Index Trend & Conditions – 07:00 a.m. I.S.T.
• Resistance zone for Nifty 50 is at 14,540 14,507 and 14,450 for the week
• Support levels for Bank Nifty is around 32,322 for the week; while Resistance zone is at 33,568 33,872 and 34,150
• The MSCI Asia Pacific ex-Japan is trading lower -0.07%, and the MSCI Emerging Market index is down -0.06%
• Trends on SGX Nifty look poised for a gap-up opening for Nifty 50 in India. The Nifty futures are trading 95 points, or 0.65% higher at 14,722 on the Singaporean Exchange at 07:00 a.m. I.S.T.
• U.S. equity futures dipped in early morning trade with S&P 500, Dow Jones and Nasdaq futures trading in red territory; alongside a mixed start in Asia-Pacific benchmarks gauges in early Monday trade with equities edging higher in Japan and falling in Hong Kong, South Korea and Australia; a negative MSCI Asia-Pacific ex-Japan index; U.S. Dollar strengthening to four-month high of 92.83 with 10-Yr Treasury Yields easing to 1.65% from 1.68% and Gold futures witnessing upside pressure at $1,727 an ounce indicate a mixed and volatile outlook in Asian equity markets
• Goldman Sachs recommends snapping up equities from South Africa and Russia, which tend to outperform their emerging-market peers when both U.S. real yields and commodity prices rise
India Markets
| NIFTY 50 | OPEN | HIGH | LOW | CLOSE |
|---|---|---|---|---|
| Friday | 14,506 | 14,572 | 14,414 | 14,507 |
India’s equity benchmarks saw some technical rebound on Friday trade, as the market witnessed a wide-ranged consolidation and ended the week on a modestly negative note
The blue-chip NSE Nifty 50 index added 182 points or 1.27% to 14,507 and the benchmark S&P BSE Sensex added 568 points or 1.17% to close at 49,008
Nifty formed a Bullish Harami Cross on the daily chart, suggesting a pause in the corrective move. However, on the weekly chart, the index formed a bearish candle and continued to form lower highs and lows
Broader markets under-performed headline peers — Midcap 100 index added 1.55%; Smallcap 250 index added 1.17% and Nifty 500 added 1.30%
Nifty P/E for Mar. 26 increased to 39.51 from 39.02 with Nifty P/B rose to 4.11 from 4.06, as recorded by NSE India
Bank Nifty opened with a gap up, but continued to move sideways throughout the day. It breached Thursday’s high but could not hold above the 33,500 level and drifted towards the 33,200 mark. The index added 311 points, or 0.94%, to settle at 33,318
India VIX or the barometer of nervousness in the market, moved down 9.02% from 22.69 to 20.65 levels
Overnight Call Money rate weighted average stood at 3.24% as per RBI data. It moved in a range of 1.90 — 3.50% for Mar 25
Under Liquidity Operations by RBI, Reverse Repo for the week (Mar 15 to Mar 21) stood below 5 lakh crores, marking lower surplus liquidity in the market
Yield curve on the benchmark 10-Yr government bond declined to 6.12%, while the rupee strengthened marginally to 72.6480 per U.S. dollar
India’s foreign exchange reserves rose $233 million to $582.271 billion in the week to March 19, the Reserve Bank of India (RBI) said on Friday. The overall reserves had risen $1.74 billion to $582.04 billion in the previous reporting week. The increase in the overall reserves during the reporting week was largely on account of a swelling of the foreign currency assets, which rose $157 million to $541.18 billion. Foreign currency assets include the effect of appreciation or depreciation of non-US units like the euro, pound and yen held in the foreign exchange reserves. Value of the gold reserves increased for the second consecutive week, and was up $80 million to $34.63 billion. The special drawing rights (SDRs) with the International Monetary Fund (IMF) fell by $2 million to $1.5 billion. Reserve position with the IMF also declined by $1 million to $4.96 billion
America Markets
U.S. stocks rose on Friday trade, as stocks related to an economic reopening performed better again, with technology, healthcare and financial stocks providing the biggest lift
The broad-based S&P 500 gained 65 points, or 1.66%, to 3,974
The Dow Jones Industrial Average, composed mostly of cyclical stocks, rose 453 points, or 1.39%, to 33,072
The tech-heavy Nasdaq Composite Index added 161 points, or 1.24%, to 13,138
For the week, the S&P rose about 1.6% and the Dow 1.4%, while the Nasdaq slipped -0.6%
U.S. equity futures dipped in early Monday trade. S&P500 futures is down -0.52%; Dow Jones futures is down -0.34% and Nasdaq futures is down -0.63%
10-Yr U.S. Treasury yields, which move inversely to the price, declined to 1.65% in early Monday, with dollar strengthening to 92.83, taking support from 200-day EMA
The Cboe Volatility Index, known as Wall Street’s “fear gauge,” fell -6.56% to 19.81 on Friday
