3-Month LIBOR Rate*	*As on 08 Jan 2021*
US DOLLAR	0.23 per cent
Euro	– 0.57 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 slipped in early Monday trade after topping $40,000, currently at $37,753 as of 07:00 a.m. I.S.T. on Jan 11

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

Bond Markets

Americas : 10 – Year Govt Bond Yields

United States : 1.09%
Canada : 0.79%

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

Germany : -0.52%
United Kingdom : 0.29%
France : -0.32%
Italy : 0.53%
Netherlands : -0.48%

Asia Pacific : 10 – Year Govt Bond Yields

India : 5.89%
Japan : 0.03%
Australia : 1.12%
Hong Kong : 0.49%
Singapore : 0.94%
South Korea : 1.72%

Fund Flows on NSE, BSE and MSEI — 08 Jan 2021

FII/FPI Net Buy Rs 6,029.83 Crore in Capital Market

DII Net Sell Rs (2,372.54) Crore in Capital Market

Where We’ve Been Reading —