Finance - Stock Market Forecast

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

• Resistance for Nifty 50 is seen at 14,650. For Friday, Jan 22, Support area seen at 14,545

• 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 -0.39%, and the MSCI Emerging Market index is down -0.29%

• Trends on SGX Nifty looked primed for a muted start for Nifty 50 in India. The Nifty futures are trading 51 points, or -0.35% lower at 14,592 on the Singaporean Exchange at 07:45 a.m. I.S.T.

• U.S. equity futures pulled back in early morning trade with Nasdaq, S&P 500 and Dow Jones futures trading in red, alongside a mostly negative start to Asia-Pacific early Friday trade with stocks rising in South Korea but falling everywhere else; a negative MSCI Asia-Pacific ex-Japan index; U.S. Dollar Index extended its retreat to 90.10 with 10-Year Treasury Yield remaining high at 1.11 after a small decline in initial jobless claims and Gold futures held earlier gains to $1,864 on the day indicate a cautious outlook for Nifty 50 India

• Earnings at S&P 500 companies are expected to rise by 24% in 2021 after falling 15% in 2020, as per Refinitiv data as of Jan. 15

India Markets

NIFTY 50	OPEN	HIGH	LOW	CLOSE
Thursday	14,730	14,753	14,517	14,590

India’s equity benchmark S&P BSE Sensex reversed gains on Thursday trade, after climbing above 50,000 points on reports of a fire at Serum Institute of India, the producer of AstraZeneca Plc’s vaccine in the South Asian nation

The blue-chip NSE Nifty 50 index dropped 54 points, or -0.37%, to 14,590 and the benchmark S&P BSE Sensex fell 167 points, or -0.34%, to 49,624

Among individual stocks, HDFC Bank contributed most to the index’s decline, slipping 1.1%; ONGC was the biggest loser with a 4% drop

Broader markets mostly under-performed their headline peers — Midcap 100 index dropped -1.22% ; Smallcap 250 index dropped -0.43% and Nifty 500 dropped -0.52%

Strategy based indices also under-performed benchmark indices — Nifty Alpha 50 dropped -0.51% and Nifty Alpha Low Volatility 30 dropped -0.05%

Nifty P/E for Jan 21, 2020 decreased to 39.41 from 39.55, and Nifty P/B edged lower to 4.13 from 4.15, as recorded by NSE India

Bank Nifty opened positive and moved up towards 33,000 level in the first leg of the session, however the upward momentum collapsed post 1330 hours. The index dropped 356 points, or -1.10%, to 32,186

India VIX or Fear gauge gained 2.92% from 21.55 to 22.18 levels

Volatility needs to cool down below 20 level to commence a fresh leg of rally at record highs. However, volatility could be comparatively higher ahead of Budget 2021

Overnight Call Money rate weighted average stood at 3.19% as per RBI data. It moved in a range of 1.90 — 3.50% for Jan 20

Yield on the benchmark 10-year government bond increased to 5.93%, while the rupee appreciated 0.2% to 72.9975 per U.S. dollar

India’s federal budget presentation is due on February 1

RBI Governor Shaktikanta Das said on Saturday that emerging markets need to build reserves as buffers against external shocks even at the risk of being added to the U.S. watchlist for currency manipulation. India rejoined the list in December due to RBI’s sustained forex purchases and a large goods trade surplus with the U.S.

“The fire at the Serum Institute of India could be the trigger for the sudden plunge,” said Umesh Mehta, head of research at Samco Securities Ltd. “The market is waiting and watching for some negative triggers because of high valuations, and they just need a reason to sell.”

America Markets

Wall Street’s markets hovered near record highs on Thursday trade, as investors counted on more pandemic relief and speedy vaccine rollouts under the Biden administration to support the economy after data showed a weakening labor market recovery

The broad-based S&P 500 gained 1.22 points, or 0.03%, to 3,853; eking out another record high as tech shares advanced

The Dow Jones Industrial Average, composed mostly of cyclical stocks, fell 12 points, or -0.04%, to 31,176

The tech-heavy Nasdaq Composite Index added 73 points, or 0.55%, to 13,530

U.S. equity futures declined in early Friday trade. S&P500 futures is down -0.14%; Dow Jones futures is down -0.16% and Nasdaq futures is down -0.17%

10-year U.S. Treasury yields gained slightly to 1.11% on the day as dollar weakened further to 90.10

