Finance - Stock Market Forecast

Index Trend & Conditions – 07:45 a.m. I.S.T.

• For Wednesday, Jan 13, Support area for Nifty 50 will be at 14,430 14,199 and 14,130. Another “risky” Support level is seen 14,480

• 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 0.46%, and the MSCI Emerging Market index is up 0.56%

• Trends on SGX Nifty indicate a gap-up opening for Nifty 50 in India. The Nifty futures are trading 35 points, or 0.24% higher at 14,636 on the Singaporean Exchange at 07:45 a.m. I.S.T.

• Contracts tied to U.S. futures rose in early trade, with Nasdaq, S&P 500 and Dow Jones futures trading in green, alongside a mostly mixed start to Asia-Pacific early Wednesday trade with shares dipping in Korea and Australia, while rising in China and Hong Kong; a positive MSCI Asia-Pacific ex-Japan index; U.S. Dollar Index extending overnight losses to 89.95 with 10-Year Treasury Yield sliding to a little over 1.10 due to investors’ positive participation in Tuesday’s 10-year treasury notes auction and Gold futures holding climbing to $1,860 on the day indicate a stable-to-positive outlook for Nifty 50 India

• Oaktree Capital Group co-founder Howard Marks says Federal Reserve rate actions have forced investors to move into risk assets as investors don’t want to sit on their cash

India Markets

NIFTY 50	OPEN	HIGH	LOW	CLOSE
Tuesday	14,473	14,590	14,432	14,563

India stocks advanced to new highs on Tuesday trade, as sentiment was boosted by a positive start to the quarterly earnings season and the commencement of vaccinations in the nation this week

The blue-chip NSE Nifty 50 index added 78 points, or 0.54%, to 14,563 and the benchmark S&P BSE Sensex added 248 points, or 0.50%, to 49,517

Broader markets under-performed their headline peers — Midcap 100 index added 0.67% ; Smallcap 250 index added 0.29% and Nifty 500 added 0.43%

Strategy based indices also out-performed benchmark indices — Nifty Alpha 50 dropped -0.22% and Nifty Alpha Low Volatility 30 dropped -0.52%

Nifty P/E for Jan 12, 2020 increased to 39.94 from 39.72, while Nifty P/B edged higher to 4.13 from 4.10, as recorded by NSE India

Bank Nifty opened negative. , but saw a quick recovery in the initial half of the session. It formed a Bullish Engulfing candle on the daily chart and saw the highest daily close. The index added 340 points, or 1.06%, to 32,339

India VIX rose 2.09% from 22.38 to 22.84 level

Volatility is moving up because of rising implied volatility in Calls and needs to cool down below 20 level to form a higher market base

Options data suggested a wider trading range between 14,000 and 15,000 levels, as the immediate trading range stood between 14,300 and 14,800 levels

Overnight Call Money rate weighted average stood at 3.19% as per RBI data. It moved in a range of 1.90 — 3.50% for Jan 11

Yield on the benchmark 10-year government bond increased to 6.001%, while the rupee weakened to 73.4250 per U.S. dollar

India’s retail price inflation dropped to 4.59% year-on-year in December 2020, the lowest in 15-months, from 6.93% in November and below market expectations of 5.28%. It is the first time since March that prices remain within the central bank’s 2-6% target range mainly due to a slowdown in the cost of food (3.41% vs 9.50%). Miscellaneous price inflation also eased to 6.60% from 6.94%. Meanwhile, prices rose at a faster pace for pan, tobacco and intoxicants (10.74% vs 10.36%), housing (3.21% vs 3.19%), fuel and light (2.99% vs 1.90%), and clothing and footwear (3.49% vs 3.30%)

The MPC has vowed to keep its easing bias intact for as long as necessary to support the economy, which the government sees shrinking -7.7% in the year ending March – the biggest contraction in records going back to 1952. The RBI’s own reading is for GDP to decline -7.5% this year, while it sees inflation averaging 5.8% in the current quarter

