Finance - Stock Market Forecast

Index Trend & Conditions – 07:00 a.m. I.S.T.

• Resistance for Nifty 50 is seen at 14,545 14,600 and 14,870. For Monday, Jan 18, Support area will be at 14,199 and 14,130

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

• The MSCI Asia Pacific ex-Japan is trading lower at -0.30%, and the MSCI Emerging Market index is down -0.22%

• Trends on SGX Nifty looked poised for a negative start for Nifty 50 in India. The Nifty futures are trading 66 points, or -0.46% lower at 14,395 on the Singaporean Exchange at 07:00 a.m. I.S.T.

• Contracts tied to U.S. futures declined in early trade, with Nasdaq, S&P 500 and Dow Jones futures trading in red, alongside a profit-booking start to Asia-Pacific early Monday trade with South Korea seeing the bulk of early losses in Asia; a negative MSCI Asia-Pacific ex-Japan index; U.S. Dollar Index edging up to 90.81 with Bond futures advancing and Gold futures falling to $1,820 an ounce on the day indicate a negative outlook for Nifty 50 India

• Foreigners continue to pile into Indian stocks, having bought a net $2.2 billion in the 2-weeks in 2021, after pumping in $23.4 billion in 2020. That was the most since 2012. Edelweiss AMC, which oversees $6.3 billion in assets, saw its balanced fund that invests in both stocks and bonds boost its equity allocation to about 75%, from just 30% in March

• Despite days that see a pullback in markets, investors still expect that the additional fiscal stimulus will support a rally in stocks this year

India Markets

NIFTY 50	OPEN	HIGH	LOW	CLOSE
Friday	14,550	14,617	14,471	14,433

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

The blue-chip NSE Nifty 50 index dropped 162 points, or -1.11%, to 14,433 and the benchmark S&P BSE Sensex shed 549 points, or -1.11%, to 49,034

India’s key stock gauges have touched successive new highs in recent weeks as foreign funds piled into the nation’s equities, buying $2.2 billion of stocks this month through Jan. 13 after last year investing the most since 2012

Among individual stocks, Infosys contributed the most to the Sensex decline, and decreased -1.9%, while Tech Mahindra had the largest drop, falling -4.4%

Broader markets mostly out-performed their headline peers — Midcap 100 index dropped -1.06% ; Smallcap 250 index dropped -1.06% and Nifty 500 dropped -1.15%

Strategy based indices also out-performed benchmark indices — Nifty Alpha 50 dropped -1.16% and Nifty Alpha Low Volatility 30 dropped -1.98%

Nifty P/E for Jan 15, 2020 decreased to 39.94 from 40.03, and Nifty P/B edged lower to 4.09 from 4.14, 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 273 points, or -0.84%, to 32,246

India VIX rose 4.27% from 23.02 to 24.01 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 3.25% as per RBI data. It moved in a range of 1.90 — 3.50% for Jan 14

Yield on the benchmark 10-year government bond increased to 5.98%, while the rupee weakened to 73.1600 per U.S. dollar

India’s bond yields surged the most in four months after the nation’s central bank drained 2 trillion rupees ($27.4 billion) from the banking system at a higher-than-expected rate. The cutoff for the 14-day reverse repurchase operation was set at 3.55%, 20 basis points higher than RBI’s reverse repo rate of 3.35%, and 3.5% forecast

The RBI is draining excess cash after money-market rates crashed way below its 3.35% — 4.00% interest-rate corridor late last year, spurring calls from investors to remedy a situation that could distort banks’ asset pricing. Too sharp a rise could drive volatility and raise concerns that the central bank is withdrawing stimulus support

The RBI is open to examining any proposal to set up a bad bank, Governor Shaktikanta Das said, days after the authority forecast a surge in soured assets. The banking sector’s bad loan ratio is forecast to rise to 13.5% by September from 7.5% a year ago as the pandemic worsened an economic slowdown

