Finance - Stock Market Forecast

Index Trend & Conditions – 07:15 a.m. I.S.T.

• Resistance for Nifty 50 is seen at 13,730 13,820 and 13,930. For Monday, Dec 21, Support area is seen at 13,636 and 13,450

• Support levels for Bank Nifty is at 30,200 and 29,750 ; while Resistance is seen at 31,300 and 31,375

• The MSCI Asia Pacific ex-Japan dropped -0.48%, and the MSCI Emerging Market index dropped -0.41%

• Trends on SGX Nifty indicate a gap-down opening with negative outlook in the morning session for Nifty 50 in India. The Nifty futures are trading -0.52% lower at 13,710 on the Singaporean Exchange at 07:15 a.m. I.S.T.

• Contracts tied to U.S. futures were slightly lower on the day, with Nasdaq, S&P 500 and Dow Jones futures trading in red, alongside a negative Asia-Pacific early Monday morning trade, a negative MSCI Asia-Pacific ex-Japan index, U.S. Dollar Index strengthening at 90.290 with 10-Year Treasury Yield sliding to 0.926 and Gold futures advancing to $1,895 on the day indicate a negative outlook for Nifty 50 India

• The current mood in the market is bracing and non-committal with enormous global liquidity

India Markets

NIFTY 50	OPEN	HIGH	LOW	CLOSE
Friday	13,764	13,772	13,658	13,760

Indian stocks capped a seventh straight week of gains as investors look beyond the benchmark indexes that keep setting record highs on Friday trade

Nifty 50 added 20 points or 0.14% to 13,760, while the BSE Sensex added 70 points or 0.15% to 46,960

Ten out of 19 sector sub-indexes compiled by BSE Ltd. declined, with a gauge of telecom stocks falling the most. Infosys Ltd. contributed most to the index advance and its 2.6% jump was the steepest, while HDFC Bank Ltd. was the biggest drag on the index and dropped 2.1%

India’s Nifty maintains higher bottom series which is broadly positive for the market, making 13,650 — the sacrosanct level. The larger texture of the market is still into the bullish side, so any short term corrections should be used to add cyclicals such as IT, Pharma and FMCG stocks with a medium-term outlook

Even amid historically high valuations, there are still pockets of the market that can outperform, mirroring the value rotation that is delivering returns globally

Broader markets under-performed their headline peers — Midcap 100 index dropped -0.25% ; Smallcap 250 index dropped -0.37% and Nifty 500 added 0.08%

Strategy based indices majorly out-performed their benchmark indices — Nifty Alpha 50 dropped -0.20% and Nifty Alpha Low Volatility 30 added 0.78%

Nifty P/E for Dec 17, 2020 advanced to 37.84 from 37.79, while Nifty P/B was steady at 3.89, as recorded by NSE India

Bank Nifty remained below 31,000 level and has under-performed the benchmark Nifty. The index dropped 132 points or -0.43% to 30,714

India VIX declined -2.79% from 19.16 to 18.62 levels. Lower volatility would suggest the bulls are getting a grip on the market and any decline may trigger buying in the market

Overnight Call Money rate weighted average stood at 3.20% as per RBI data. It moved in a range of 1.90 — 3.45% for Dec 16. With excess cash in the banking system, estimated at ₹7 lakh crore or $95 billion, key overnight rates have plunged below the reverse repurchase rate that marks the lower bound of the central bank’s policy corridor. Lower shorter rates without a similar drop in long-term borrowing costs means a steeper yield curve, which can downsize growth and also cause a mismatch between assets and liabilities in the financial sector

Yield on the benchmark 10-year government bond appreciated to 5.96%, while rupee strengthened at 73.53 against the U.S. dollar

India’s bond markets have witnessed a $14 billion outflow of funds in 2020 — Foreign investors have never sold so much in a single year

“Economic revival, vaccine news-flow and stable or weak U.S. dollar will likely drive the value theme to perform well,” said Mahesh Nandurkar, Jefferies India Ltd.

America Markets

U.S. stocks ended lower on Friday trade, pulled down by uncertainty around a $900 billion coronavirus stimulus deal

All three major indexes hit record highs at the opening before retreating

The Nasdaq Composite Index dropped 9 points, or 0.07% to 12,755

The S&P 500 lost 13 points, or 0.35% to 3,709

Nine of the 11 major S&P 500 sectors notched gains, with some of the biggest advances coming out of the health-care, technology and real-estate sectors

The Dow Jones Industrial Average fell 124 points, or 0.41% to 30,179

Volume on U.S. exchanges was 15.8 billion shares, compared with the 11.6 billion average for the full session over the last 20 trading days

Contracts tied to U.S. futures were little changed in early Monday trade. S&P500 futures is down -0.13%, while Dow Jones and Nasdaq futures is up 0.01% and 0.25% respectively

