Finance - Stock Market Forecast

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

• Resistance for Nifty 50 is seen at 13,775 and 13,945. For Monday, Dec 28, Support area is seen at 13,450

• Support levels for Bank Nifty is at 30,200 and 28,900 with Resistance at 30,850 and 31,351

• The MSCI Asia Pacific ex-Japan is trading higher at 0.26%, and the MSCI Emerging Market index is up 0.13%

• Trends on SGX Nifty indicate a gap-up opening for Nifty 50 in India. The Nifty futures are trading 0.36% higher at 13,802 on the Singaporean Exchange at 07:30 a.m. I.S.T.

• Contracts tied to U.S. futures pushed higher in early trade, with Nasdaq, S&P 500 and Dow Jones futures trading in green, alongside a mostly positive start to Asia-Pacific early Monday morning trade, a positive MSCI Asia-Pacific ex-Japan index, U.S. Dollar Index ticked lower at 90.233 with 10-Year Treasury Yield edging higher at 0.950 and Gold futures strengthening at $1,895 on the day indicate a mixed 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
Thursday	13,672	13,771	13,626	13,749

Indian stocks rose on Thursday trade, clocking its longest stretch of weekly gains since January 2018, as investors favored prospects for economic growth against risks posed by a new virus strain

Nifty 50 added 148 points, or 1.09%, to 13,749 while the BSE Sensex advanced 529 points, or 1.14%, to 46,973

On the stocks front, twenty Sensex shares gained and ten slumped with Axis Bank Ltd. as best performer with 3% gain. Reliance Industries Ltd. contributed the most to the index advance, increasing 2.6%. Mrs Bectors Food Specialities Ltd. jumped 107% to more than double on listing day

The S&P BSE Metal Index has surged by around a third so far in the three months through December, jumping the most since the quarter ended June 2009. Metal companies are in an earnings upcycle after two years of downgrades, and steel demand and pricing has improved sharply. Aluminum maker Hindalco Industries Ltd. and iron ore miner NMDC Ltd. have risen more than 30% so far during the quarter

Shares of Birlasoft surged 22.48% to Rs 254.20 after Invesco MF, Aditya Birla MF, ICICI Pru MF together bought 60 lakh shares of the company in bulk deal. It was the biggest gainer in BSE500 index

Broader markets under-performed headline peers — Midcap 100 index added 0.18% ; Smallcap 250 index added 0.76% and Nifty 500 added 0.89%

Strategy based indices majorly under-performed benchmark indices — Nifty Alpha 50 added 0.55% and Nifty Alpha Low Volatility 30 added 0.18%

Nifty P/E for Dec 24, 2020 appreciated to 37.81 from 37.40, while Nifty P/B edged higher to 3.89 from 3.84, as recorded by NSE India

Bank Nifty opened with a gapup above 30,000 level and continued its northward journey towards 30,500 level. It formed a bullish candle on the daily scale and a long lower shadow on the weekly scale, which indicated that every decline got bought into. The index added 519 points, or 1.74%, to 30,402

India VIX declined -2.57% to 19.96 from 20.49 levels.

A cooldown in volatility from higher levels has provided support for a decent bounceback move, and now it has to hold below 19 to help the bulls continue their grip on the market

Overnight Call Money rate weighted average stood at 3.26% as per RBI data. It moved in a range of 1.90 — 3.50% for Dec 23

Yield on the benchmark 10-year government bond declined to 5.936%, while rupee strengthened to 73.5560 against the U.S. dollar

PM Modi released 180 billion rupees ($2.5 billion) as part of a program for smallholders. Under the initiative, the government has announced to deposit a total of 6,000 rupees in a year directly to the bank accounts of beneficiary farmers in three equal installments. The move comes at a time when the protesting farmers, mainly from the northern states of Haryana and Punjab, have been camping outside the capital since late last month. About 800 million of the more-than-1.3 billion population depend directly or indirectly on agriculture that accounts for 16% of the economy. Farmers are a powerful voting bloc in India, which is the world’s top grower of cotton, the second-biggest producer of wheat and sugar, and the largest palm oil buyer

The U.S. listed iShares MSCI India ETF saw inflows for eight straight days through Dec. 22, the longest streak since March 2017. Passive flows are helping push India’s equity valuations to historical highs

Foreign portfolio investors (FPI) have pumped in a net Rs 60,094 crore into Indian markets in December so far amidst optimism in the global markets, according to the depositories data. Overwhelming response is a combined result of tax reforms, containment of the virus, new measures announced (like PLI, NPA measures, guarantee to MSME) and strong pharma capabilities

Auto companies to come out with their monthly sales data this week, leaving to movement in individual stocks. After a full recovery in sales in the last couple of months, passenger vehicle makers hope to continue the momentum

RBI will release deposit and loan growth data for the fortnight ended December 18. The central bank will also release forex data for the week ended December 25 on January 1, which may have an impact on currency markets

“India-based steel capacity is capitalizing on a global shortage of steel and the inability of the other global manufacturers to supply,” said Saurabh Bhatnagar, partner and national leader for metals and mining at Ernst & Young India. “While there is a continuous increase of demand from China on account of the government aided growth and focus on sectors such as infrastructure and construction, the revival of demand from India is pushing steel prices up.”