HDFC Bank Ltd., India’s largest private lender by assets, posted third-quarter profit that beat analyst expectations buoyed by strong loan growth and a drop in bad loans. Net income was 87.6 billion rupees, or $1.2 billion in the Dec. ended quarter compared with 74.2 billion rupees a year earlier, beating the average estimate of 76.4 billion rupees. The bank’s loan book grew by an annual 16% in the Oct. — Dec. period, out pacing the sector’s average growth of 6%

“The reverse repo cutoffs are a clear sign that RBI wants to align money market yields above the operational policy rate, which is the reverse repo rate, “ said Arvind Chari, head of fixed income and alternatives at Quantum Advisors Pvt. “The cutoffs at the next two to three auctions will be crucial to see if this indeed is the start of normalization of monetary policy.”

“A combination of factors weighed on yields including higher cutoffs at the reverse repo, delay in RBI’s open-market announcement and higher U.S. yields,” said Vijay Sharma, executive vice president for fixed-income at PNB Gilts Ltd. “Since the RBI has now announced the OMO, long-end yields are likely to go back into the last one-month’s range,” he said.

“We are in a mega-bull market triggered by liquidity, and the market will be heading higher until the budget, and we don’t expect a major decline,” said A. K. Prabhakar, head of research at IDBI Capital Market Services Ltd. in Mumbai. With the budget due on Feb. 1, there has been “no disappointment” so far in company results

“While we are seeing some kind of weakness, this doesn’t mean it is negative news per se, because earnings are going to be pretty good at least for next one or two quarters,” said Abhimanyu Sofat, head of research at IIFL Securities Ltd.”

America Markets

Wall Street’s main indexes finished lower on Friday trade, weighed down by big U.S. banks after their earnings reports, while the energy fell sharply due to a regulatory probe into Exxon Mobil Corp

The broad-based S&P 500 lost 27 points, or -0.72%, to 3,768

Shares of Wells Fargo, JPMorgan Chase and Citigroup tumbled even though they had posted better-than-expected fourth-quarter profits

The Dow Jones Industrial Average, composed mostly of cyclical stocks, fell 177 points, or -0.57%, to 30,814

The tech-heavy Nasdaq Composite Index dropped 114 points, or -0.87%, to 12,998

For the week the S&P 500 and the Nasdaq fell around -1.5% while the Dow lost -0.91%

Contracts tied to U.S. futures declined in early Monday trade. S&P500 futures is down -0.33%, Dow Jones futures is down -0.21%, and Nasdaq futures is down -0.37%

There is no trading of cash Treasuries on Monday, due to the Martin Luther King Jr. holiday, though bond futures advanced

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

U.S. consumer sentiment cooled more than forecast in January and other economic data such as sluggish retail sales and producer prices also portray the obstacles still facing the country as it emerges from the pandemic

The University of Michigan‘s consumer sentiment fell to 79.2 in January 2021, from the previous month’s 80.7 and below market expectations of 80

On the corporate front, JPMorgan Chase & Co. posted its highest-ever quarterly profit after releasing $2.9 billion in funds it had set aside to cover soured loans. The bank’s profit jumped 42% to $12.14 billion, or $3.79 per share, far past the $2.62 per share forecast by analysts polled by FactSet. A year earlier, JPMorgan had reported a quarterly profit of $8.52 billion, or $2.57 a share. For the full year, the bank posted record revenue of $119.54 billion, up 4% from 2019

Citigroup Inc. said that its fourth-quarter income fell 7% and that it drew down some of the reserves it had set aside to cover potentially soured loans. Profit fell to $4.63 billion, or $2.08 a share, compared with $4.98 billion, or $2.15 a share, a year earlier. That still beat the $1.34 expected by analysts polled by FactSet

Industrial production in the U.S. advanced 1.6% month-over-month in December 2020, following an upwardly revised 0.5% growth in November and easily beating market consensus of 0.5%. Manufacturing output rose 0.9%, an 8th-consecutive monthly gain. The production of durable goods other than motor vehicles and parts rose 1.5%, and non-durable goods production increased 0.9%

