Finance - Stock Market Forecast

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

• Resistance for Nifty 50 is seen at 14,870. For Friday, Jan 15, Support area will be at 14,545 14,470 and 14,430

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

• The MSCI Asia Pacific ex-Japan is trading lower at -0.11%, and the MSCI Emerging Market index is down -0.12%

• Trends on SGX Nifty looked poised for a negative start for Nifty 50 in India. The Nifty futures are trading 65 points, or -0.45% lower at 14,556 on the Singaporean Exchange at 07:30 a.m. I.S.T.

• Contracts tied to U.S. futures dipped in early trade, with Nasdaq, S&P 500 and Dow Jones futures trading in red, alongside a profit-booking start to Asia-Pacific early Friday trade with shares rising in Australia; a negative MSCI Asia-Pacific ex-Japan index; U.S. Dollar Index gaining momentum to 90.29 with 10-Year Treasury Yield retreating to 1.107 as investors scrutinized President-elect Joe Biden’s much-anticipated $1.9 trillion Covid-19 relief plan and Gold futures rising to $1,852 on the day indicate a cautious outlook for Nifty 50 India

• Strategists from Nomura Holdings and Kotak Mahindra AMC have warned against overly optimistic earnings estimates and a reduction in liquidity to pose threats to the scorching pace of gains in Indian capital markets

• Traders betting on an economic recovery this year are tolerating lofty equity valuations, partly because they expect more U.S. fiscal spending and better control of the pandemic with vaccines

India Markets

NIFTY 50	OPEN	HIGH	LOW	CLOSE
Thursday	14,550	14,617	14,471	14,595

India stocks ticked higher on Thursday trade, after fluctuating between small gains and losses on hopes of strong Q3 corporate earnings

The blue-chip NSE Nifty 50 index added 30 points, or 0.21%, to 14,595 and the benchmark S&P BSE Sensex added 91 points, or 0.19%, to 49,584

Nifty formed an Inside Bar and a bullish candle on the daily chart with a long lower shadow, suggesting that declines are being bought into

Among individual stocks, Infosys was the biggest drag on the broader Nifty index, falling -1.2%, as investors booked profit after the IT company posted better-than-expected quarterly earnings; Reliance contributed most to the advance with a 1% gain

Broader markets mostly out-performed their headline peers — Midcap 100 index added 0.06% ; Smallcap 250 index added 0.44% and Nifty 500 added 0.24%

Strategy based indices also out-performed benchmark indices — Nifty Alpha 50 added 0.55% and Nifty Alpha Low Volatility 30 added 0.47%

Nifty P/E for Jan 14, 2020 increased to 40.03 from 39.94, and Nifty P/B edged higher to 4.14 from 4.13, as recorded by NSE India

Bank Nifty opened flattish and remained consolidative for most part of the session. It formed a Doji candle on the daily scale, which indicated a tug of war at the new high territory. The index dropped 54 points, or -0.17%, to 32,519

India VIX fell -1.13% from 23.29 to 23.02 levels

Recent increase in the volatility gauge is likely in anticipation of rise in sharp swings in the market ahead of the Budget

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 3.21% as per RBI data. It moved in a range of 1.90 — 3.50% for Jan 13

Yield on the benchmark 10-year government bond decreased to 5.89%, while the rupee strengthened to 73.0462 per U.S. dollar

Defence companies were among the most sought after today as the government’s Rs 48,000 crore Tejas fighter aircraft order boosted outlook for the sector. Hindustan Aeronautics that will manufacture the fighter planes saw its stock soar 9.5%

UBS Group AG is in talks to invest $400 million in Paytm, the most valuable Indian startup, in a bet on the surging digital payments market in the world’s second-most populous country. Paytm competes with the likes of Google Pay, Walmart Inc.’s PhonePe, Facebook Inc.’s WhatsApp payments service and dozens of smaller startups

India’s rapidly-growing market has attracted global investors keen to capitalize on growing acceptance of electronic payment systems since the government took huge swathes of cash out of circulation in 2016. Paytm, whose backers include Chinese tech tycoon Jack Ma’s Ant Group Co., was valued at $16 billion in a 2019 funding round

“We may see further consolidation in the index ahead and it would be healthy for markets. The recent rise in volatility on the stock-specific front is on expected lines and we expect this trend to continue during the earnings season,” Ajit Mishra, vice president of research at Religare Broking

America Markets

Major U.S. stock indexes slipped on Thursday trade, on expectations that Biden’s stimulus package will be close to $2 trillion

The broad-based S&P 500 dipped 14 points, or -0.38%, to 3,795

The Dow Jones Industrial Average, composed mostly of cyclical stocks, dropped 69 points, or -0.22%, to 30,991