Tata Chemicals is in advanced talks to acquire the industrial salt unit of Archean Group, which saw an investment of $156 million in 2018 by India Resurgence Fund, a JV between Bain Capital and Piramal Enterprises Ltd

Byju’s has signed a deal to acquire Blackstone Group-backed brick & mortar test prep leader Aakash Educational Services Ltd. for $1 billion. In the deal with Byju’s, Aakash’s founders, the Chaudhry family, will exit completely, while Blackstone will swap a portion of its 37.5% equity in Aakash for Byju’s stake

Power Finance Corporation (PFC), the nation’s biggest lender to the power sector, will raise Rs 10,000 crore through bonds in two tranches. The first tranche of Rs 5,000 crore will open for subscription on January 15 and close on January 29. PFC had previously sold tax-free infrastructure bonds to retail investors and this would be its maiden taxable issuance to individual buyers. At least 75% of the proceeds would go towards onward lending and financing/refinancing of existing debt. The interest for high net worth individuals and retail individual investors would be 4.80%, 5.80% and 6.97-7.15% for bonds of 3, 5, and 15-year tenure. The 10-year bonds for this set of investors will fetch 6.78 to 7% interest

“With inflation falling well within RBI’s 2%-6% mandate, we see the RBI MPC cutting rates by 25 basis points in February,” said Aastha Gudwani, an economist at Bank of America. “Fundamental factors of inflation remain under check – low demand, contained depreciation, good rains, reasonable rabi sowing,” or winter crops.

“Congenial liquidity and financing conditions have shored up the financial parameters of banks, but it is recognised that the available accounting numbers obscure a true recognition of stress,” Governor Shaktikanta Das wrote in the report. “It is in this context that banks must exploit the congenial financial conditions and the conducive policy environment to plan for capital augmentation and alterations in business models that address emerging challenges.”

“December quarter results look promising and have been boosted by a recovery in the economy,” said Deven Choksey, a strategist at KRChoksey Investment Managers Pvt. in Mumbai, “The start of the vaccination drive is positive for sentiment and is continuing globally.”

America Markets

Major U.S. stock indexes edged slightly higher on Tuesday trade, as traders mulled investor demand for bonds and the prospect of fiscal spending under Joe Biden

Energy, materials and the consumer discretionary sectors were the best performers as investors mulled the prospects of an economic recovery

The broad-based S&P 500 ticked up 1.6 points, or less than 0.1%, to 3,801

Utilities and communication services sectors lead the declines

The Dow Jones Industrial Average, composed mostly of cyclical stocks, rose 60 points, or 0.20%, to close at 31,068

The tech-heavy Nasdaq Composite Index advanced 36 points, or 0.30%, to 13,072

Contracts tied to U.S. futures rose in early Wednesday trade. S&P500 futures is up 0.04%, Dow Jones futures is up 0.05%, and Nasdaq futures is up 0.10%

10-year U.S. Treasury yields fell to just above 1.10% on the day, after a government auction on Tuesday was met with solid interest

The Treasury Department is due to auction $24 billion in 30-year bonds on Wednesday, seen as tests of market sentiment. On Monday and Tuesday, it sold a record $58 billion in three-year notes and $38 billion in 10-year notes, respectively

The Cboe Volatility Index, known as Wall Street’s “fear gauge,” dropped -3.11% to 23.33 on Tuesday

In the coming days, money managers will parse quarterly results as earnings season gets under way among U.S. companies

Earnings for S&P 500 companies are expected to have dropped -9.8% year-over-year in the final quarter of 2020, according to IBES data from Refinitiv, but they are expected to rebound in 2021, with a gain of 16.4% projected for the first quarter

U.S. consumer-price inflation figures are due Wednesday

U.S. retail sales, industrial production, business inventories and consumer sentiment figures are due Friday

“There is an expectation for an earnings recovery compared with last year, which is quite important,” said Maria Municchi, multiasset portfolio manager at M & G Investments. “The stimulus we have seen is certainly supportive to some of this earnings growth.”

