Finance - Stock Market Forecast

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

• Resistance for Nifty 50 is seen at 14,195 — 14,275 — 14,300 zone. For Wednesday, Jan 06, Support area is seen at 13,950 — 13,960 and 13,775

• Support levels for Bank Nifty are at 31,500 31,375 and 30,850 with Resistance at 32,400

• The MSCI Asia Pacific ex-Japan is trading higher at 0.07%, and the MSCI Emerging Market index is up 0.33%

• Trends on SGX Nifty indicate a muted opening for Nifty 50 in India. The Nifty futures are trading 0.00% higher at 14,226 on the Singaporean Exchange at 07:30 a.m. I.S.T.

• Contracts tied to U.S. futures retreated in early trade, with Nasdaq, S&P 500 and Dow Jones futures trading in red, alongside a mixed start to Asia-Pacific early Wednesday morning trade with modest gains in Japan, while Chinese equities were at a 13-year high, a positive MSCI Asia-Pacific ex-Japan index, U.S. Dollar Index trading its lowest since Feb 2018 at 89.55 with 10-Year Treasury Yield climbing to 0.97 and Gold futures easing to $1,947 on the day indicate a negative-to-stable outlook for Nifty 50 India

• The momentum is positive as a lot of money is coming into the emerging markets like India

India Markets

NIFTY 50	OPEN	HIGH	LOW	CLOSE
Tuesday	14,075	14,215	14,048	14,199

Indian stocks notched a second record closing high on Tuesday trade, amid continued foreign fund inflows and hopes that the country’s emergency approvals of coronavirus vaccines would lead to a quick economic recovery

The blue-chip NSE Nifty 50 index added 66 points, or 0.47%, to 14,199 and the benchmark S&P BSE Sensex climbed 260 points, or 0.54%, to 48,437

Among individual stocks, HDFC Ltd hit a record high, closing 2.8% higher as individual loan business continued to improve during the Oct-Dec quarter, with disbursement growth of 26% from a year earlier. Gains in HDFC lifted the heavy-weight financials sector and boosted Nifty finance sub-index up 1.23%, while the Nifty Bank Index gained 1.65%.

IT surges again with InfoEdge as the biggest gainer, up 13.67%, while other constituents of the index rose up to 8%

Reliance Industries fell about 1.2% and was the top drag on the Nifty50

Broader markets out-performed their headline peers — Midcap 100 index added 1.41% ; Smallcap 250 index added 1.31% and Nifty 500 added 1.01%

Strategy based indices out-performed benchmark indices — Nifty Alpha 50 added 0.84% and Nifty Alpha Low Volatility 30 added 0.59%

Nifty P/E for Jan 05, 2020 appreciated to 39.05 from 38.87, while Nifty P/B edged higher to 4.02 from 4.01, as recorded by NSE India

Bank Nifty opened negative, but continued to rise through the day on the back of lenders’ performance on Dec quarter, after taking support at the 200-day EMA of of the 31,000 mark in the initial hours of trade. It formed a long bodied Bullish candle on the daily scale. The index added 509 points, or 1.63%, to 31,722

India VIX moved up 2.14% to 20.46 from 20.03 levels

Volatility needs to sustain below 20 level to support the bullish market setup and fuel the bulls with a higher market base

Overnight Call Money rate weighted average stood at 3.18% as per RBI data. It moved in a range of 1.90 — 3.75% for Jan 04

Yield on the benchmark 10-year government bond increased to 5.92%, while rupee appreciated to 73.1300 against the U.S. dollar

India is set to roll out a COVID-19 vaccination programme by next week, aiming to cover 300 million people by July — one of the world’s largest inoculation drives against the coronavirus

British PM Boris Johnson cancelled a planned trip to India later this month, as part of efforts to speed up talks on trade, with Britain in search of new bilateral deals after leaving the European Union, citing the need to oversee the pandemic response at home