The yield on 10-year U.S. Treasury note slid to 0.926% on the day

Congressional leaders are believed to have agreed upon the terms of a roughly $900 billion stimulus plan to help the U.S. economy weather the pandemic, though the legislation is still being written and the House and Senate won’t vote on it until Monday

On the stocks front, trading was heavy and volatile in shares of electric-car maker Tesla Inc. on Friday, which will become the most valuable company to be ever added to Wall Street’s main benchmark index on Monday. The stock had jumped $39, or 6%, to $695.00 hitting a record high

FedEx Corp. fell -5.7% after it did not give an earnings forecast for 2021, even as its quarterly profit almost doubled

While JPMorgan Chase & Co. argue that the rise of bitcoin in mainstream finance is coming at the expense of gold, Goldman Sachs Group believe gold and bitcoin can co-exist as speculative retail investment causes bitcoin to act as an excessively risky asset

MSCI Inc. became the third index provider to delete some Chinese stocks from its benchmarks, after the Trump administration banned U.S. investments in companies with links to the Chinese military

U.S. Treasury Department designated Switzerland and Vietnam as currency manipulators in the Trump administration’s final foreign-exchange policy report

“Investors definitely want to see something come through or like to see something come through on the stimulus front sooner rather than later as COVID cases continue to rise and economic data has shown that it is beginning to deteriorate,” said Lindsey Bell, chief investment strategist at Ally Invest, North Carolina

Asia-Pacific Markets

Asian stock markets mostly retreated in early Monday trade as London goes into a complete lockdown sapping investors’ risk appetite

Japan’s Nikkei 225 dropped -0.72% to 26,570 and Topix 500 dropped -0.56% to 1,384

South Korea’s Kospi dropped -0.58% to 2,756

In Hong Kong, Hang Seng dropped -0.69% to 26,319 while Hang Seng China Enterprises dropped -0.57% to 10,426

In China, CSI 300 dropped -0.24% to 4,987 and Shanghai Composite dropped -0.08% to 3,392

Australia’s S&P/ASX 200 dropped -0.50% to 6,641

Overall, MSCI Asia-Pacific, is down -0.44%

Investors positioning for a post-pandemic recovery have South Korean sovereign bonds in their crosshairs. They’re expecting won bond yields to be among the quickest to rise, with its economy on track for a sharp rebound

The economic blow from coronavirus has wiped out 81 million jobs across Asia-Pacific this year, with women and young people disproportionately affected, according to the International Labour Organization

China injected cash into the financial system by offering medium-term loans, in the government’s latest effort to ensure the country’s banks have sufficient liquidity

China pulled further ahead of other major economies in November as industrial output and retail sales strengthened, reinforcing expectations of healthy growth in 2021

China’s loan prime rates — a benchmark for banks’ corporate lending rates — are expected to be kept steady on Monday, extending a seven-month streak

South Korea, an export-driven economy, is expected to expand 3.2% after contracting -1.1% this year, according to the finance ministry’s 2021 policy outlook. S. Korea lost the largest number of manufacturing jobs in almost two years in November, suggesting the pandemic’s toll is broadening from services to production

Korea’s board member of a bank suggested to expand asset purchase program to ease the volatility of long-term market yields

The Bank of Korea and the U.S. Federal Reserve to extend their $60 billion currency swap contract by six months

Indonesia’s 10-year government bond yield fell to the lowest in over seven years with the rupiah’s exchange rate level trading 10% below its fundamentals, according to Bank Indonesia Governor Perry Warjiyo

Taiwan’s central bank left its benchmark interest rate unchanged, as expected, with the focus shifting to the local dollar after the U.S. it in its watchlist of potential currency manipulators

Shares in Semiconductor Manufacturing International Corp. fell 5.2% in Hong Kong trading after the Trump administration added China’s largest manufacturer of computing chips to the export blacklist

“Navigating markets was extremely challenging in 2020, and 2021 should prove similarly complicated,” Societe Generale SA strategists including Jason Daw in Singapore and Phoenix Kalen in London wrote this month. “Right now, the market is filled with euphoria, and that is the path of least resistance, but various events could upset the apple cart.”