“On an average, markets look 3-6 months into the future about what environment we are likely to be dealing with, allowing it to push back on events in Washington last week and the surge in the COVID-19 cases,” said Matt Stucky, portfolio manager, equities, at Northwestern Mutual Wealth Management Company in Milwaukee, Wisconsin

Asia-Pacific Markets

Asian stocks mostly opened higher in early Wednesday trade, tracking modest Wall Street gains as prospects of an eventual victory against coronavirus shored up recovery hopes

Korean and Australian shares dipped, while equities ticked up in China and Hong Kong

Japan’s Nikkei 225 added 0.42% to 28,288 and Topix 500 dropped -0.11% to 1,444

South Korea’s Kospi dropped -0.08% to 3,123

In Hong Kong, Hang Seng added 0.15% to 28,324 while Hang Seng China Enterprises added 0.05% to 11,223

In China, CSI 300 added 0.70% to 5,635 and Shanghai Composite dropped -0.15% to 3,603

Australia’s S&P/ASX 200 dropped -0.15% to 6,669

Overall, MSCI Asia-Pacific, is up 0.27%

North Asia’s liquefied natural gas benchmark rose above $30 per million British Thermal units for the first time, as freezing temperatures across north Asia have boosted gas consumption and caught short some end-users, sending the spot rate to new highs

The seasonally adjusted unemployment rate in South Korea jumped to 4.6% in December 2020 from 4.1% in the prior month. It was the highest jobless rate since January 2010, as the number of unemployed surged by 130 thousand to 1.284 million. For the 2020 year, it stood at 4.0%, the worst since 2001

EU Markets

European stocks traded cautiously on Tuesday trade, following Monday’s steep losses, as worries about record covid-19 infections and hospitalizations, with most of Europe under strictest restrictions, offset expectations of massive fiscal stimulus in the U.S.

The pan-European Stoxx Europe 600 dropped -0.17% to 405 and Stoxx 50 dropped -0.23% to close at 3,612

Germany’s DAX30 dropped -0.08% to 13,925

London’s blue-chip FTSE 100 dropped -0.65% to 6,754

France’s CAC40 dropped -0.20% to 5,651

Denmark’s OMX Copenhagen 20 dropped -1.58% to 1,453

Spain’s IBEX 35 dropped -0.14% to 8,345

Italy’s FTSE MIB dropped -0.33% to 22,646

Analysts at banks including JPMorgan Chase & Co. and UBS Group AG are downgrading forecasts for Euro-area economy to account for renewed lockdowns. JPMorgan, which reckons the economy suffered a massive 9% contraction in the fourth quarter of 2020, now projects a 1% downturn in the first quarter of this year compared with its earlier forecast for 2% growth. UBS expects a first-quarter drop of 0.4%, compared with its earlier expectation for 2.4% growth. Goldman Sachs Group Inc. predicts a slight contraction, with major uncertainty and “risks skewed further toward the downside.”

Euro zone is poised to shrink again at the start of this year as the resurgent pandemic plunges the region into a double-dip recession

Bloomberg Economics now says the euro-area economy will shrink about 4% in the first three-months of 2021, based on “pessimistic” assumptions about how long restrictions will last. It previously forecast growth of 1.3%

Group of borrowers is seeking an immediate end to benchmark Libor, claiming it to be a price-fixing agreement. Libor is derived from a daily survey of bankers who estimate how much they would charge each other to borrow. It’s used to help determine the cost of borrowing around the world, from student loans and mortgages to interest-rate swaps and collateralized loan obligations. In the wake of the 2008 financial crisis, regulators discovered that lenders had been manipulating the rates to their advantage, resulting in billions of dollars of fines

Oil & Natural Gas Markets

Crude-oil climbed to their highest level since February 2020 in early Wednesday trade, after API data showed a bigger-than-expected decline in US crude inventories