Nykaa E-Retail Pvt is planning an initial public offering as soon as this year that could value the Indian online cosmetic retailer at a minimum $3 billion

Fiat Chrysler Automobiles (FCA) to invest $250 million to grow its presence in India with the launch of four new sport-utility vehicles (SUVs) under its Jeep brand over the next two years. FCA will produce and assemble the new SUVs at its car plant in western India, which it jointly owns with domestic automaker Tata Motors. FCA’s three-row SUV is expected to compete with Ford Motor’s Endeavour and Toyota Motor’s Fortuner SUVs

“Markets are showing tremendous resilience on every dip but still lack decisiveness. We feel the global Covid situation and progress of the vaccine drive would remain in focus, at least in the near future. On the domestic front, the start of the Q3 earnings season would hold importance as expectations are high this time,” said Ajit Mishra, VP Research, Religare Broking

“In spite of the market being heated up, foreign institutional investment flows continue, risk-on sentiment is prevailing and the money will keep pouring into markets like India,” said Aishvarya Dadheech, a fund manager at Ambit Asset Management in Mumbai. “It is a very liquid market.”

“Corporate earnings post the dip are likely to stage a handsome growth trajectory,” analysts at ICICI Securities Ltd. in Mumbai said in a note. “For the calendar year 2021, we expect mid-caps and small-caps to gain relatively more than the large-caps.”

America Markets

U.S. stocks climbed on Tuesday trade

The S&P 500 rose 26 points, or 0.7%, to 3,726

All major S&P sectors were higher, with energy stocks surging about 2% on the back of higher oil prices. The dividend-paying defensive sectors – consumer staples, utilities and real estate – were the laggards

The Dow Jones Industrial Average climbed 167 points, or 0.6%, to 30,391

The Nasdaq Composite Index jumped 120 points, or 1%, to 12,818

Contracts tied to U.S. futures retreated in early Tuesday trade. S&P500 futures is down -0.17%, Dow Jones futures is down -0.03%, and Nasdaq futures is down -0.46%

U.S. Treasury yields surged to 0.97% on the day as stock indexes tumbled. Yields rise when prices fall due to more supply

The Cboe Volatility Index flip-flopped after closing at its highest level in two months in the prior session, which saw Wall Street’s main indexes drop to two-week lows on concerns over a persistent surge in coronavirus cases

Among individual stocks, Chipmaker Micron Technology rose about 5% after Citigroup raised its rating on the stock to “buy” on expectations of a recovery in demand and pricing for DRAM chips

General Motors reported a 4.8% rise in U.S. auto sales for the fourth quarter, boosted by demand for new vehicles during the COVID-19 pandemic. The U.S. automaker said its sales rose to 771,323 units from 735,909 units Year-over-Year

The NYSE reversed its decision to delist China’s three largest telecommunications companies, after consulting with regulatory authorities about a recent U.S. investment ban

Minutes of the Federal Reserve’s Dec. 15-16 policy meeting are due on Wednesday and should offer more details on discussions about making the U.S. central bank’s forward policy guidance more explicit and the chance of a further increase in asset purchases this year

Friday brings the U.S. employment report for December

“We don’t view a Democrat Senate as a bearish game changer in the short term because there would still be a lot of positives in this market,” Tom Essaye, a former Merrill Lynch trader wrote in a note to clients. “But it would be a new and unaccounted for initial headwind on stocks, and with valuations so high, we could easily see a 5%-10% pullback (or more).”

“There is still really bad news on the virus, but the market is looking through that because of the vaccines,” said Fahad Kamal, chief investment officer at Kleinwort Hambros. “We are certainly positively tilted, given the expected economic recovery, historically low interest rates, a lot of fiscal spending and monetary policy to come: all of that positivity remains.”