“Local steel price increases are purely a reflection of import parity pricing,” according to Ritesh Shah, an analyst at Investec Capital Services India Pvt. Ltd. “We have been positive on the steel cycle, that is, steel pricing and profitability,” since March and continue to remain constructive on the profitability of steel mills into 2021, he said

America Markets

U.S. equities edged higher on holiday-shortened Thursday trade, as investors monitored the latest developments on the congressional aid package, while the pound strengthened after a post-Brexit trade accord agreement was reached

The Nasdaq Composite Index increased 33 points, or 0.2%, to 12,771

The S&P 500 ticked up 13 points, or 0.4%, to 3,703

Technology and real estate shares led the S&P 500 led higher, with energy the only one of the benchmark index’s 11 sector groups to finish in the red

The Dow Jones Industrial Average rose 70 points, or 0.2%, to 30,129

Contracts tied to U.S. futures edged up in early Monday trade. S&P500 futures is up 0.39%, Dow Jones futures is up 0.29%, and Nasdaq futures is up 0.38%

The yield on 10-year U.S. Treasury note increased to 0.950% in early morning trade

U.S. holiday season sales beat low expectations to grow 3% versus a forecast of 2.4%. Home-related categories, which have been outperforming throughout the pandemic as consumers splurge on their residences, saw the strongest growth. Furniture and furnishings rose 16% and home improvement products gained 14% compared with a year ago. The weakest sectors were apparel and luxury, falling 19% and 21%, respectively

U.S. pending home sales and goods trade balance data are due Wednesday

“Going forward with online sales, retailers should watch for gift card sales, a bright spot this year, which will only be recorded when they’re redeemed. For shoppers, expect fewer year-end promotions because retailers have accumulated low inventory this year. That’ll benefit their profit margins,” Steve Sadove, senior adviser for Mastercard and former chief executive officer of Saks Inc., said

Asia-Pacific Markets

Disinfecting at the Shanghai Stock Exchange

Asian stock markets mostly traded positive in early Monday trade, amid reports that President Donald Trump has approved a coronavirus stimulus package

Shares fluctuated in Tokyo and Seoul, and slipped in Hong Kong

Japan’s Nikkei 225 added 0.36% to 26,751 and Topix 500 added 0.19% to 1,383

South Korea’s Kospi added 0.61% to 2,824

In Hong Kong, Hang Seng added 0.39% to 26,485 while Hang Seng China Enterprises dropped -0.47% to 10,376

In China, CSI 300 added 0.05% to 5,044 and Shanghai Composite dropped -0.24% to 3,387

Australia’s S&P/ASX 200 added 0.33% to 6,664

Overall, MSCI Asia-Pacific, was up 0.12%

Chinese regulators ordered Jack Ma’s online financial titan Ant Group Co. to return to its roots as a provider of payments services, threatening to throttle growth in its most lucrative businesses of consumer loans and wealth management. Authorities also berated Ant for sub-par corporate governance, disdain toward regulatory requirements, and engaging in regulatory arbitrage. The central bank said Ant used its dominance to exclude rivals, hurting the interests of its hundreds of millions of consumers

Valued at about $315 billion before its IPO was halted, Ant corralled investments from the world’s biggest funds. Among them: Warburg Pincus, Carlyle Group, Silver Lake Management, Temasek Holdings and GIC

The two biggest mobile payments operators, Ant and Tencent, have heavily subsidized the businesses, using them as a gateway to win over users. To make money, they leveraged the payments services to cross sell products including wealth management and credit lending. The online payments business have largely been loss-making

The government could ask Ant to spin off its more lucrative operations in wealth management, credit lending and insurance, offloading them into a financial holding company that will face tougher scrutiny

Ant’s growth potential will be capped with the focus back onto its payments services. On the mainland, the online payments industry is saturated and Ant’s market share pretty much reached its limit

Vietnam‘s GDP advanced by 4.48% year-on-year in the Q4 of 2020, accelerating from a marginally revised 2.69% growth in the previous period, as exports and manufacturing extended their recovery from the pandemic slump. exports and manufacturing extended their recovery from the pandemic slump. Consumer prices rose 0.19% in December from a year earlier. The government aims to cap average inflation at 4% this year and next. Pledged foreign direct investment for 2020 through Dec. 20 was down -25% year-on-year to $28.5 billion, while disbursed FDI dropped -2% to about $20 billion

Retail sales in Japan rose by 0.7% year-on-year in November 2020, slowing from a 6.4% gain a month earlier and missing market estimates of a 1.7% increase, as consumption eased following a resurgence in local covid infections

Profits at Chinese industrial enterprises grew at a slower pace in November as producer prices continued to ease. Industrial profits rose 15.5% last month, after gaining 28.2% in October.