The Cboe Volatility Index, known as Wall Street’s “fear gauge,” fell -1.20% to 21.32 on Thursday

Federal Reserve policy makers hold their first meeting of 2021 next week

The MSCI World Index reached an intraday record on Thursday as investors look forward to increased economic support to battle the pandemic

Earnings at S&P 500 companies are expected to rise by 24% in 2021 after falling -15% in 2020, as per Refinitiv data as of Jan. 15

In a reversal of the trend earlier this month, the Russell 1000 growth index, which includes mega-cap technology stocks, is far outperforming the Russell 1000 value index this week

The number of Americans filing for unemployment benefits, a proxy for layoffs, declined to 900K in the week ended January 16th, from the previous week’s five-month high of 926K and below market expectations of 910K

Housing starts in the US surged 5.8% month-over-month to an annualized rate of 1,669K in December 2020, beating market forecasts of 1,560K. It is the highest reading since September 2006

“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.

“High valuations could find justification in the strong recovery that we expect, while inflation assets remain in the affordable zone,” according to Florian Ielpo, head of macroeconomic research and multi-asset portfolio manager at Unigestion SA. “We therefore see 2021 as a land of investment opportunities.”

Asia-Pacific Markets

Asian benchmark stocks looked set to pullback in early Friday trade from an all-time high, as investors assessed earnings expectations

Shares fell in Japan, Hong Kong, China and Australia but rose in South Korea

Japan’s Nikkei 225 dropped -0.40% to 28,642 and Topix 500 dropped -0.25% to 1,445

South Korea’s Kospi added 0.32% to 3,170

In Hong Kong, Hang Seng dropped -0.35% to 29,813 while Hang Seng China Enterprises dropped -0.39% to 11,839

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

In China, CSI 300 added 0.05% to 5,567 and Shanghai Composite dropped -0.30% to 3,610

Australia’s S&P/ASX 200 dropped -0.19% to 6,810

Overall, MSCI Asia-Pacific, is up 0.69%

The Bank of Japan left its main policy unchanged after forecasting the economy will regain more lost growth than previously thought once it starts to recover from the current state of emergency

Japan’s core consumer prices fell -1.0% in December from a year earlier, the fastest drop in a decade, in a sign that deflationary pressures are intensifying in the economy as the coronavirus pandemic drags on

Japan’s factory activity slipped into contraction in January and the services sector was more pessimistic, as state of emergency weighs in. The au Jibun Bank Flash Japan Manufacturing Purchasing Managers’ Index (PMI) fell to 49.7 from a final 50.0 in December, largely due weakening output and new export orders as well as employment conditions

Ant Group’s valuation seen dropping to $108 billion and may plunge further if its payment unit is forced to break up due to potential anti-trust probes by China’s central bank. The revised estimate for Ant is a far cry from valuations that ran as high as $320 billion before the company was forced to scrap its record IPO in November. China’s crackdown forced Ma’s firm to withdraw the $35 billion IPO just days before its planned listing in Hong Kong and Shanghai

EU Markets

European equities lost steam heading into the close on Thursday trade, weighed down by oil and real estate shares

Tech firms led gains as the stocks jumped 1.6% as their U.S. peers rallied, while British software maker Sage Group jumped 4.9% after posting higher quarterly recurring revenue

The pan-European Stoxx Europe 600 dropped -0.12% to 408 and Stoxx 50 also dropped -0.16% to close at 3,618

Germany’s DAX30 dropped -0.18% to 13,906

London’s blue-chip FTSE 100 dropped -0.37% to 6,715

France’s CAC40 dropped -0.67% to 5,590

Denmark’s OMX Copenhagen 20 added 0.19% to 1,485

Spain’s IBEX 35 dropped -1.00% to 8,122

Italy’s FTSE MIB dropped -0.98% to 22,428

The European Central Bank kept its monetary policy unchanged on Thursday, reiterating that interest rates would stay low till inflation approached its target. ECB President Christine Lagarde signaled that the euro-zone economy is headed for a double-dip recession, while insisting that the current level of monetary stimulus is enough for now

Economists are increasingly predicting a contraction in the first three months of this year as governments extend lockdowns to contain the resurgent coronavirus

Lagarde still reeled off a list of “positives” including progress on vaccinations, the approval of the European Union’s recovery fund, a pickup in manufacturing, and the removal of political uncertainty in the U.S.