Former Treasury Secretary Lawrence Summers reiterated his warning that the U.S. risks rising inflation amid massive government stimulus, easy monetary policy and an expected surge in consumer spending as the Covid-19 pandemic recedes. The debate over the path of inflation has been intensifying among economists, lawmakers and Wall Street
Inflation metrics in coming months will be temporarily impacted by so-called “base effects.” Due to the very weak inflation prints seen at the start of the public-health crisis, year-over-year increases in the price metrics will appear large
L Brands jumped 3.7% after the Victoria’s Secret owner raised its current-quarter profit forecast for the second time this month as it benefits from consumers spending their stimulus checks and relaxation of COVID-19 restrictions
The Federal Reserve last week raised its GDP estimate for 2021 to 6.5% from 4.2% and many economists expect still faster growth, which has spurred fears the economy could run too hot and force the Fed to raise interest rates
The gains in utilities have come amid a rotation from technology and other growth stocks into so-called value stocks. An end-of-quarter re-balancing of investment portfolios by institutional investors may be adding to the recent rotation from growth into value
The utilities sector is trading at 18.3 times forward earnings compared with a price-to-earnings ratio of 22.1 for the S&P 500 index and 26 for technology, according to Refinitiv’s data
David Bianco, Americas chief investment officer for DWS, which has an overweight rating on utilities, said interest rates are still low, but utilities offer inflation protection because they would be able to raise their prices
U.S. consumer spending fell by the most in 10 months in Feb, as a cold snap gripped many parts of the country and the boost from a second round of stimulus checks to middle- and lower-income households faded. Consumer spending, which accounts for more than 2/3rds of U.S. economic activity, dropped -1.0% in Feb amid a broad decline in purchases of goods, following a 3.4% rebound in Jan
“We remain bullish on the global growth path (and the pass-through to commodities prices) as vaccine distribution ramps up, and would recommend that investors use this as an opportunity to re-engage in pro-cyclical trades,” said Goldman Sach’s New York-based strategists Ron Gray and Caesar Maasry. “Local equity indices in South Africa and Russia are good candidates.”
“If you were looking to un-anchor inflation expectations, having the Fed chair say the Fed’s going to have a new regime and is no longer sure that overheating the economy leads to inflation, and having the administration say we’re in an entirely new progressive era where policy is going to differ radically from what it has been for the last 40 years — those would seem like the best things you could do if you were trying to un-anchor expectations,” Former U.S. Treasury Secretary Lawrence Summers said.
Asia-Pacific Markets
Asian stocks opened steady in early Monday trade
Japanese shares climbed, while Australia, Hong Kong and South Korea dipped
Japan’s Nikkei 225 added 0.82% to 29,412 and Topix 500 added 0.41% to 1,548
South Korea’s Kospi dropped -0.26% to 3,032
In Hong Kong, Hang Seng dropped -0.33% to 28,282 and Hang Seng China Enterprises dropped -0.52% to 10,905
In China, CSI 300 added 0.86% to 5,037 and Shanghai Composite added 0.26% to 3,427
Australia’s S&P/ASX 200 dropped -0.19% to 6,811
Chinese stocks have been under pressure after a warning from the Securities and Exchange Commission that it’s taking steps to force accounting firms to let U.S. regulators review the financial audits of overseas companies – the penalty for non-compliance being ejection from exchanges
China’s rebalancing of its economy from investment-led growth to consumption is likely to slow in the coming five years as the population ages and the workforce shrinks, as per a government researcher, Xu Hongcai, deputy director of the China Association of Policy Science’s economic policy committee. Xu also warned China may face the risk of imported inflation as a stronger global economy pushes up commodity prices
Next week, Bank of Japan’s Tankan survey for the first quarter and China’s official manufacturing PMI for March may give investors an opportunity to gauge the health of the region’s economic recovery, with a faster economic recovery will support value stocks
“It’s very possible for the value rally to continue as the valuation disconnect between growth and value stocks remains large,” said Avo Ora, Pictet Asset Management’s co-head of emerging equities, who likes selected Chinese materials, Korean financials and Asia’s industrials shares. “For examples, a MSCI index of Asian financial shares trades at 10.5 times profit for the next 12 months, compared with 19 times for technology shares. While the gap has has narrowed, it’s still wider than its average in the past decade.”