Analysts at Goldman Sachs Group raised their U.S. growth forecast for the second time this month on expectations that President-elect Joe Biden’s fiscal stimulus plan will hasten the economy’s recovery from the pandemic. The bank expects economic growth of 6.6% in 2021, compared with a previous forecast of 6.4%

Joe Biden takes office as U.S. president on Wednesday

“This year is the year for financials, energy, materials, industrials. So if there is a day when they’re not leading, it’s not good news for the market,” said Chris Zaccarelli, chief investment officer at Independent Advisor Alliance in Charlotte, North Carolina

“Ultimately, you can’t expect equities to go up every day in a straight line,” said Mike Bell, global market strategist at J.P. Morgan Asset Management. “The numbers are really quite incredible and I think it is going to all add up to a boom in growth once the vaccines are rolled out.”

Asia-Pacific Markets

Asian benchmark stocks declined in early Monday trade, as investors greeted the week with a lack of risk appetite and traders looked ahead to data on the progress in China’s economic recovery

South Korea saw the bulk of early losses in Asia

Japan’s Nikkei 225 dropped -0.88% to 28,268 and Topix 500 dropped -0.33% to 1,441

South Korea’s Kospi dropped -1.05% to 3,053

In Hong Kong, Hang Seng dropped -0.42% to 28,454 while Hang Seng China Enterprises dropped -0.47% to 11,266

In China, CSI 300 dropped -0.23% to 5,458 and Shanghai Composite dropped -0.32% to 3,554

Australia’s S&P/ASX 200 dropped -0.50% to 6,682

Overall, MSCI Asia-Pacific, is down -0.74%

In Asia, all eyes turn to China’s 4th-quarter GDP, alongside December’s industrial production, retail sales, unemployment rate, and fixed asset investment. Markets expect a 6.1% growth in Oct. to Dec. period, faster than the third quarter’s 4.9%, as activity and demand continued to recover. Also, the People’s Bank of China will provide an update on its new loan prime rate (LPR) on Wednesday, which was kept steady at 3.85% last month

Bank of Japan is expected to keep its policy interest rate at -0.1% and the 10-year Japanese government bond yield target at around zero when it holds a meeting on January 20-21

Global asset managers are struggling to find a foothold in China’s 3.74 trillion yuan ($578 billion) hedge fund industry, despite long-awaited policy changes designed to give foreigners more paths to invest. In November, China expanded access for more than 400 foreign institutions allowing them to invest through private securities funds, the local version of hedge funds. But reality has not lived up to expectations

EU Markets

European stocks snapped four weeks of gains on Friday trade, as the prospect of tighter lockdowns, slow vaccine shipments to the continent and resurgent coronavirus cases in China dampened hopes of a speedy economic recovery

The pan-European Stoxx Europe 600 dropped -0.93% to 406 and Stoxx 50 dropped -1.15% to close at 3,599

Mining and oil & gas sectors slumped -3.1% and -2.6%, respectively, after Chinese authorities put more than 28 million people under new lockdowns, raising concerns about demand from the major consumer of commodities

Germany’s DAX30 dropped -1.44% to 13,787

DAX dropped after Pfizer announced it would temporarily reduce deliveries of its vaccine to Europe while it upgrades its production capacity

London’s blue-chip FTSE 100 dropped -0.97% to 6,735

France’s CAC40 dropped -1.22% to 5,611

French grocer Carrefour fell almost 3% after the French government all but killed off a possible $20 billion takeover by Canada’s Alimentation Couche-Tard

Denmark’s OMX Copenhagen 20 dropped -0.67% to 1,459

Spain’s IBEX 35 dropped -1.69% to 8,230

Italy’s FTSE MIB dropped -1.09% to 22,381

Concerns about the pace of vaccination mounted in recent weeks as several European countries said they were receiving lower-than-expected supplies and complained about uncertainty over future deliveries

Policy decisions are due on Wednesday from ECB

“Market positioning had been quite aggressive, so I suppose it is a pause for breath,” said Roger Jones, head of equities at London & Capital. “The rollout and the speed of vaccination is becoming increasingly important and the market is willing to look through a period of extended lockdown if it’s a relatively short period.”

