Finance - Stock Market Forecast

Index Trend & Conditions – 07:10 a.m. I.S.T.

• Major Resistance for Nifty 50 is seen at 13,550. For Tuesday, Dec 22, Support area is seen at 13,131 13,050 and 12,950

• Support levels for Bank Nifty is at 28,900 and 28,200 ; while a Major Resistance is seen at 30,200

• The MSCI Asia Pacific ex-Japan dropped -0.29%, and the MSCI Emerging Market index dropped -0.13%

• Trends on SGX Nifty indicate a gap-up opening with positive outlook for Nifty 50 in India. The Nifty futures are trading 1.25% higher at 13,423 on the Singaporean Exchange at 07:10 a.m. I.S.T.

• Contracts tied to U.S. futures were slightly higher on the day, with Nasdaq and S&P 500 futures trading in green, alongside a mixed Asia-Pacific early Tuesday morning trade, a negative MSCI Asia-Pacific ex-Japan index, U.S. Dollar Index gaining at 90.171 with 10-Year Treasury Yield edging lower at 0.933 and Gold futures appreciating at $1,879 on the day indicate a negative-to-stable 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
Monday	13,742	13,777	13,131	13,328

Most Indian stocks fell on Monday trade, as investors assessed heady valuations and new virus cases ahead of the winter holidays, dealing a blow to prospects for the global economic recovery

Nifty 50 dropped 432 points or -3.14% to 13,328, while the BSE Sensex plunged 1,406 points or -3.00% to 45,554

Oil & Natural Gas Corp. posted the steepest fall, declining -9.2%, while Reliance Industries Ltd. was the biggest drag on the index, sliding -2.6%

“The apprehension is coming from the prolonged lockdown in the U.K and the concerns related to the new variant of the virus,” said Sanjay Sinha, strategist at Citrus Advisors. “Foreign institutional investor flows will likely not sustain going into the holiday season.”

All 19 sector sub-indexes compiled by BSE Ltd. declined, with a gauge of metal stocks falling the most

Broader markets under-performed their headline peers — Midcap 100 index dropped -4.81% ; Smallcap 250 index dropped -4.91% and Nifty 500 dropped -3.44%

Strategy based indices majorly out-performed their benchmark indices — Nifty Alpha 50 dropped -3.60% and Nifty Alpha Low Volatility 30 dropped -3.23%

Nifty P/E for Dec 21, 2020 declined to 36.65 from 37.84, while Nifty P/B slid to 3.77 from 3.89, as recorded by NSE India

Bank Nifty opened negative and witnessed sustain selling pressure throughout the day. It formed a Bearish Belt Hold candle on the daily scale. The index dropped 1,250 points or -4.10% to 29,456

India VIX appreciated 24.53% from 18.62 to 23.19 levels. The spike in volatility from lower levels and a cross above the 23 mark indicates short-term pressure on the market as long as it doesn’t cool down below the 19 mark

Overnight Call Money rate weighted average stood at 2.90% as per RBI data. It moved in a range of 2.50 — 3.90% for Dec 19. With excess cash in the banking system, estimated at ₹7 lakh crore or $95 billion, key overnight rates have plunged below the reverse repurchase rate that marks the lower bound of the central bank’s policy corridor. Lower shorter rates without a similar drop in long-term borrowing costs means a steeper yield curve, which can downsize growth and also cause a mismatch between assets and liabilities in the financial sector

Yield on the benchmark 10-year government bond appreciated to 5.960%, while rupee weakened at 74.0130 against the U.S. dollar

Virus infections have crossed the 10 million mark as India awaits several emergency vaccine approvals. Meanwhile, monetary policy members unanimously voted to keep interest rates lower to battle a recession, overlooking high inflation

Honda Motor Co. continues to shut shop after ending production of four-wheel cars in the Philippines and Argentina. Honda is scaling back operations in India by closing its factory in Noida amid production cuts of its four-wheels by 40% as the virus pandemic continues to hurt sales

Amazon.com Inc and Reliance continue its spat over Future Group in a hope to dominate India’s estimated $1 trillion retail market

Japan’s second-biggest bank, Sumitomo Mitsui Financial Group Inc., is seeking to buy an Asian lender in Vietnam, the Philippines and India and team up with a global investment bank to underwrite equity and bond sales in the U.S. and elsewhere, signaling its expansion plans remain undeterred by the pandemic

“It may not immediately lead to a profit increase, but we’re going to buy what will provide a business platform in emerging countries from a long-term perspective,” Sumitomo Mitsui’s CEO Jun Ohta said, explaining the rationale behind buying commercial banks in Asia.

