Finance - Stock Market Forecast

Index Trend & Conditions – 08:00 a.m. I.S.T.

• Resistance area for Nifty 50 is at 13,290 — 13,330. For Monday, Dec 07, Support area is seen at 13,050 12,950 and 12,840

• Resistance area for Bank Nifty at 30,200, while Support area is at 29,750 29,400 and 28,900

• The MSCI Asia Pacific ex-Japan is down -0.31%, while the MSCI Emerging Market index is down -0.26%

• Trends on SGX Nifty indicate a muted start with mixed outlook for Nifty 50 in India with a 50 points loss. The Nifty futures were trading at 13,277 on the Singaporean Exchange at 08:00 a.m. I.S.T.

• Contracts tied to U.S. futures looked set for cut on the day with S&P500 and Dow Jones in red while Nasdaq futures traded in green. Most Asia-Pacific stocks trading in red in early Monday morning, a negative MSCI Asia-Pacific ex-Japan index, a weakening U.S. Dollar Index at 90.709 with 10-Year Treasury Yield edging higher at 0.915 and weakening Gold futures on the day indicate a positive-to-stable outlook for Nifty 50 India

• The current mood in the market is bracing and non-committal

India Markets

NIFTY 50	OPEN	HIGH	LOW	CLOSE
Friday	13,177	13,280	13,152	13,258

Domestic equity markets added more strength on Friday trade with a broad-based rally

Nifty 50 added 125 points or 0.95% to a fresh all-time high 13,133, while the BSE Sensex added 447 points or 1.00% to 45,079

Nifty has gained 11% in November, with an extended breadth, and has pushed itself more than two standard deviations above its 50-day moving average. The gauge’s 14-day RSI is also in overbought territory. 98% of stocks in Nifty 50 Index traded above their 200-day moving average, last week

The rally has been powered mainly by FII flows due to severe weakness in the dollar. Any pullback in the Dollar Index, DXY, has a potential to disrupt the rally

The short-term trend continues to be bullish, but the index is trading at the rising channel on the weekly chart

Broader markets under-performed their headline peers — Midcap 100 index added 0.35% ; Smallcap 250 index added 0.50% ; Nifty 500 added 0.78% ; Nifty Alpha 50 added 0.25% and Nifty Alpha Low Volatility 30 added 0.59%

On Sectoral Indices front, Private Bank and PSU Bank stocks were at the vanguard of the rally, while Media, Auto and IT stocks were the laggards on the day

Nifty P/E for Dec 04, 2020 advanced to 36.46 as recorded by NSE India

Bank Nifty opened positive and continued its northward journey after a small dip. The index formed a bullish candle on the daily and weekly scales. It added 604 points or 2.05% to 30,052. Levels of 29,750 29,400 and 28,900 to act as good support levels. Resistance area is at 30,200

India VIX fell 5.12% from 19.00 to 18.02 levels. Lower volatility suggests the bulls are holding a grip on the market and any decline may trigger buying in the market

Lower volatility has also added directional bias to the market

Overnight Call Money rate weighted average stood at 3.09% as per RBI data. It moved in a range of 1.90 — 3.40% for Dec 02

The yield on the benchmark 10-year Government Bond cut to 5.873%, while the rupee weakened to 73.80 against the U.S. dollar

Pfizer India has applied to India’s drug regulator for emergency-use authorization for its Covid-19 vaccine, after the company’s parent received clearance for the treatment from Britain and Bahrain

India reports October industrial production on Friday. Factory output turned positive for the first time in seven months in September amid the easing of lock-down measures.

The rupee is emerging Asia’s worst-performing currency this year

India’s central bank left interest rates unchanged for a third straight meeting amid stubbornly high inflation and signs of an economic revival

A gauge of India’s recovery created by Jefferies Financial Group Inc. climbed again in November, a move seen as “encouraging” given the decline in government expenditure

“There could be a short-term correction in the Nifty, but a milder one,” said Sameer Kalra, a strategist at Mumbai-based Target Investing. “Stocks which were outperforming have stabilized for a while now. I think for the next couple of weeks at least, until the month end, midcaps might outperform the Nifty by a huge margin. If the catchup rally is to be broad-based, midcaps are where the laggards are the highest in number,” he added.

