Finance - Stock Market Forecast

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

• Resistance for Nifty 50 is seen at 14,433 14,545 and 14,600. For Tuesday, Jan 19, Support area will be at 14,230 14,190 and 14,130

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

• The MSCI Asia Pacific ex-Japan is trading higher at 1.06%, and the MSCI Emerging Market index is up 0.75%

• Trends on SGX Nifty looked poised for a gap-up start for Nifty 50 in India. The Nifty futures are trading 102 points, or 0.71% higher at 14,377 on the Singaporean Exchange at 07:00 a.m. I.S.T.

• Contracts tied to U.S. futures advanced in early trade, with Nasdaq, S&P 500 and Dow Jones futures trading in green, alongside a positive start to Asia-Pacific early Tuesday trade with stocks rising in Japan, South Korea and Australia; a positive MSCI Asia-Pacific ex-Japan index; U.S. Dollar Index paring an earlier advance to 90.65 with 10-Year Treasury Yield climbing to 1.11 as investors awaited President Donald Trump’s last full day in office and Gold futures attempting to rebound at $1,842 on the day indicate a positive outlook for Nifty 50 India

• Investors will watch out for comments from Treasury Secretary nominee Janet Yellen, who has a Senate confirmation hearing Tuesday

• Though many investors expect the rally to continue, they say stocks are likely to remain bumpy in the coming weeks amid signs that high coronavirus case rates are hurting economic activity

India Markets

NIFTY 50	OPEN	HIGH	LOW	CLOSE
Monday	14,453	14,459	14,222	14,281

India’s equity benchmark fell in line with its regional peers on Monday trade, extending Friday’s decline on account of profit-booking

The blue-chip NSE Nifty 50 index dropped 152 points, or -1.06%, to 14,281 and the benchmark S&P BSE Sensex shed 470 points, or -0.96%, to 48,564

As per ET analysts, markets have broken the crucial support of 14,350 and should ideally be headed further south to levels closer to 14,150 and then 14,000

Among individual stocks, Infosys Ltd. contributed the most to the Sensex decline, and decreased 2.5%, while Oil and Natural Gas Corp. had the largest drop, falling 4.6%

Among the bluechip names, UPL was the top gainer, rising 6.21%. Reliance Industries, Titan, HDFC Bank, ITC and Eicher Motors were other gainers

Trent, Whirlpool of India, Jubilant FoodWorks, KEI Electronics, Tata Elxsi and CSB Bank were top gainers from mid and small-cap indices, climbing in the range of 2-7%

Broader markets mostly under-performed their headline peers — Midcap 100 index dropped -2.12% ; Smallcap 250 index dropped -1.85% and Nifty 500 dropped -1.85%

Strategy based indices also out-performed benchmark indices — Nifty Alpha 50 dropped -1.83% and Nifty Alpha Low Volatility 30 dropped -1.47%

Nifty P/E for Jan 18, 2020 decreased to 38.92 from 39.34, and Nifty P/B edged lower to 4.05 from 4.09, as recorded by NSE India

Bank Nifty opened flat and headed down towards 31,800 in the first leg of the bearish rally before forming a big bearish candle on the daily scale. The index dropped 435 points, or -1.35%, to 31,811

India VIX or Fear gauge rose 1.60% from 24.01 to 24.39 levels

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

Markets have broken the crucial support of 14,350 and should ideally be headed further south to levels closer to 14,150 and then 14,000. Any bounce can be exposed to short positions in the near-term

Overnight Call Money rate weighted average stood at 2.80% as per RBI data. It moved in a range of 2.45 — 3.40% for Jan 16

Yield on the benchmark 10-year government bond remained at 5.98%, while the rupee weakened to 73.2210 per U.S. dollar amid strong dollar and risk aversion in the domestic markets

“Markets look poised for a smaller correction, as the narrative around Covid-19 globally suggests that the problem might still not be behind us,” said Nikhil Kamath, chief investment officer at True Beacon, an India-based hedge fund. “A second wave of lockdowns following the trend of what’s happening globally is a possibility.”

America Markets

Wall Street’s markets were closed on Monday trade, due to the Martin Luther King Jr. holiday

Contracts tied to U.S. futures advanced in early Tuesday trade. S&P500 futures is up 0.58%, Dow Jones futures is up 0.46%, and Nasdaq futures is up 0.58%

10-year U.S. Treasury yields jumped to 1.11% on the day

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

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 pushed higher in early Tuesday trade, as investors awaited comments from Treasury Secretary nominee Janet Yellen on U.S. stimulus and the dollar

Stocks rose in Japan, South Korea and Australia

Japan’s Nikkei 225 added 1.37% to 28,620 and Topix 500 added 0.68% to 1,446

South Korea’s Kospi added 1.53% to 3,056

In Hong Kong, Hang Seng added 1.01% to 28,862 while Hang Seng China Enterprises added 1.25% to 11,462

In China, CSI 300 added 1.11% to 5,518 and Shanghai Composite added 0.84% to 3,596

Australia’s S&P/ASX 200 added 1.18% to 6,741

Overall, MSCI Asia-Pacific, is down -0.31%

China’s GDP rose 6.5% in the 4th-quarter from a year earlier, pushed by industrial output and exports, according to data released by the National Bureau of Statistics. Growth for all of 2020 hit 2.3%, making China the only major world economy to grow in a year when the pandemic slammed activity globally. Details of the report below :

• Industrial output rose 7.3% in December from a year earlier, and 2.8% in 2020
• Retail sales growth slowed to 4.6% in December from 5% in November. For the whole of 2020, sales shrank 3.9%, led by an almost 17% drop in catering and restaurants
• Fixed-asset investment was 2.9% bigger in 2020 than in 2019
• The jobless rate was 5.2% at the end of December

Economists expect China’s GDP will expand 8.2% in 2021, continuing to outpace global peers even as they begin to recover due to a roll-out of vaccines

“China is the only major economy to squeak out growth last year, a testament to their successful pandemic containment efforts,” said David Chao, global market strategist for Asia Pacific (ex-Japan) at Invesco Ltd. “Looking forward to 2021, all eyes will be focused on whether China’s dual-circulation strategy – relying on internal consumption-driven growth – will take off.”

