Finance - Stock Market Forecast

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

• Resistance for Nifty 50 is seen at 14,650. For Thursday, Jan 21, Support area seen at 14,545 and 14,600

• 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 higher at 0.56%, and the MSCI Emerging Market index is up 0.43%

• Trends on SGX Nifty looked primed for a positive start for Nifty 50 in India. The Nifty futures are trading 58 points, or 0.40% higher at 14,702 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 positive start to Asia-Pacific early Thursday trade with a rally led by Japan and Korea; a positive MSCI Asia-Pacific ex-Japan index; U.S. Dollar Index extended its retreat to 90.35 with 10-Year Treasury Yield sliding to 1.08 and Gold futures paring overnight gains to $1,868 on the day indicate a positive outlook for Nifty 50 India

• Joe Biden was sworn in as the 46th president of the United States on Wednesday, offering a message of unity and restoration to a deeply divided country reeling from a battered economy and a raging coronavirus pandemic

India Markets

NIFTY 50	OPEN	HIGH	LOW	CLOSE
Wednesday	14,538	14,666	14,517	14,644

India’s equity benchmark rose for a second day to settle at record highs on Wednesday trade

The blue-chip NSE Nifty 50 index added 123 points, or 0.85%, to 14,644 and the benchmark S&P BSE Sensex rose 393 points, or 0.80%, to 49,792

Among individual stocks, Reliance Industries contributed most to the index advance with a 1.9% jump, while Maruti Suzuki was the biggest winner, rising 2.8%

Bajaj Finance reported net income lower than analyst estimates’ after market close. Bajaj Finserv Ltd. is due to report results for the quarter ended December later today

Broader markets mostly under-performed their headline peers — Midcap 100 index added 1.04% ; Smallcap 250 index added 0.41% and Nifty 500 added 0.81%

Strategy based indices also under-performed benchmark indices — Nifty Alpha 50 added 0.71% and Nifty Alpha Low Volatility 30 added 0.58%

Nifty P/E for Jan 19, 2020 increased to 39.55 from 39.22, and Nifty P/B edged higher to 4.15 from 4.12, as recorded by NSE India

Bank Nifty opened negative but gained momentum throughout the session, however remaining range-bound between two of its most critical resistance – 32,400 and 32,613. The index added 118 points, or 0.37%, to 32,543

India VIX or Fear gauge slipped -5.88% from 22.89 to 21.55 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

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 19

Yield on the benchmark 10-year government bond increased 5.92%, while the rupee appreciated 0.2% to 73.0275 per U.S. dollar

India’s federal budget presentation is due on February 1

HDFC Asset Management Company reported a 5% increase in PAT at Rs 369.26 crore for Decemeber-ended Q3 FY21, while it was 352.55 in the same period in previous fiscal year. The company’s average asset under management (AAUM) surged 10% to Rs 4.06 lakh crore as of December 31, 2020 from Rs 3.69 lakh crore as on December 31, 2019

The Securities and Exchange Board of India (SEBI) on Wednesday granted approval to the deal between Kishore Biyani-led Future Group and Reliance Retail, an arm of the Mukesh Ambani-led Reliance Industries Limited. The market regulator, in its letter which approved the deal, listed a number of conditions in accordance to the Composite Scheme of Arrangement

“Earnings are coming in and they are reasonably good while commentary is supportive,” said Amit Khurana, head of research at Dolat Capital Market Ltd. in Mumbai.

America Markets

Wall Street’s markets closed at record highs on Wednesday trade, led by shares of Netflix and other communication companies, on hopes that newly inaugurated U.S. President Joe Biden would put in place further economic stimulus to offset damage wreaked by the Covid-19 pandemic

The broad-based S&P 500 gained 52 points, or 1.4%, to 3,851, a new closing high

The Dow Jones Industrial Average, composed mostly of cyclical stocks, finished at a fresh high after rising 257 points, or 0.8%, to 31,188

The tech-heavy Nasdaq Composite Index rose 260 points, or 2%, to 13,457, also notching a record close

U.S. equity futures rose slightly in early Thursday trade, buoyed by earnings and hopes for more stimulus. S&P500 futures is up 0.18%; Dow Jones futures is u%; and Np 0.07% and Nasdaq futures is up 0.47%