America Markets

Wall Street stocks climbed to all-time highs on Friday trade, after after a report showing U.S. employment gains slowed in November, bolstering expectations for more federal stimulus

The Dow Jones added 248 points, or 0.83% to 30,218, the highest on record with the biggest advance in more than a week and the S&P 500 added 32 points, or 0.88% to 3,699 ; while the Nasdaq gained 87 points, or 0.88% to 12,464

Contracts tied to U.S. futures were little changed in early Monday trade. S&P500 futures is down -0.13%, Dow Jones futures is down -0.10% whereas Nasdaq futures is up 0.05%

Yield on the 10-year Treasury note reached the highest in nine months, since March

Energy shares overall soared nearly 27% in November, leading the charge among sectors expected to benefit from the broad economic revival promised by encouraging developments for several vaccines

The U.S. labor market rebound slowed markedly in November, indicating the surge in Covid-19 cases is hitting workers and curbing the broader economic recovery

Biden said on Friday that Congress must act immediately to provide more aid as millions have lost work or had hours slashed, noting the jobless rate decline was driven by more Americans leaving the labor force

Goldman Sachs Group Inc. has said the tactical upside in emerging markets may be more muted from here, even as it turns more positive on the 2021 outlook for high-yielding currencies such as the South African rand, Mexican peso and Indian rupee

“Low interest rates, increased conversation about stimulus and a ‘flight-to-quality’ unwind with progress on the Covid vaccine should keep the U.S. dollar dropping, which should be a boost to equities,” said Malcolm Dorson, a New York-based money manager at Mirae Asset Global Investments.

“The disappointing payroll gain — at least relative to consensus — is a negative signal for growth prospects, but could perversely have a positive economic effect in terms of focusing fiscal negotiations toward the urgent need for substantial additional stimulus,” Bloomberg economists said in a report.

Asia-Pacific Markets

Asian shares traded mixed with modest moves in early Monday trade, with stocks gaining in Australia while retreating in Japan, South Korea and China

Japan’s Nikkei 225 dropped -0.42% to 26,641, with Topix 500 dropping -0.19% to 1,376

South Korea’s Kospi dropped -0.31% to 2,723

In Hong Kong, Hang Seng dropped -1.58% to 26,416 while Hang Seng China Enterprises dropped -1.56% to 10,461

In China, CSI 300 dropped -0.52% to 5,039 and Shanghai Composite dropped -0.41% to 3,430

Australia’s S&P/ASX 200 added 0.49% to 6,666

Singapore’s Straits Times Index added 0.01% to 2,839

Overall, MSCI Asia-Pacific, is up 0.44%

Central banks in South Korea and Taiwan are taking steps to curb the appreciation of their currencies, after Thailand’s Baht rose about 10% from this year’s low reached in April. The Bank of Thailand prefers to monitor speculation, especially in short-term bonds, and deregulate offshore investments and foreign-exchange transactions, rather than resort to capital controls

Japan’s government sees an urgent need to support the economy to prevent a slide back into deflation amid the pandemic

Australian agriculture exports are expected to fall 7% in 2020-21, lowest levels in 5 years, just as output booms. China slapped anti-dumping duties of up to 212% on Australian wine on top of trade measures that impact other commodities including timber, barley and lobster

China is due to release trade data for November on Monday as well as its foreign reserves

Chinese consumer and producer inflation data are due on Wednesday. The CPI could drop below zero in the coming months amid a slump in pork prices, while factory prices are already in deflation

China may also release a slew of data on money supply, credit and foreign direct investment

The yuan is among emerging Asia’s best-performing currencies this year

Taiwan, an Asian export powerhouse, releases November trade data on Monday

The Philippines reports trade figures for October on Thursday. The peso, which is near a four-year high, is benefiting from a smaller trade deficit this year amid an import slump

Malaysia is also due to release October industrial production data on Friday. Output turned positive since July but remains sluggish. The ringgit has risen more than 2% this quarter

Foreign-reserves data from Indonesia, Malaysia, Philippines and Thailand are also due this week

“The strong recovery in Chinese exports experienced over recent months is at risk of tapering as resurgent Covid-19 infections force some of its main trading partners into lockdown again,” Prakash Sakpal, a senior economist for Asia at ING Group NV in Singapore, said.