The tech-heavy Nasdaq Composite Index lost 16 points, or -0.12%, to 13,112

Contracts tied to U.S. futures retreated in early Friday trade. S&P500 futures is down -0.11%, Dow Jones futures is down -0.14%, and Nasdaq futures is down -0.02%

10-year U.S. Treasury yields retreated to 1.109% on the day, as investors scrutinized President-elect Joe Biden’s much-anticipated $1.9 trillion Covid-19 relief plan

The Cboe Volatility Index, known as Wall Street’s “fear gauge,” rose 4.68% to 23.25 on Thursday

The Trump administration announced that it’s blacklisting Chinese smartphone maker Xiaomi for its links to the military, and China’s third-biggest oil company China National Offshore Oil Corp., over drilling in disputed South China Sea waters

Mortgage rates in the U.S. climbed to the highest level in two months. The average for a 30-year, fixed loan reached 2.79%, up from 2.65% last week and the highest since Nov. 12. Mortgage rates have been below 3% since July, but higher borrowing costs could threaten a housing rally that’s been a bright spot in the pandemic-battered economy

Mortgage rates are the highest they've been in two months

Applications for U.S. state unemployment benefits surged last week by the most since late March, pointing to persistent labor-market pain. Initial jobless claims rose by 181,000 to 965,000 in the week ended Jan. 9, according to Labor Department data. Among states, Illinois and Florida reported initial claims exceeding 50,000 last week, while California and Kansas topped 20,000 on an unadjusted basis

U.S. President-elect Joe Biden has unveiled a much-expected multitrillion-dollar rescue package, a proposal to pour $1.9 trillion into a hobbled economy, to support businesses and households. The proposal, called the American Rescue Plan, includes $1,400 checks for most Americans, a $400-per-week unemployment insurance supplement through September, expanded paid leave, increases in the child tax credit and a rise in the federal minimum wage to $15 per hour. On top of that, the package includes $400 billion of new spending to tackle the pandemic, with $20 billion toward a national vaccine program. The government expects to spend $4.8 trillion in 2021

Banks are expected to announce plans for stock buybacks, one of the main ways they return capital to shareholders. The Federal Reserve stopped buybacks at big banks last year, a move to preserve capital in an unsettled economy, but said in December that banks could restart them with limitations

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

“The restrictions imposed to combat the third Covid wave clearly have done great damage, but it’s not obvious that the incremental hit is still increasing,” Ian Shepherdson, chief economist at Pantheon Macroeconomics, said in a note. “Claims will drift sideways, more or less, over the next two to three months, before restrictions on the services sector can be gradually eased as vaccination brings herd immunity into sight.”

“As Treasury yields have risen, it is putting pressure on mortgage rates to move up,” Sam Khater, chief economist at Freddie Mac, said in the statement.”

Asia-Pacific Markets

Asian benchmark stocks eased in early Friday trade, as caution over rising coronavirus cases prompted some profit-taking from investors

Shares rose in Australia for the third-straight session

Japan’s Nikkei 225 dropped -0.24% to 28,632 and Topix 500 dropped -0.47% to 1,451

South Korea’s Kospi dropped -1.37% to 3,106

In Hong Kong, Hang Seng dropped -0.06% to 28,487 while Hang Seng China Enterprises dropped -0.04% to 11,295

In China, CSI 300 dropped -0.36% to 5,450 and Shanghai Composite added 0.45% to 3,581

Australia’s S&P/ASX 200 added 0.39% to 6,741

Overall, MSCI Asia-Pacific, is up 0.48%

China reports better-than-expected export growth. China’s trade surplus jumped to a record high in December. Exports soared 18% year-on-year, the 7th straight month of increase while imports rose at 6.5%, the 4th consecutive month of growth

Investors from mainland China have spent billions of dollars buying beaten-down shares in Hong Kong-listed companies subject to a U.S. government blacklist. Buyers using a trading link known as Stock Connect have bought the equivalent of a net $15.8 billion in Hong Kong shares in the first nine trading days of this year, according to Wind, with a heavy concentration on stocks targeted by the U.S.

“It’s a very smart move by Chinese mainland investors because all these stocks are largely domestically focused,” Justin Tang, the head of Asian research at United First Partners said on Chinese investors pouring billions into stocks on U.S. blacklist. “Nothing has changed about their fundamentals. It’s just that U.S. investors can’t buy.”