America Markets

U.S. equities joined a global decline on Monday trade, as a new variant of the coronavirus in the U.K. and a wave of lockdowns and travel restrictions damped investor spirits ahead of the Christmas holiday

The Nasdaq Composite Index slipped 13 points, or -0.1%, to 12,742

The S&P 500 fell 14 points, or -0.4%, to 3,694

The Dow Jones Industrial Average ticked up 37.40 points, or 0.1%, to 30,216, having bounced back from a midmorning loss of more than 420 points

Some investors took advantage of Monday’s declines to buy stocks, helping lift the market off its session lows

“To me, it’s a buying opportunity,” said Philip Blancato, president of Ladenburg Thalmann Asset Management. “You could have as many as 20 million Americans inoculated by the first week of January. As those numbers increase, it’s going to have a profound effect.”

Nine of the S&P 500’s 11 sectors closed the day in negative territory on Monday. The only sectors to post gain were technology and financials, which got a boost after the Federal Reserve said late Friday afternoon that it would allow banks to resume share buybacks

Contracts tied to U.S. futures were little changed in early Tuesday trade. S&P500 futures is up 0.03%, Dow Jones futures is down -0.06%, and Nasdaq futures is up 0.34%

The yield on 10-year U.S. Treasury note slid to 0.933% on the day

Congressional leaders in Washington finally reached a deal on a broader $900 billion stimulus deal to bolster the U.S. economy, marking one of the largest economic rescue measure in the nation’s history

The stimulus check would provide direct payments of $600 to most Americans and $300-per-week in enhanced unemployment benefits through March. Furthermore, $284 billion would be available for the Paycheck Protection Program that forgives loans to small businesses

House Speaker Nancy Pelosi and the Trump administration were close to a $2 trillion deal before the Nov. 3 election and the final agreement is less than half that

“Fiscal stimulus is clearly fading as a catalyst, with Covid trends dictating the direction of markets,” said Emily Roland, the co-chief investment strategist at John Hancock Investment Management. “Risk assets had been shrugging off worsening virus trends, but are now showing some signs of vulnerability – even with the backstop of additional stimulus.”

Asia-Pacific Markets

Asian stock markets mostly mixed in early Tuesday trade, as a new variant of the coronavirus in the U.K. and a wave of lockdowns and travel restrictions hurt sentiment

Japan’s Nikkei 225 dropped -0.42% to 26,600 and Topix 500 dropped -1.03% to 1,375

South Korea’s Kospi dropped -0.49% to 2,765

In Hong Kong, Hang Seng dropped -0.17% to 26,271 while Hang Seng China Enterprises added 0.38% to 10,439

In China, CSI 300 dropped -0.26% to 5,034 and Shanghai Composite dropped -0.30% to 3,410

Australia’s S&P/ASX 200 dropped -0.78% to 6,618

Overall, MSCI Asia-Pacific, is down -0.43%

People’s Bank of China (PBoC) kept its benchmark loan prime rates — a benchmark for banks’ corporate lending rates — steady for the eighth-straight month at its December fixing, in line with market consensus

The decision came after China’s Central Bank made its largest-ever injection of medium-term loans last week to shore up liquidity. The one-year loan prime rate (LPR) was left unchanged at 3.85%, while the five-year remained at 4.65%

Japan’s cabinet approved a record defense budget plan of about $51.6 billion for the coming year, amid threats from China and North Korea

EU Markets

European equities slumped on Monday trade, as Netherlands, Belgium, Italy, Germany, Switzerland, Austria, Ireland, Bulgaria, Portugal, Canada, France, Sweden, Hong Kong, Israel and Iran suspended travel links to the U.K.

