Finance - Stock Market Forecast

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

• Resistance for Nifty 50 is seen at 14,545 14,600 and 14,650. For Wednesday, Jan 20, Support area seen at 14,433 14,280 14,230 and 14,190

• Nifty 50 is in a channel-wise resistance

• 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 0.53%, and the MSCI Emerging Market index is up 0.44%

• Trends on SGX Nifty looked poised for a negative start for Nifty 50 in India. The Nifty futures are trading 60 points, or -0.42% lower at 14,496 on the Singaporean Exchange at 07:30 a.m. I.S.T.

• U.S. equity futures rose in early trade buoyed by earnings and hopes for more stimulus with Nasdaq, S&P 500 and Dow Jones futures trading in green, alongside a mixed start to Asia-Pacific early Wednesday trade with stocks rising in Australia and outperforming in Hong Kong; a positive MSCI Asia-Pacific ex-Japan index; U.S. Dollar Index extended its retreat to 90.39 with 10-Year Treasury Yield sliding to 1.09 and Gold futures attempting to rebound at $1,846 on the day indicate a stable-to-positive outlook for Nifty 50 India

• 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
Tuesday	14,371	14,546	14,350	14,521

India’s equity benchmark rose by the most in over two months on Tuesday trade, tracking regional peers higher, after two days of declines dragged indexes back from record high levels

The blue-chip NSE Nifty 50 index added 240 points, or 1.68%, to 14,521 and the benchmark S&P BSE Sensex rose 834 points, or 1.72%, to 49,398

Among individual stocks, HDFC contributed most to the index advance; while Bajaj Finserv rose the most, adding 6.8%

Broader markets mostly under-performed their headline peers — Midcap 100 index added 2.32% ; Smallcap 250 index added 1.67% and Nifty 500 added 1.75%

Strategy based indices also out-performed benchmark indices — Nifty Alpha 50 added 1.28% and Nifty Alpha Low Volatility 30 added 1.51%

Nifty P/E for Jan 19, 2020 increased to 39.22 from 38.92, and Nifty P/B edged higher to 4.12 from 4.05, as recorded by NSE India

Bank Nifty opened with a gap-up and remained consolidative in the first half of the session, but moved northwards in line with the broader market sentiment. The index added 613 points, or 1.93%, to 32,424

India VIX or Fear gauge slipped -6.16% from 24.39 to 22.89 levels

Volatility needs to cool down below 20 level to commence a fresh leg of rally for a new lifetime high. However, volatility could be comparatively higher ahead of Budget 2021

Options data suggested a wider trading range between 14,000 and 14,800 levels, while the immediate trading range is seen between 14,300 and 14,700 levels

Overnight Call Money rate weighted average stood at 3.16% as per RBI data. It moved in a range of 1.90 — 3.50% for Jan 18

Yield on the benchmark 10-year government bond was little changed at 5.91%, while the rupee appreciated 0.2% to 73.1725 per U.S. dollar

India’s federal budget presentation is due on February 1

“Volatility is up because of rotational trade and in anticipation of the budget,” said Sanjeev Hota, head of research at Sharekhan Ltd. in Mumbai. “The hopes are very high but nobody knows how it will pan out and the market level is quite elevated.”

America Markets

Wall Street’s markets climbed on Tuesday trade, as U.S. Treasury Secretary nominee Janet Yellen advocated for a hefty fiscal relief package before lawmakers to help the world’s largest economy ride out a pandemic-driven slump

Volume on U.S. exchanges was 13.87 billion shares, compared with the 12.93 billion on average for the full session over the last 20 trading days

The broad-based S&P 500 gained 30 points, or 0.81%, to 3,798

The Dow Jones Industrial Average, composed mostly of cyclical stocks, rose 116 points, or 0.38%, to 30,930

The tech-heavy Nasdaq Composite Index added 198 points, or 1.53%, to 13,197

U.S. equity futures rose slightly in early Wednesday trade, buoyed by earnings and hopes for more stimulus. S&P500 futures is up 0.09%; Dow Jones futures is down -0.02%; and Nasdaq futures is up 0.38%

10-year U.S. Treasury yields slid to 1.09% on the day as dollar weakened further to 90.39

The Cboe Volatility Index, known as Wall Street’s “fear gauge,” dropped -4.52% to 23.24 on Tuesday