Asia-Pacific Markets

Asian shares were off to a mixed start in early Wednesday trade, as investors anxiously awaited results of U.S. runoff elections that would determine the legislative balance of power in the world’s largest economy

Japan’s Nikkei 225 dropped -0.37% to 27,058 and Topix 500 added 0.21% to 1,395

South Korea’s Kospi dropped -0.25% to 2,983

In Hong Kong, Hang Seng dropped -0.11% to 27,623 while Hang Seng China Enterprises added 0.60% to 10,841

In China, CSI 300 added 0.93% to 5,418 and Shanghai Composite added 0.34% to 3,541

Australia’s S&P/ASX 200 dropped -0.96% to 6,617

Overall, MSCI Asia-Pacific, is up 0.99%

“2021 starts with a bang with pivotal political and economic news for markets to digest. The undisputed highlight will be the result of the Senate seat run-off elections in Georgia,” James Knightley, chief international economist at ING, said.

EU Markets

The Paternoster Square Column stands in an empty square outside the London Stock Exchange

European stocks traded in the red on Tuesday trade, as a surge in COVID-19 cases and hospitalizations prompted governments across Europe to announce tougher restrictive measures to curb the spread of the pandemic

The pan-European Stoxx Europe 600 dropped -0.42% to 398 and Stoxx 50 dropped -0.78% to close at 3,535

Stocks considered as safe-havens like utilities, healthcare and food & beverage fell the most among European sectors

Germany’s DAX30 dropped -0.67% to 13,636 at all-time highs

London’s blue-chip FTSE 100 added 0.32% to 6,592

Shares in Marks and Spencer, Morrisons and Tesco rose between 0.9% and 2.9% after market researcher Kantar said British grocery sales hit a record high in December

France’s CAC40 dropped -0.91% to 5,538

Denmark’s OMX Copenhagen 20 dropped 1.46% to 1,465

Spain’s IBEX 35 dropped -0.27% to 8,077

Italy’s FTSE MIB dropped -0.60% to 22,181

Denmark, the country with the longest history of negative central bank rates is offering homeowners 20-year loans at a fixed interest rate of zero. Customers at the Danish home-finance unit of Nordea Bank can, as of Tuesday, get the mortgages, which will carry a lower coupon than benchmark U.S. 10-year Treasuries. Danish homeowners have enjoyed continuous slides in borrowing costs

Britain’s Finance minister Rishi Sunak offered an extra 4.6 billion pound ($6.2 billion) support package for businesses on Tuesday to soften an expected recession caused by a surge in COVID-19 cases that has prompted a third national lockdown. Government forecasters in November predicted almost 400 billion pounds of borrowing this financial year, equivalent to 19% of GDP – a peacetime record but one that, at least for now, can be financed at record-low interest rates. The Bank of England is buying government debt and in November ramped up its asset purchase programme to almost 900 billion pounds with the intention of using it throughout 2021

JP Morgan economist Allan Monks said he was now expecting Britain’s economy to shrink by 2.5% in the first quarter of 2021 – compared with almost 20% in the April-June period of last year

On the virus front, German Chancellor Angela Merkel is expected to announce an extension to the current lockdown until January 31st, while Scotland and England were placed under a national lockdown similar to the one introduced in March that will see most non-essential businesses closing their doors until at least mid-February

“It doesn’t seem like restrictions have much of an impact as traders are fixated on the wider story that vaccines are being distributed and the world should be in a very different place in another two to four months,” said David Madden, analyst at CMC Markets

Oil & Natural Gas Markets

Crude-oil jumped in early Wednesday trade on news of planned output cuts with Saudi Arabian pledging to cut an extra 1 million barrels a day of crude output in February and March

The Saudi move reflects signs of weak demand as lockdowns return, Goldman Sachs said in a note. The output cuts and the prospect for a tight market next quarter will likely support prices in the coming weeks