Oil & Natural Gas Markets

Crude-oil slid in early Monday trade, as a stronger dollar and weak U.S. economic data stoked concerns over an economic rebound

WTI Crude is trading lower at $51.92 per barrel

Brent Crude is trading lower at $54.64 per barrel

Natural Gas futures is steady at $2.750/MMBtu

On MCX-India, Crude oil futures dropped to 3,825 on Friday trade

On MCX-India, Natural gas futures rose to 199/MMBtu on Friday trade

“The dollar strength is putting pressure on crude,” said Bob Yawger, head of the futures division at Mizuho Securities. Meanwhile, Republican opposition facing Biden’s virus aid proposal means “it may get chopped up and pushed out piecemeal, which is less than ideal. That’s been weighing on all risk assets, including oil.”

“A bit of a pullback is just natural,” said Helge Andre Martinsen, senior oil market analyst at DNB Bank ASA. A strong dollar, a decline in equities and Brent’s recent overbought run are spurring the current drop, he said

Commodities Markets

Gold fell in early Monday trade, the weakest in almost six weeks

U.S. Gold futures (Comex) is trading lower at $1,820 an ounce

Silver futures (Comex) is trading lower at $24.61 an ounce

Copper futures (Comex) is trading lower at $3.5940 per pound

In India, Spot Gold dipped to INR 47,787 per 10 grams

India — NCDEX Agridex

Agricultural futures index tracking the performance of the 10 liquid commodities traded lower, closing below 1,160 ; with top gains in Dhaniya futures and drags in Mustardseed and Refined Soybean Oil futures on Friday trade

Currency Markets

The U.S. dollar index, DXY strengthened in early Monday trade to 90.811, reducing the appeal of commodities priced in the currency

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 weakened with USD / INR at 73.1600

JPY weakened with USD / JPY at 103.8100

CNY weakened with USD / CNY at 6.4809

EUR weakened with EUR / USD at 1.2086

GBP weakened with EUR / GBP at 0.8890

GBP weakened with GBP / USD at 1.3595

*3-Month LIBOR Rate*	*As on 15 Jan 2021*
US DOLLAR	0.24 per cent
Euro	– 0.55 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 dropped -0.20% in early Monday trade to $35,747 as of 07:00 a.m. I.S.T.

Wall Street finance executives who were thinking of plunging some of their company’s cash reserves into Bitcoin, watched Bitcoin sink more than -25% in a 24-hour period starting Sunday. Burning a hole of that size in the corporate rainy day fund would amount to a career-ending wipeout at virtually any S&P 500 firm

Still, there are plenty of Bitcoin bulls. Scott Minerd of Guggenheim Investments recently said it could grow to be worth $400,000. JPMorgan Chase & Co. said Bitcoin has the long-term potential of reaching $146,000. Projections like these only add to fears of missing out on the boom

“It would be a red flag for investors if a corporation bought financial assets for speculation purposes unrelated to their core business,” said Michael O’Rourke, chief market strategist at JonesTrading

Bond Markets — 15 Jan 2021

Americas : 10 – Year Govt Bond Yields

United States : 1.08%
Canada : 0.80%

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

Germany : -0.54%
United Kingdom : 0.29%
France : -0.32%
Italy : 0.61%
Netherlands : -0.49%

Asia Pacific : 10 – Year Govt Bond Yields

India : 5.93%
Japan : 0.02%
Australia : 1.08%
Hong Kong : 0.49%
Singapore : 0.94%
South Korea : 1.72%

Fund Flows on NSE, BSE and MSEI — 15 Jan 2021

FII/FPI Net Buy Rs 971.06 Crore in Capital Market

DII Net Sell Rs (942.07) Crore in Capital Market

Where We’ve Been Reading —