10-year U.S. Treasury yields slid to 1.08% on the day as dollar weakened further to 90.34

The Cboe Volatility Index, known as Wall Street’s “fear gauge,” dropped -7.14% to 21.58 on Wednesday

President-elect Joe Biden starts his term as the 46th U.S. president from Wednesday with at least 15 executive actions that will reverse some of President Donald Trump’s key polices. The U.S. is to rejoin the Paris climate agreement and the WHO, to stop construction of the wall on the Mexican border. Biden is likely to end the travel ban against some predominantly Muslim countries and revoke the permit for the Keystone XL pipeline. He will also introduce measures to reduce inequality and ease student debt burdens

On the stimulus front, Biden administration will need 10 GOP senators to vote in favor of the $1.9 trillion relief plan in order for it to have a swift passage into law

Netflix soared after the company announced that it had added more subscribers than expected and would no longer need to borrow money to build its entertainment empire

“Restrained inflation, low interest rates and rising earnings provide valuation support and the basis for stocks to trend higher,” Terry Sandven, chief equity strategist at U.S. Bank Wealth Management, wrote to clients in a recent note, adding that favorable growth trends for communications stocks such as Netflix, along with companies in the tech, consumer discretionary and health-care sectors, remain intact.

“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 pushed higher in early Thursday trade, rising for a third straight session, led by Japan and South Korea

Japan’s Nikkei 225 added 0.79% to 28,748 and Topix 500 added 0.64% to 1,449

South Korea’s Kospi added 0.66% to 3,135

In Hong Kong, Hang Seng dropped -0.07% to 29,947 while Hang Seng China Enterprises dropped -0.01% to 11,945

Hang Seng Index pulled back after hitting a 20-month high, with stocks buoyed in recent days by hefty inflows from mainland China

In China, CSI 300 added 0.47% to 5,502 and Shanghai Composite added 0.44% to 3,598

Australia’s S&P/ASX 200 added 0.66% to 6,815

Overall, MSCI Asia-Pacific, is up 0.93%

The Bank of Japan is to deliver policy decisions on Thursday

The resurgence of Covid-19 in China has led to lockdowns and calls for citizens not to travel during the upcoming Lunar New Years holidays, stoking concern that oil and fuel demand will take a near-term hit. Uncertainties about Chinese demand are starting to flow through to the physical oil market

EU Markets

European equities traded higher on Wednesday trade, with tech shares hitting their highest in nearly two decades, lifted by strong quarterly results from ASML and Richemont, and by incoming US Treasury Secretary Janet Yellen’s call to “act big” on coronavirus relief spending

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

The pan-European Stoxx Europe 600 added 0.86% to 409 and Stoxx 50 also added 0.77% to close at 3,623

Germany’s DAX30 added 0.86% to 13,932

London’s blue-chip FTSE 100 added 0.29% to 6,732

France’s CAC40 added 0.53% to 5,628

Denmark’s OMX Copenhagen 20 added 0.09% to 1,485

Spain’s IBEX 35 dropped -0.15% to 8,186

Italy’s FTSE MIB added 0.81% to 22,622

The inflation rate in the U.K. edged up to 0.6% in December 2020 from 0.3% in November and slightly above market forecasts of 0.5%, as some coronavirus restrictions were eased. Biggest upward contribution came from transport (1.9% vs 1%), namely air fares and second-hand cars; clothing and footwear (-1.8% vs -3.6%); recreation and culture (2.6% vs 1.9%); and alcohol and tobacco (3.6% vs 2%). In contrast, main downward pressure came from food and non-alcoholic beverages (-1.4% vs -0.6%); furniture (-0.7% vs -0.3%); communication (2.6% vs 3.5%); and restaurants and hotels (0.1% vs 0.4%). On a monthly basis, consumer prices were up 0.3%, above forecasts of 0.2%

Shares of Pearson rose nearly 6% after the British education publisher reported sales growth, in part due to the increase in online learning during the pandemic

On the virus front, Germany suffered record daily deaths and a study on the South African variant raised concern about the efficacy of vaccines

Policy decisions are due on Thursday from ECB

“Third-quarter results showed how quickly the economy rebounded after the lockdowns. That clearly won’t be the story of the 4th-quarter during which new social distancing measures triggered a loss of momentum”, said Emmanuel Cau, head of European equity strategy at Barclays in London. “Manufacturing should prove resilient in comparison with say, tourism or other discretionary sectors,” Cau added.