The possibility that the ECB could buy up less than the total allocated to its stimulus pushed down European bonds on Thursday, with 10-year yields on Italian debt rising to the highest since November

“Risks surrounding the euro-area growth outlook remain tilted to the downside, but less pronounced,” ECB President Christine Lagarde said. “The roll-out of vaccines, which started in late December, allows for greater confidence in the resolution of the health crisis.”

“We believe fiscal support has to be continued,” Christine Lagarde said. “The slight qualification we would have is that we certainly recommend it is as targeted as possible and temporary, given that we all hope for recovery during the course of 2021, probably in the second half more than the first half.”

Oil & Natural Gas Markets

Crude-oil slid in early Friday trade, as worsening global coronavirus outbreaks point to the long road ahead for a consumption recovery

JPMorgan Chase & Co. cut demand estimates for China as lockdowns spread, while the U.K. suffered its worst day of the pandemic on Wednesday

WTI Crude is trading at $52.46 per barrel

Brent Crude is trading at $55.47 per barrel

Natural Gas futures is steady at $2.500/MMBtu

On MCX-India, Crude oil futures rose to 3,894 on Thursday trade

On MCX-India, Natural gas futures fell to 180/MMBtu on Thursday trade

“Oil prices are a touch weaker this morning as the market continues to consolidate after surging higher in the first two weeks of the year,” said Ryan Fitzmaurice, commodities strategist at Rabobank. “Investor interest in the broader commodity markets is helping put a floor under oil prices and dips have been shallow thus far.”

Commodities Markets

Gold held earlier gains in early Friday trade, as the dollar extended declines and Joe Biden was sworn in as U.S. president

U.S. Gold futures (Comex) is trading higher at $1,864 an ounce

Silver futures (Comex) is trading higher at $25.71 an ounce

Copper futures (Comex) is trading higher at $3.6350 per pound

SGX Iron-Ore futures is trading higher at $169.83 per tonne

In India, Spot Gold rose to INR 48,576 per 10 grams

“It’s all driven by the comments of Janet Yellen,” said Giovanni Staunovo, commodities analyst at UBS Group AG, referring to Biden’s pro-stimulus pick for Treasury secretary. That is “pushing up equities, weighing on the U.S. dollar, but also supporting inflation expectations, which is in my view the reason why gold trades again at $1,870 an ounce.”

Currency Markets

The U.S. dollar index, DXY extended decline to 90.109 in early Friday 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 72.9975

JPY weakened with USD / JPY at 103.5600

CNY strengthened with USD / CNY at 6.4620

EUR strengthened with EUR / USD at 1.2144

The euro is struggling to join a broader risk rally against the dollar as analysts fear 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 in on the currency

GBP strengthened with EUR / GBP at 0.8852

GBP strengthened with GBP / USD at 1.3719

“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 21 Jan 2021*
US DOLLAR	0.22 per cent
Euro	– 0.55 per cent
British Pound	0.03 per cent
Swiss Franc	– 0.77 per cent
Japanese Yen	– 0.07 per cent

Bitcoin

Bitcoin / U.S. Dollar tumbled -2.19% in early Friday trade to $30,165 as of 07:30 a.m. I.S.T.

Bitcoin tumbled as much as -11% in the New York Thursday morning, sliding below $31,000

Despite the selloff, Wall Street hasn’t lost interest in the new asset class. On Wednesday, BlackRock Inc. filed paperwork to add Bitcoin futures as an eligible investment in two funds, the first time the money manager is offering clients exposure to cryptocurrency

“Bitcoin has already achieved the fastest-ever price appreciation of any must-have asset,” wrote JPMorgan Chase & Co. strategists John Normand and Federico Manicardi in a report on Thursday. “Current prices are so far above production costs that mean-reversion lower in returns is a recurring concern.”

Bond Markets

Americas : 10 – Year Govt Bond Yields

United States : 1.11%
Canada : 0.86%

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

Germany : -0.50%
United Kingdom : 0.33%
France : -0.28%
Italy : 0.65%
Netherlands : -0.44%

Asia Pacific : 10 – Year Govt Bond Yields

India : 5.91%
Japan : 0.01%
Australia : 1.06%
Hong Kong : 0.48%
Singapore : 1.01%
South Korea : 1.70%

Fund Flows on NSE, BSE and MSEI — 21 Jan 2021

FII/FPI Net Buy Rs 1,614.66 Crore in Capital Market

DII Net Sell Rs (1,039.48) Crore in Capital Market

Where We’ve Been Reading —