WTI Crude is trading higher at $49.98 per barrel

Brent Crude is trading higher at $53.79 per barrel

Natural Gas futures increased to $2.699/MMBtu

On MCX-India, Crude oil futures roseto 3,664 on Tuesday trade

On MCX-India, Natural gas futures rose to 198/MMBtu on Tuesday trade

Commodities Markets

Gold steadied in early Tuesday trade, on the back of a battered three-year low U.S. dollar and surging covid-19 infections that are muddling the outlook for a swift global economic recovery

Looking ahead, there’s little consensus from Wall Street’s biggest names on bullion’s direction. Morgan Stanley sees gold and other precious metals coming under pressure as financial markets normalize and longer maturity bond yields rise. Meanwhile, HSBC sees gold climbing higher on continued uncertainty

U.S. Gold futures (Comex) is trading higher at $1,947 an ounce

Silver futures (Comex) is trading higher at $27.34 an ounce

Copper futures (Comex) is trading higher at $3.6545 per pound

In India, Spot Gold strengthened to INR 50,897 per 10 grams

“Gold’s main drivers – weaker U.S. dollar and low real interest rates – are likely to provide support even as vaccines are distributed around the world,” said Vasu Menon, executive director, investment strategy, at Singapore-based Oversea-Chinese Banking Corp. “With the lower-for-longer Fed, it is too early to throw in the towel on gold,” he said in an email

India — NCDEX Agridex

Agricultural futures index tracking the performance of the 10 liquid commodities was down -1.15%, trading at 1,185.50 ; with top gains for Cotton Seed Oilcake futures and losses for Chana futures on Tuesday trade

Currency Markets

The U.S. dollar index, DXY continues its retreat in early Wednesday trade at 89.55

INR weakened with USD / INR at 73.1800

JPY strengthened with USD / JPY at 102.6800

CNY strengthened with USD / CNY at 6.4562

EUR strengthened with EUR / USD at 1.2292

GBP strengthened with EUR / GBP at 0.9025

GBP strengthened with GBP / USD at 1.3620

*3-Month LIBOR Rate*	*As on 05 Jan 2021*
US DOLLAR	0.24 per cent
Euro	– 0.57 per cent
British Pound	0.03 per cent
Swiss Franc	– 0.76 per cent
Japanese Yen	– 0.08 per cent

Bitcoin

Bitcoin / U.S. Dollar rose 1.75% to $32,536

JP Morgan Chase & Co.’s strategists speculate that Bitcoin has the potential to reach $146,000 in the long term as it competes with gold as an asset class

Bitcoin’s market capitalization of around $575 billion would have to rise by 4.6 times — for a theoretical price of $146,000 — to match the total private sector investment in gold via exchange-traded funds or bars and coins

For now, JPMorgan sees headwinds for the largest cryptocurrency, with indicators like a buildup of speculative long positions and an increase in investment wallets holding small amounts of Bitcoin showing potential froth

“The valuation and position backdrop has become a lot more challenging for Bitcoin at the beginning of the New Year,” JPMorgan strategists wrote. “While we cannot exclude the possibility that the current speculative mania will propagate further pushing the Bitcoin price up toward the consensus region of between $50,000-$100,000, we believe that such price levels would prove unsustainable.”

Bitcoin “will be on the road to $50,000 probably in the first quarter of 2021,” said Antoni Trenchev, managing partner and co-founder of Nexo in London, which bills itself as the world’s biggest crypto lender

Bond Markets

Americas : 10 – Year Govt Bond Yields

United States : 0.95%
Canada : 0.71%

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

Germany : -0.58%
United Kingdom : 0.21%
France : -0.34%
Italy : 0.57%
Netherlands : -0.50%

Asia Pacific : 10 – Year Govt Bond Yields

India : 5.92%
Japan : 0.00%
Australia : 0.98%
Hong Kong : 0.39%
Singapore : 0.86%
South Korea : 1.72%

Fund Flows on NSE, BSE and MSEI — 05 Jan 2021

FII/FPI Net Buy Rs 986.30 Crore in Capital Market

DII Net Sell Rs (490.03) Crore in Capital Market

Where We’ve Been Reading —