“We’re getting more headlines that the current lockdowns will be extended further, which could mean that the euro zone would be flirting with a double-dip recession before long,” said Valentin Marinov, head of G10 FX research at Credit Agricole, noting Europe’s lag in rolling out a coronavirus vaccine compared to the United States and Britain.

Oil & Natural Gas Markets

Crude-oil pared a rally in early Thursday trade as concerns over lackluster consumption clouded optimism

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 $53.00 per barrel

Brent Crude is trading lower at $55.76 per barrel

Natural Gas futures is trading higher at $2.538/MMBtu

On MCX-India, Crude oil futures rose to 3,910 on Wednesday trade

On MCX-India, Natural gas futures fell to 181/MMBtu on Wednesday 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 pared overnight gains in early Thursday trade, following comments from President-elect Joe Biden’s cabinet nominees on the dollar, the merits of massive stimulus, and the outlook for trade

U.S. Gold futures (Comex) is trading higher at $1,865 an ounce

Silver futures (Comex) is trading higher at $25.68 an ounce

Copper futures (Comex) is trading higher at $3.6345 per pound

SGX Iron-Ore futures is trading lower at $168.00 per tonne, pulling back from 4-weeks high

Iron ore prices for mid-grade fines dropped on Wednesday January 20 due to weak demand for steel despite the potential impact of tropical cyclone near West Australia on shipments, while high-grade fines gained on tight supply

In India, Spot Gold rose to INR 48,558 per 10 grams

“Gold has been facing headwinds from a strong U.S. dollar and higher real rates so far this year,” said Stephen Innes, chief market strategist at Axicorp. Ltd. “Still, maximum stimulus overdrive and a slightly weaker dollar paint an encouraging backdrop for gold prices provided real rates oblige.”

Currency Markets

The U.S. dollar index, DXY weakened to 90.348 in early Thursday trade

U.S. Treasury Secretary nominee Janet Yellen disavowed using exchange-rate policy to weaken the dollar, a difference from outgoing Treasury Secretary Steven Mnuchin, without expressing she backs a “strong” dollar

INR strengthened with USD / INR at 73.0263

JPY strengthened with USD / JPY at 103.5700

CNY strengthened with USD / CNY at 6.4663

EUR weakened with EUR / USD at 1.2099

The euro struggled to join a broader risk rally against the dollar on Wednesday as analysts said the risk of extended lockdowns in Europe to combat the spread of Covid-19 and the continent’s lag in a vaccine rollout were weighing on the currency

GBP strengthened with EUR / GBP at 0.8860

GBP strengthened with GBP / USD at 1.3655

“We remain bearish U.S. dollar, and expect the downtrend to resume as U.S. real yields top out,” said Ebrahim Rahbari, FX strategist at CitiFX. “Continued Fed dovishness remains important for our view, in addition to global recovery, so we’ll watch upcoming Fed-speak closely.”

*3-Month LIBOR Rate*	*As on 20 Jan 2021*
US DOLLAR	0.22 per cent
Euro	– 0.56 per cent
British Pound	0.03 per cent
Swiss Franc	– 0.76 per cent
Japanese Yen	– 0.07 per cent

Bitcoin

Bitcoin / U.S. Dollar slid -2.44% in early Thursday trade to $34,600 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 : 1.08%
Canada : 0.81%

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

Germany : -0.53%
United Kingdom : 0.29%
France : -0.31%
Italy : 0.60%
Netherlands : -0.47%

Asia Pacific : 10 – Year Govt Bond Yields

India : 5.91%
Japan : 0.02%
Australia : 1.08%
Hong Kong : 0.48%
Singapore : 1.01%
South Korea : 1.70%

Fund Flows on NSE, BSE and MSEI — 20 Jan 2021

FII/FPI Net Buy Rs 2,289.05 Crore in Capital Market

DII Net Sell Rs (864.62) Crore in Capital Market

Where We’ve Been Reading —