EU Markets

Equities in Europe closed mostly in the green on Friday on Friday trade

The pan-European Stoxx Europe 600 added 0.51% to 393 and Stoxx 50 added 0.63% to close at 3,539

Germany’s DAX30 added 0.35% to 13,299

London’s FTSE 100 added 0.92% to close to 6,550

France’s CAC40 added 0.62% to 5,609

Denmark’s OMX Copenhagen 20 added 0.11% to 1,371

Italy’s FTSE MIB added 0.78% at 22,179

German factory orders (chart below) jumped 2.9% month-over-month for October 2020, following 1.1% increase in September and well above market expectations of 1.5%

The IHS Markit Germany Construction PMI edged up to 45.6 in November of 2020 from 45.2 in October, pointing to the 9th straight month of falling construction activity

U.K. Prime Minister Boris Johnson said the U.K. will examine its tax and regulatory environment as it tries to stimulate British business in the wake of the coronavirus pandemic. Meanwhile, the Treasury is getting almost 10 billion pounds ($13 billion) a year in interest on its own debt under the Bank of England’s bond-buying plan

Brexit negotiations resumed in Brussels — with the U.K. and European Union striving to finalize a deal before Monday evening. The EU wants to bind the British government to its rules on subsidies, labor rights and environmental standards so that U.K. firms don’t enjoy an unfair advantage over their continental rivals if they are granted tariff and quota-free access to the bloc’s single market

European Union heads of state will meet on Dec. 10 to discuss a multi-annual budget and emergency coronavirus stimulus measures that have been held back by a Hungarian and Polish veto over efforts to tie spending to upholding democratic standards

Poland is showing willingness to find a solution that would allow an agreement to be reached on the European Union’s €1.8 trillion stimulus package

Sweden booked a government surplus twice as big as expected in November, due to lower disbursements and higher tax income than expected. Central government payments resulted in a surplus of 40.4 billion kronor ($4.8 billion) last month, while the debt office had expected 20.5 billion kronor. Tax income were approximately 7 billion kronor higher than calculated. Disbursements from a number of agencies were lower than expected. The Debt Office’s net lending to government agencies etc. were 0.8 billion kronor lower than forecast. Interest payments on central government debt were were 1.3 billion kronor higher than calculated. For the twelve-month period up to the end of November 2020, central government payments resulted in a deficit of 193.1 billion kronor

Oil & Natural Gas Markets

Oil booked fifth weekly gain on Friday trade

Oil edged higher as OPEC+ reached an agreement to ease its oil-output cuts next year more gradually than previously planned

WTI Crude is trading higher at $46.11 per barrel

Brent Crude is trading higher at $49.04 per barrel

Natural Gas futures is up 0.23% at $2.570/MMBtu

On MCX-India, Crude oil futures is up 0.65% to 3,407 on Friday trade

On MCX-India, Natural gas futures is up 2.14% to 191/MMBtu on Friday trade

“A battle for market share lies ahead and OPEC+ does not plan to make life easy for U.S. shale,” Bank of America Global Research said in its Global Energy Weekly note. “Entering a post-hydrocarbon world with large swaths of spare oil production capacity could be fiscally devastating to oil producers and OPEC will try to avoid it.”

Gold & Silver Markets (+ Copper Futures)

Gold’s upside momentum lost some steam and the bullion is witnessing technical selling, in early Monday trade

If 10-Year U.S. Treasury Yield rises to 1% and above due to reflation trade, then inflation breakevens and Gold prices will keep strengthening above $1,800, but if the yield rises to 1.5% then Gold prices will weaken from $1,800, closer to $1,700

U.S. Gold futures (Comex) strengthened to $1,838.50 an ounce

Silver futures (Comex) strengthened to $24.25 an ounce

Copper futures (Comex) strengthened to $3.5245 per pound — highest since 2014

In India, Spot Gold weakened to INR 48,449 per 10 grams

India — NCDEX Agridex

Agricultural futures index tracking the performance of the 10 liquid commodities, was down -0.23% trading at 1,167.65 ; with top gains seen in Cotton Seed Oilcake, Ref Soya Oil and Mustard Seed futures on Friday trade

Currency Markets

The U.S. dollar index, DXY extended its slide, trading at 90.701 in early Monday trade, falling below 91 for the first time since April of 2018

INR strengthened with USD / INR at 73.7887

JPY weakened with USD / JPY at 104.1700

CNY strengthened with USD / CNY at 6.5316

EUR weakened with EUR / USD at 1.2121

GBP weakened with GBP / USD at 1.3440

Credit Suisse Group AG is forecasting that the euro may rise to 1.25 by the end of 2021, while Goldman Sachs Asset Management favors shorting the dollar against the yuan, and sees further gains in the euro and yen. Morgan Stanley and Citigroup Inc. have also forecast a weaker greenback

*3-Month LIBOR Rate*	*As on 04 Dec 2020*
US DOLLAR	0.23 per cent
Euro	– 0.55 per cent
British Pound	0.04 per cent
Swiss Franc	– 0.78 per cent
Japanese Yen	– 0.12 per cent