The pan-European Stoxx Europe 600 declined -2.36% to 384 and Stoxx 50 dropped -2.68% to close at 3,450

Travel and leisure companies and other businesses most susceptible to extended lockdowns were among the worst performers on Monday

Germany’s DAX30 dropped -2.79% to 13,250

London’s FTSE 100 dropped -1.70% to close to 6,416

France’s CAC40 dropped -2.43% to 5,393

Denmark’s OMX Copenhagen 20 dropped -0.88% to 1,441

Italy’s FTSE MIB dropped -2.52% at 21,422

Pfizer Inc. and BioNTech SE’s Covid-19 vaccine won the backing of a key European review panel

The new faster-spreading mutation of the virus has also been detected in Australia, Denmark and Gibraltar as per Prime Minister Boris Johnson’s spokesman, Jamie Davies

Britain’s biggest port in Dover stopped all traffic heading to Europe and food supplies into the nation is facing major disruption

London-listed shares of Royal Dutch Shell fell -5% after the oil major said it would write down the value of its assets by up to $4.5 billion

“As long as the vaccines are rolled out on schedule then by the second quarter of next year we should see activity moving back to normality,” said Nicholas Brooks, head of economic and investment research at Intermediate Capital Group

“Cases have absolutely rocketed, so we’ve got a long way to go,” U.K.’s Health Secretary Matt Hancock told Sky News. “I think it will be very difficult to keep it under control until the vaccine has rolled out.” People in the new Tier 4 areas “should behave as though they have it,” he said.

Oil & Natural Gas Markets

Crude oil fell in early Tuesday trade, amid expectations that fresh restrictions on European travel and transport will pinch fuel demand heading into 2021

“Oil is being driven by negative sentiment and fundamentals,” said Harry Tchilinguirian, head of commodity markets strategy at BNP Paribas SA. “New severe restrictions could impact mobility of people and goods between the U.K. and Europe.”

WTI Crude is trading lower at $47.78 per barrel

EIA crude oil inventory report is due Wednesday

Brent Crude is trading lower at $50.77 per barrel

Natural Gas futures is steady at $2.697/MMBtu

On MCX-India, Crude oil futures declined to 3,529 on Monday trade

On MCX-India, Natural gas futures climbed to 199/MMBtu on Monday trade

“Dollar-denominated commodities across the board are getting pumped up,” said John Kilduff, a partner at Again Capital LLC. “It bodes well for demand, because it’s becoming so much cheaper for countries like India that have to do the currency translation. This is effectively a big price cut for foreign buyers of crude oil.”

Commodities Markets

Gold gained in early Monday trade, amid escalating virus cases

U.S. Gold futures (Comex) strengthened to $1,879.33 an ounce

Silver futures (Comex) strengthened to $26.23 an ounce

Copper futures (Comex) slid to $3.5750 per pound, after making a seven year high last week

“Copper’s fierce ascent is really boosted by hopes on the U.S. stimulus talks,” TD Securities analyst Ryan McKay said. “The China recovery scenario, a weaker dollar and green-inspired reflation wave have also lifted copper, especially with the Chinese stockpiling impulse having been bigger than initially thought and more strategic in nature.”

In India, Spot Gold strengthened to INR 49,642 per 10 grams

India — NCDEX Agridex

Agricultural futures index tracking the performance of the 10 liquid commodities, was down -1.80% trading at 1,132.35 ; with top losses in Guar Gum and Cotton Seed Oilcake futures on Monday trade

Currency Markets

The U.S. dollar index, DXY strengthened in early Tuesday trade to 90.171 as investors turned to safe-heaven assets amid a resurgence of the new more infectious virus strain in the U.K.

INR declined with USD / INR at 74.0130

JPY declined with USD / JPY at 103.3400

CNY declined with USD / CNY at 6.5498

EUR declined with EUR / USD at 1.2232

The euro rose above $1.22 for the first time since 2018 in the wake of the better-than-expected numbers

EUR appreciated with EUR / GBP at 0.9114

The pound slid as Britain and the E.U. blew through another deadline on Brexit negotiations with the U.K.’s coronavirus situation worsening

*3-Month LIBOR Rate*	*As on 21 Dec 2020*
US DOLLAR	0.24 per cent
Euro	– 0.57 per cent
British Pound	0.04 per cent
Swiss Franc	– 0.79 per cent
Japanese Yen	– 0.10 per cent