The market is also being supported by Saudi Arabia’s pledges to limit supply and prospects of more economic stimulus spending in the U.S. to aid the coronavirus-battered economy

WTI Crude is trading higher at $53.60 per barrel

Brent Crude is trading higher at $57.03 per barrel

Natural Gas futures climbed to $2.859/MMBtu

On MCX-India, Crude oil futures rose to 3,883 on Tuesday trade

On MCX-India, Natural gas futures jumped to 210/MMBtu on Tuesday 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 virus cases are weighing on fuel sales, weakening the prospect of an energy demand recovery in the first half of 2021

Commodities Markets

Gold rose in early Wednesday trade after government auction on Tuesday for Ten-year Treasury notes was met with solid interest with the dollar falling after a three-day rally

Gold’s initial advances were overturned by a surge in Treasury yields, which damped the appeal of the non-interest bearing asset. The outlook for more borrowing under the Biden administration drove rates higher, while a decline in inflation expectations caused real returns on Treasuries to rise, further hurting bullion’s appeal. The dollar’s recovery from its lowest level in almost three years is also putting pressure on gold

U.S. Gold futures (Comex) is trading marginally at $1,860 an ounce

Silver futures (Comex) is trading higher at $25.57 an ounce

Copper futures (Comex) is trading higher at $3.6345 per pound

In India, Spot Gold ticked higher to INR 48,642 per 10 grams

India — NCDEX Agridex

Agricultural futures index tracking the performance of the 10 liquid commodities traded lower at 1,173.35 ; with top gains for Soy Bean futures and losses for Mustardseed futures on Tuesday trade

Currency Markets

The U.S. dollar index, DXY extended overnight losses in early Wednesday trade at 89.959 after posting its biggest three-day rise since September

Morgan Stanley strategists have dropped their expectations of near-term weakening in the dollar amid a regime shift in U.S. rates propelled partly by prospects for meaningful fiscal expansion

INR strengthened with USD / INR at 73.2870

JPY strengthened with USD / JPY at 104.1700

CNY strengthened with USD / CNY at 6.4636

EUR strengthened with EUR / USD at 1.2163

GBP strengthened with EUR / GBP at 0.8927

GBP strengthened with GBP / USD at 1.3624

*3-Month LIBOR Rate*	*As on 12 Jan 2021*
US DOLLAR	0.22 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 -3.03% in early Wednesday trade to $33,000 as of 07:30 a.m. I.S.T.

Bitcoin’s parabolic gains are attracting more regulatory scrutiny to cryptocurrencies — which the co-founder of a mining company says is positive for digital coins

Bitcoin bulls argue that this rally will end differently from 2017, when the digital coin tumbled, because the players then were mostly retail investors. More institutions and notable investors, from Paul Tudor Jones to Scott Minerd and Stan Druckenmiller, have either started allocating funds to Bitcoin or have said they’re open to doing so. Some forecasts for its long-term price range from $146,000 to $400,000

“There’s signs that retail investors are taking profit,” said Ryan Rabaglia, the global head of trading at OSL. “Heightened volatility is often correlated with an uptick in retail participation.”

Bond Markets

Americas : 10 – Year Govt Bond Yields

United States : 1.17%
Canada : 0.88%

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

Germany : -0.47%
United Kingdom : 0.35%
France : -0.26%
Italy : 0.66%
Netherlands : -0.42%

Asia Pacific : 10 – Year Govt Bond Yields

India : 5.92%
Japan : 0.02%
Australia : 1.14%
Hong Kong : 0.53%
Singapore : 0.97%
South Korea : 1.69%

Fund Flows on NSE, BSE and MSEI — 12 Jan 2021

FII/FPI Net Buy Rs 571.47 Crore in Capital Market

DII Net Sell Rs (1,334.50) Crore in Capital Market

Where We’ve Been Reading —