“It is worth noting that business accounts receivable and inventories of finished goods are still increasing,” Zhu Hong, a government economist, said in the statement. “Going forward, we still need to focus on supply-side structural reform and demand-side management.”

“I don’t think regulators are thinking of breaking up Ant, as no fintech company in China has a monopoly status,” said Zhang Kai, an analyst at market research firm Analysys Ltd. “The act is not just targeting Ant but also sending out a warning to other Chinese fintech companies.”

EU Markets

Freight lorries and heavy-goods vehicles parked at Manston Airport near Ramsgate England

European stocks rose on Thursday trade

The pan-European Stoxx Europe 600 added 1.03% to 394 and Stoxx 50 added 0.11% to close at 3,543

Germany’s DAX30 was closed for a holiday

London’s FTSE 100 added 0.10% to close to 6,502

On Christmas Eve, U.K. clinched a historic trade deal with the EU as negotiators finalized the accord, which will complete Britain’s separation from the bloc

France’s CAC40 dropped -0.10% to 5,522

Denmark’s OMX Copenhagen 20 was closed for a holiday

Italy’s FTSE MIB was closed for a holiday

News that the U.K. and European Union have signed a trade deal, wasn’t a big deal in the grand scheme of things as the divorce will still create significant disruption for a range of industries and face new costs and bureaucracy. Investors say the limited scope of the agreement with the financial industry and the services sector not part of the deal caps benefits for U.K. assets. U.K. suffers disproportionately under Covid restrictions due to the importance and significance of the service sector as the sector makes up 80% of its economy. Growth is still forecasted to be 0.5 percentage points lower every year for the next decade than what it would’ve been had Britain stayed in the bloc, as per Bloomberg analysts

Goldman Sachs Group said that most U.K. sectors trade at a “substantial discount” to both European and U.S. peers. The firm is overweight the FTSE 100 relative to the Stoxx Europe 600 Index, citing compelling valuations and a tilt toward value shares and sees the megacap gauge as far less sensitive to Brexit outcomes than FTSE 250 or domestic stocks. Within the U.K., stocks that have borne the brunt of dragging negotiations are also likely to benefit the most from the resolution, including banks and homebuilders. Financial and energy shares, which have a heavy weighting in the megacap gauge, may also get a further boost from the value trade

“The last-minute deal between the EU and the U.K. is a good case to be made for the U.K. market in the context of value hunting,” said Oddo BHF strategist Sylvain Goyon. “The ‘end’ of the Brexit saga could be an interesting trigger to rediscover the FTSE 100.”

“One of the big, unanswered questions remains whether those international investors who aggressively sold their U.K. equity exposure following the 2016 referendum will be tempted back to the market, given still-attractive valuations relative to developed-market peers,” said Richard Buxton, head of strategy, U.K. Alpha at Jupiter Asset Management. “The process may be slow with many likely to wait and see how the U.K. fares outside of the EU.”

Oil & Natural Gas Markets

Crude-oil pared losses in early Monday trade

WTI Crude is trading higher at $48.19 per barrel

Brent Crude is trading higher at $51.22 per barrel

Natural Gas futures plunged to $2.514/MMBtu

On MCX-India, Crude oil futures weakened to 3,554 on Thursday trade

On MCX-India, Natural gas futures weakened to 187/MMBtu on Thursday trade

Commodities Markets

Gold advanced in early Monday trade

U.S. Gold futures (Comex) strengthened to $1,895.47 an ounce

Silver futures (Comex) strengthened to $26.62 an ounce

Copper futures (Comex) strengthened to $3.6015 per pound

In India, Spot Gold strengthened to INR 49,788 per 10 grams

India — NCDEX Agridex

Agricultural futures index tracking the performance of the 10 liquid commodities was down, trading at 1,150.05 ; with major drag in Chana futures and top gains in Castor Seed and Soy Bean futures on Thursday trade

Currency Markets

The U.S. dollar index, DXY stayed lower in early Monday trade at 90.233

INR strengthened with USD / INR at 73.5560

JPY strengthened with USD / JPY at 103.4300

CNY weakened with USD / CNY at 6.5418

EUR strengthened with EUR / USD at 1.2193

GBP strengthened with EUR / GBP at 0.8998

The pound strengthened for a second day, after the U.K. clinched a historic trade deal with the European Union, averting the threat of an acrimonious breakup

GBP strengthened with GBP / USD at 1.3560

“An accord is temporarily bullish for sterling, but we think that most of the good news is in the price and suggest taking profit around $1.36,” Sheena Shah, currency strategist at Morgan Stanley, said before the announcement. “The many uncertainties for the pound – local and global – lead us to expect it to be an underperformer for most of 2021.”

In cryptocurrencies, Bitcoin kept rallying over the festive break, surging past $28,000 for the first time before retreating

*3-Month LIBOR Rate*	*As on 25 Dec 2020*
US DOLLAR	0.25 per cent
Euro	– 0.57 per cent
British Pound	0.02 per cent
Swiss Franc	– 0.79 per cent
Japanese Yen	– 0.09 per cent