EU Markets

European equities closed with small gains on Monday trade, with a decline in utility stocks offsetting an advance for technology shares

The pan-European Stoxx Europe 600 added 0.15% to 406 and Stoxx 50 dropped -0.02% to close at 3,598

Germany’s DAX30 added 0.29% to 13,827

London’s blue-chip FTSE 100 dropped -0.32% to 6,714

France’s CAC40 added 0.02% to 5,613

Denmark’s OMX Copenhagen 20 added 0.26% to 1,463

Spain’s IBEX 35 added 0.19% to 8,246

Italy’s FTSE MIB added 0.46% to 22,484

Among individual stocks, shares of Carrefour slid -5.5% after the French grocer and Canadian convenience-store operator Alimentation Couche-Tard called off takeover talks. The decision came after the French government shot down Couche-Tard’s offer to buy Carrefour, saying it threatened jobs and food security

Airline stocks including British Airways-owner International Consolidated Airlines Group and Deutsche Lufthansa slipped, indicating nervousness among investors about the speed at which the travel sector will reopen

British firms called on Tuesday for another 7.6 billion pounds ($10.3 billion) of emergency government help, saying they cannot wait until finance minister Rishi Sunak’s March budget to learn if they will get more pandemic support. Sunak has extended his support measures several times already and has said his response to the pandemic will cost 280 billion pounds during the current financial year, saddling Britain with a peacetime record budget deficit

Policy decisions are due on Wednesday from ECB

“The market is focusing back on some of the negatives,” said Emmanuel Cau, head of European equity strategy at Barclays. “There will be a bit of a reality check for markets from the earnings season starting.”

“The markets are in a way front-running the recovery and the normalization of economic activity,” said Agnès Belaisch, chief European strategist at the Barings Investment Institute. “Stocks are bound to pause intermittently given the disconnect between the market and the way Covid-19 restrictions are crimping the economic recovery,” she added.

Oil & Natural Gas Markets

Crude-oil changed marginally in early Tuesday trade, as a stronger dollar, fears over soaring Covid-19 cases around the world and the slow pace of vaccination against the virus weighed in

Prices found some support in a drop in Libyan oil output, with Waha Oil Company reducing production by up to 200,000 barrels per day because of maintenance

WTI Crude is trading lower at $52.32 per barrel

Brent Crude is trading lower at $54.98 per barrel

Natural Gas futures is trading lower at $2.542/MMBtu

On MCX-India, Crude oil futures fell to 3,813 on Monday trade

On MCX-India, Natural gas futures fell to 191/MMBtu on Monday 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.”

“Corona-induced economic fears, a stronger U.S. dollar and more pessimistic investor sentiment are all playing their part in the fact that Brent is trading around $3 lower than last Wednesday,” said Commerzbank analyst Eugen Weinberg

Commodities Markets

Gold attempted to rebound in early Tuesday trade after falling to $1,809, its lowest since Dec. 2

Although U.S. inflation expectations have risen in anticipation of more U.S. fiscal stimulus, gold has not been the sole beneficiary – bond yields have risen and weighed on gold

U.S. Gold futures (Comex) is trading higher at $1,842 an ounce

Silver futures (Comex) is trading higher at $25.29 an ounce

Copper futures (Comex) is trading higher at $3.6250 per pound

In India, Spot Gold rose to INR 48,082 per 10 grams

Currency Markets

The U.S. dollar index, DXY pared an earlier advance in early Tuesday trade to 90.650

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 73.1450

JPY weakened with USD / JPY at 103.7500

CNY weakened with USD / CNY at 6.4928

EUR strengthened with EUR / USD at 1.2095

GBP strengthened with EUR / GBP at 0.8896

GBP strengthened with GBP / USD at 1.3608

*3-Month LIBOR Rate*	*As on 18 Jan 2021*
US DOLLAR	0.23 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 rose 1.16% in early Tuesday trade to $37,040 as of 07:00 a.m. I.S.T.

The JPMorgan strategists said Bitcoin was in a similar position in late November, except with $20,000 as the test. Flows of institutional investment into the Grayscale trust helped the world’s largest cryptocurrency extend its rally. Trend-following traders “could propagate the past week’s correction” and “momentum signals will naturally decay from here up till the end of March” if Bitcoin’s price fails to break above $40,000

Bitcoin’s proponents argue it’s maturing as a hedge for dollar weakness and the possibility of faster inflation in a recovering global economy. Others say its defining characteristic remains speculative booms followed by busts

Bond Markets

Americas : 10 – Year Govt Bond Yields

United States : 1.11%
Canada : 0.81%

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

Germany : -0.53%
United Kingdom : 0.29%
France : -0.31%
Italy : 0.63%
Netherlands : -0.47%

Asia Pacific : 10 – Year Govt Bond Yields

India : 5.91%
Japan : 0.03%
Australia : 1.06%
Hong Kong : 0.47%
Singapore : 0.93%
South Korea : 1.72%

Fund Flows on NSE, BSE and MSEI — 18 Jan 2021

FII/FPI Net Buy Rs 650.60 Crore in Capital Market

DII Net Sell Rs (42.51) Crore in Capital Market

Where We’ve Been Reading —