Goldman Sachs Group Inc. reported sharply higher profit for the Q4, punctuating a turbulent year in which the Wall Street firm benefited from the markets’ quick recovery. Goldman reported quarterly profit of $4.51 billion, or $12.08 a share, more than double its level from the same quarter a year ago. Revenue of $11.74 billion was 18% above 2019’s 4th-quarter level

With its relatively small loan book and heavy exposure to underwriting and trading securities, Goldman was better placed than peers for the environment of the past several months, as IPOs, corporate borrowing and major stock indexes hit new records in 2020

On Friday, JPMorgan Chase & Co. said Q4 profit soared 42% to a record $12.14 billion after the bank released $2.9 billion from its stockpile of funds previously set aside to cover soured loans. On Tuesday, Bank of America Corp. said profit fell 22% but topped analysts’ expectations after it released $828 million from its loan-loss reserves

Netflix shares rose more than 11% following the closing bell on Tuesday after the streaming television provider reported paid subscriber additions for the fourth quarter, topping Wall Street expectations

Janet Yellen, President-elect Joe Biden’s pick for Treasury secretary, said the U.S. is prepared to take on China’s “abusive” practices such as dumping products and erecting trade barriers. The relationship between the world’s two largest economies is seen remaining fraught under Biden since both Republicans and Democrats in Congress are eager to put pressure on China for intellectual property theft and unfair trade practices

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

“Yellen is a positive,” said Mohit Kumar, strategist at Jefferies International. “We should have greater co-operation between the Fed and the Treasury, with both the monetary and fiscal policy working together and supportive. This is a good backdrop for risk sentiment.”

“The market is rising on good news but choosing to largely ignore weaker data and rising infection rates,” Goldman strategists led by Peter Oppenheimer said. “There is a risk of a correction, but without a bear market inflection.”

Asia-Pacific Markets

Asian benchmark stocks attempted to push higher in early Wednesday trade amid a mixed rally

Stocks outperformed in Hong Kong and rose in Australia

Japan’s Nikkei 225 dropped -0.40% to 28,520 and Topix 500 dropped -0.62% to 1,436

South Korea’s Kospi dropped -0.03% to 3,091

In Hong Kong, Hang Seng added 0.41% to 29,771 while Hang Seng China Enterprises added 1.03% to 11,850

In China, CSI 300 dropped -0.03% to 5,436 and Shanghai Composite added 0.14% to 3,572

Australia’s S&P/ASX 200 added 0.38% to 6,769

Overall, MSCI Asia-Pacific, is up 1.54%

The Bank of Japan is to deliver policy decisions on Thursday

The unemployment rate in Hong Kong increased to 6.6% in the December-ended Q4 of 2020 from 6.3% in Q3. It is the highest jobless rate since the last quarter of 2004 as the coronavirus pandemic continues to weigh on local consumption sentiment and disrupt economic activities. The number of unemployed rose to 246K and the employed population decreased to 3.65 million

“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 slipped on Tuesday trade, dragged down by retailers, travel and banking stocks, as the possible extension of Germany’s coronavirus lockdown raised concerns about the damage to earnings and economic growth

The EU is expected to unveil a plan to strengthen the international role of the single currency

The pan-European Stoxx Europe 600 dropped -0.20% to 406 and Stoxx 50 also dropped 0.20% to close at 3,595

Defensive sectors that tend to remain immune to economic cycles such as healthcare, telecom and utilities gained the most, while retail stocks took the biggest hit

Germany’s DAX30 dropped -0.24% to 13,815

Prospect of longer lockdowns kept investors on edge as German Chancellor Angela Merkel and state premiers agreed to extend a lockdown for most shops and schools until Feb. 14

London’s blue-chip FTSE 100 dropped -0.12% to 6,713

U.K.-listed shares of Rio Tinto slipped despite reporting a 2.4% rise in fourth-quarter iron ore shipments, helped by industrial activity in top consumer China

France’s CAC40 dropped -0.33% to 5,598

Denmark’s OMX Copenhagen 20 added 1.36% to 1,483

Spain’s IBEX 35 dropped -0.52% to 8,211

Italy’s FTSE MIB dropped -0.08% to 22,481

FTSE MIB traded slightly higher on Tuesday, after Italian Prime Minister Giuseppe Conte comfortably won the backing of the lower house of parliament on Monday, days after Matteo Renzi’s Italia Viva party withdrew its support from the government’s coalition. . Conte is now facing a second vote of confidence in the upper house, where the government had a thin majority even with Italia Viva’s 18 senators