EU Markets

European stocks inched up for a third-straight session on Wednesday trade, as hopes of a large stimulus under incoming U.S. President Joe Biden and upbeat Chinese export data boosted sentiment

The pan-European Stoxx Europe 600 added 0.74% to 410 and Stoxx 50 added 0.69% to close at 3,641

Germany’s DAX30 added 0.35% to 13,988

DAX index rose after preliminary data showed Europe’s largest economy shrank by a smaller-than-expected 5.0% in 2020 as a strong state response helped limit the havoc caused by the covid-19 pandemic

London’s blue-chip FTSE 100 added 0.84% to 6,802

France’s CAC40 added 0.33% to 5,681

Denmark’s OMX Copenhagen 20 added 0.42% to 1,469

Spain’s IBEX 35 added 0.14% to 8,372

Italy’s FTSE MIB dropped -0.47% to 22,637

Germany‘s economy shrank by 5.0% year-on-year in 2020, the most since the financial and economic crisis of 2008/2009 and compared with market expectations of a 5.1% contraction

Germany is targeting pandemic recovery without another broad stimulus program like in 2020, according to Economy Minister Peter Altmaier. According to government projections, the economy is set for growth of 4.4% in 2021. Lockdown restrictions are likely to weigh on expansion, and the recovery will probably fall somewhat short of what was expected

On European Central Bank‘s interest rate decision, policymakers agreed that the expansion and extension of PEPP purchases and the recalibration of the TLTRO III conditions were the most suitable tools to ensure that financing conditions remained favorable throughout the pandemic, the accounts of the December’s meeting showed. However, there was a number of ECB officials calling for a more moderate increase in the PEPP envelope on the argument that significant space for purchases was still available from past decisions and that in an environment of high uncertainty it was worth “keeping some powder dry” by maintaining the option to further adjust the envelope in the future

“There’s a feeling that we’ll get stimulus much bigger than expected, we won’t see any negative moves from central banks, particularly the Federal Reserve, and economic data globally might be picking up, all that’s helping,” said Edward Park, chief investment officer at Brooks Macdonald

“Stimulus programs in the classical sense, like the one we enacted last year, are not appropriate at the moment,” the member of Merkel’s conservative bloc said. “But there is a need to invest significantly in industries of the future” to help Germany achieve a goal of carbon neutrality by 2050, he added.”

Oil & Natural Gas Markets

Crude-oil dipped in early Friday trade, as surging coronavirus cases in Europe and new lockdowns in China renewed worries about global oil demand and eclipsed bullish signals from Chinese import data and U.S. crude oil stocks draws

WTI Crude is trading lower at $52.94 per barrel

Brent Crude is trading lower at $55.84 per barrel

Natural Gas futures is trading lower at $2.684/MMBtu

On MCX-India, Crude oil futures dropped to 3,873 on Thursday trade

On MCX-India, Natural gas futures dropped to 196/MMBtu on Thursday trade

“The complex remains in pause mode, a development that should not be surprising given the magnitude of the oil price gains that have been developing for some 2-1/2 months,” Jim Ritterbusch, president of Ritterbusch and Associates, said. “Global oil demand improvement during the next few months may well be intersecting with reduced production as the Saudis initiate their voluntary cuts at a time when U.S. shale producers are showing reluctance in boosting output in response to higher prices.”

Commodities Markets

Gold was slightly changed in early Friday trade

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 higher at $1,852 an ounce

Silver futures (Comex) is trading higher at $25.65 an ounce

Copper futures (Comex) is trading higher at $3.6765 per pound

In India, Spot Gold ticked higher to INR 48,363 per 10 grams

India — NCDEX Agridex

Agricultural futures index tracking the performance of the 10 liquid commodities traded lower closing at 1,162.05 ; with top gains in Guar seed futures and drags in Mustardseed futures on Thursday trade

Currency Markets

The U.S. dollar index, DXY held steady in early Friday trade at 90.259

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 73.0462

JPY strengthened with USD / JPY at 103.6700

CNY weakened with USD / CNY at 6.4746

EUR weakened with EUR / USD at 1.2152

GBP strengthened with EUR / GBP at 0.8882

GBP strengthened with GBP / USD at 1.3681

*3-Month LIBOR Rate*	*As on 14 Jan 2021*
US DOLLAR	0.23 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 added 0.48% in early Friday trade to $39,309 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 : 1.10%
Canada : 0.81%

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

Germany : -0.56%
United Kingdom : 0.28%
France : -0.34%
Italy : 0.65%
Netherlands : -0.50%

Asia Pacific : 10 – Year Govt Bond Yields

India : 6.00%
Japan : 0.01%
Australia : 1.09%
Hong Kong : 0.49%
Singapore : 0.94%
South Korea : 1.72%

Fund Flows on NSE, BSE and MSEI — 14 Jan 2021

FII/FPI Net Buy Rs 1,076.62 Crore in Capital Market

DII Net Sell Rs (188.10) Crore in Capital Market

Where We’ve Been Reading —