EU Markets

European equities traded cautiously on Friday trade, as investors closely watched negotiations between the U.K. and the European Union over a post-Brexit trade deal

The pan-European Stoxx Europe 600 declined -0.4% to 394 and Stoxx 50 dropped -0.42% to close at 3,545

Germany’s DAX30 dropped -0.27% to 13,630

London’s FTSE 100 dropped -0.33% to close to 6,529

France’s CAC40 dropped -0.39% to 5,527

Denmark’s OMX Copenhagen 20 added 1.63% to 1,454

Italy’s FTSE MIB dropped -0.16% at 21,976

Poland is planning tax exemptions for foreign central banks that buy its government debt in a bid to lure more “stable” bondholders to finance a bulging pandemic-era budget deficit

Hungary left its monetary policy unchanged despite a slowdown in inflation and a rally in the forint

U.K.’s Health Secretary Matt Hancock warned that the new strain of the coronavirus is out of control. Emerging scientific evidence suggests the new variant — which Hancock said has also appeared in Australia and continental Europe — can spread significantly more quickly than previous strains in circulation and is behind the surge in infections in recent days

“Cases have absolutely rocketed, so we’ve got a long way to go,” U.K.’s Health Secretary Matt Hancock told Sky News. “I think it will be very difficult to keep it under control until the vaccine has rolled out.” People in the new Tier 4 areas “should behave as though they have it,” he said.

Oil & Natural Gas Markets

Crude oil fell in early Monday trade, on concern a mutation of Covid-19 discovered in the U.K. could speed transmission of the virus and lead to more lockdown measures

OPEC cut forecasts for oil demand again as the group and its allies prepare to weigh up whether they can continue gradually restoring halted supplies

“There’s great news about the arrival of vaccines, the promise they hold, and that global demand is likely to return in a big way as a result,” said Matt Marshall, director of market analytics at AEGIS. “But in the near term, that has zero effect on petroleum demand.”

WTI Crude is trading lower at $47.98 per barrel

EIA crude oil inventory report is due Wednesday

Brent Crude is trading lower at $50.87 per barrel

Natural Gas futures is steady at $2.714/MMBtu

On MCX-India, Crude oil futures appreciated to 3,596 on Friday trade

On MCX-India, Natural gas futures climbed to 197/MMBtu on Friday trade

“Dollar-denominated commodities across the board are getting pumped up,” said John Kilduff, a partner at Again Capital LLC. “It bodes well for demand, because it’s becoming so much cheaper for countries like India that have to do the currency translation. This is effectively a big price cut for foreign buyers of crude oil.”

Commodities Markets

Gold gained in early Monday trade, amid escalating virus cases

“Even with a vaccine, at least another round of U.S. fiscal stimulus is needed, if not more – raising inflation expectations,” said Howie Lee, an economist at Oversea-Chinese Banking Corp., who is long gold through 2021. “Additionally, we expect dollar outflows in 2021, while rates are highly expected to stay low till 2023. Gold could trade above $2,000 from the second quarter onward as markets divert their attention toward excess liquidity in a world that is on its way to being inoculated.”

U.S. Gold futures (Comex) strengthened to $1,898.45 an ounce

Silver futures (Comex) strengthened to $26.60 an ounce

Copper futures (Comex) eased at $3.6280 per pound, after making a seven year high

“Copper’s fierce ascent is really boosted by hopes on the U.S. stimulus talks,” TD Securities analyst Ryan McKay said. “The China recovery scenario, a weaker dollar and green-inspired reflation wave have also lifted copper, especially with the Chinese stockpiling impulse having been bigger than initially thought and more strategic in nature.”

In India, Spot Gold strengthened to INR 49,876 per 10 grams

India — NCDEX Agridex

Agricultural futures index tracking the performance of the 10 liquid commodities, was up 0.01% trading at 1,151.45 ; with top gains in Refined Soybean Oil and Mustardseed futures on Friday trade

Currency Markets

The U.S. dollar index, DXY climbed in early Monday trade at 90.229 as the worsening pandemic and lack of progress on Brexit trade talks sapped risk appetite despite a nearing U.S. stimulus package

INR appreciated with USD / INR at 73.5700

Value erosion in dollar and excessive liquidity is drove foreign investors to bet big on Indian equities, which gave the rupee a slight appreciating bias in the near term

JPY declined with USD / JPY at 103.3400

CNY declined with USD / CNY at 6.5400

EUR declined with EUR / USD at 1.2220

The euro rose above $1.22 for the first time since 2018 in the wake of the better-than-expected numbers.

EUR appreciated with EUR / GBP at 0.9113

The pound slid as Britain and the E.U. blew through another deadline on Brexit negotiations with the U.K.’s coronavirus situation worsening

“Bitcoin’s scarcity combined with rampant money printing by the Federal Reserve mean the digital token should eventually climb to about $400,000,” Scott Minerd said on Wednesday as Bitcoin breached $20,000 for the first time. “It’s based on the scarcity and relative valuation such as things like gold as a percentage of GDP. So you know, Bitcoin actually has a lot of the attributes of gold and at the same time has an unusual value in terms of transactions.”

*3-Month LIBOR Rate*	*As on 18 Dec 2020*
US DOLLAR	0.24 per cent
Euro	– 0.57 per cent
British Pound	0.05 per cent
Swiss Franc	– 0.78 per cent
Japanese Yen	– 0.10 per cent