The ZEW Indicator of Economic Sentiment for Germany rose to 61.8 in January 2021 from previous month’s 55, slightly beating market expectations of 60.0. The economic outlook for the German economy improved amid rising export expectations

Analysts are forecasting a 26.3% decline in Q4 profit for companies listed on the STOXX 600, as per Refinitiv IBES

Construction output in the Euro Area contracted 1.3% year-on-year in November 2020, following an upwardly revised 1.9% drop in October

Policy decisions are due on Thursday from ECB

“With the extension of lockdowns, Q1 GDP growth will be negative, in Germany and euro area as well,” said Matthias Bausch, senior cross asset strategist at Commerzbank. “However, the current situation is not the important driver for equity markets. If investors realise that lockdowns might be extended into Q2 or Q3, there is a much bigger risk.”

“Going in to the Q4 earnings season investors are more likely to be concerned with the outlook than historic performance given that the situation with the virus is changing so quickly,” said Edward Stanford, head of European equity strategy at HSBC

Oil & Natural Gas Markets

Crude-oil rose in early Wednesday trade on hopes that Biden’s proposed stimulus will lift economic output

The International Energy Agency lowered forecasts for global oil demand for this quarter by 600,000 barrels a day, as renewed lockdowns to contain the pandemic temper the recovery expected this year

WTI Crude is trading lower at $53.25 per barrel

Brent Crude is trading lower at $56.11 per barrel

Natural Gas futures is trading lower at $2.548/MMBtu

On MCX-India, Crude oil futures rose to 3,872 on Tuesday trade

On MCX-India, Natural gas futures fell to 187/MMBtu on Tuesday 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.”

Commodities Markets

Gold firmed in early Wednesday trade after falling to $1,802, its lowest since Nov. 30

Benchmark iron ore futures pulled back on Tuesday after hitting 4-week highs in the previous session, as weakening steel margins in top steel producer China weighed on raw material prices. The sell-off in steelmaking inputs pulled down Dalian coking coal by as much as 4.2% and coke by up to 4.1%

U.S. Gold futures (Comex) is trading higher at $1,847 an ounce

Silver futures (Comex) is trading higher at $25.43 an ounce

Copper futures (Comex) is trading higher at $3.6325 per pound

SGX Iron-Ore futures is trading lower at $169.80 per tonne, pulling back from 4-weeks high

In India, Spot Gold rose to INR 48,103 per 10 grams

“Steel margins have been falling quickly in recent days. This would motivate some high-cost steelmakers to conduct maintenance and consequently reduce iron ore consumption,” said Richard Lu, a senior analyst at CRU consultancy in Beijing

Currency Markets

The U.S. dollar index, DXY retreated to 90.390 in early Wednesday trade from a 5-week high of 90.9 hit in the previous session, amid a general increase in risk sentiment

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 73.1700

JPY weakened with USD / JPY at 103.9000

CNY strengthened with USD / CNY at 6.4802

EUR strengthened with EUR / USD at 1.2137

The euro strengthened after data from Germany’s ZEW Institute showed investors are growing more confident in the economic recovery

GBP weakened with EUR / GBP at 0.8914

GBP strengthened with GBP / USD at 1.3615

*3-Month LIBOR Rate*	*As on 19 Jan 2021*
US DOLLAR	0.22 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 slid -0.18% in early Wednesday trade to $35,850 as of 07:30 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 : 1.09%
Canada : 0.82%

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

Germany : -0.52%
United Kingdom : 0.30%
France : -0.30%
Italy : 0.60%
Netherlands : -0.46%

Asia Pacific : 10 – Year Govt Bond Yields

India : 5.91%
Japan : 0.03%
Australia : 1.09%
Hong Kong : 0.49%
Singapore : 0.95%
South Korea : 1.72%

Fund Flows on NSE, BSE and MSEI — 19 Jan 2021

FII/FPI Net Buy Rs 257.55 Crore in Capital Market

DII Net Sell Rs (199.30) Crore in Capital Market

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