“Opening up China’s borders earlier than expected will benefit the country’s airports and online travel portals,” said Ernest Yeung, a portfolio manager at T Rowe Price. He sees opportunities in Southeast Asia and thinks valuations of financials in emerging markets are relatively attractive.
“A prolonged rotation into value stocks requires a positive earnings cycle and higher expectations for inflation, said Jing Ning, a portfolio manager for Fidelity’s China Focus Fund. “There are some signs these shifts are taking hold.”
EU Markets
European equities ended the week close to all-time highs on Friday trade, as investors shrugged off worries about a third wave of coronavirus infections and focused on prospects of a solid global economic recovery
Mining and oil & gas stocks gave the biggest boost to the index, while defensive sectors including healthcare and utilities were slightly down
The pan-European Stoxx Europe 600 added 1.01% to 421 and Stoxx 50 added 0.89% to 3,866
Led by chipmakers, notably ASML and ASM International, the STOXX 600 tech index posted its biggest weekly gain since early Nov
Germany’s DAX30 added 0.89% to 14,748
London’s blue-chip FTSE 100 added 0.99% to 6,740
France’s CAC40 added 0.61% to 5,988
Denmark’s OMX Copenhagen 20 added 1.37% to 1,439
Spain’s IBEX 35 added 1.05% to 8,498
Italy’s FTSE MIB added 0.72% to 24,393
Sweden’s OMX Stockholm 30 added 1.18% to 2,198
ECB chief economist Philip Lane said that the European Central Bank must remain a key stabilizer of the euro zone economy as the bloc is at risk of suffering longer-term damage from its pandemic-induced double-dip recession. A sustained period of low activity reduces labour productivity, weakens corporate balance sheets and saps confidence, leading to a potential downward spiral
Morgan Stanley said global equities should slow down but Europe was poised to outperform relative to other markets, as it expects the region’s relative economic momentum to improve over the next 3-6 months
The Ifo Business Climate indicator for Germany rose to 96.6 in March 2021, the highest level since June 2019 and comfortably above market expectations of 93.2. Companies became optimistic regarding developments over the coming months (100.4 vs 95.0 in February), while their assessments of the current situation were also better (93.0 vs 90.6). Sentiment among manufacturers improved firmly (11.2 vs 2.7) as export expectations exploded due to strong demand from the US and China
“There is a clear risk of self-fulfilling adverse dynamics taking hold, through which uncertain economic prospects induce households, firms and governments to hold back on expenditure plans, leading to a decline in overall demand that validates the loss in confidence about the future,” ECB chief economist Philip Lane said. “To counter these risk factors, it is essential that the ECB acts as a stabilising force and boosts confidence by committing to the preservation of favourable financing conditions.”
Oil & Natural Gas Markets
Crude-oil prices climbed above $60 a barrel in early Monday trade, over concerns that the Suez Canal blockage may last weeks and tighten supply
WTI Crude is trading at $60.75 per barrel
Brent Crude, the international benchmark for oil, is trading at $64.42 per barrel
Natural Gas futures rose to $2.626/MMBtu
Commodities Markets
Gold futures dulled in early Monday trade on the back of a four-month stronger dollar
Gold unlikely to rise above $1,700 – $1,750 range in the near-term, until growth and inflation likely stalls with investors favoring assets and commodities that track higher inflation
Some investors view gold as a hedge against higher inflation that could follow stimulus measures, but higher Treasury yields have dulled some of the appeal of the non-yielding commodity
U.S. Gold futures (Comex) is trading at $1,727 an ounce
Silver futures (Comex) is trading at $24.81 an ounce
Gold / Silver Ratio rose marginally to $69.53
Copper futures (Comex) rose to $4.0565 per pound
Citigroup forecasts copper prices will rally to $5 per pound in six to 12 months on a better-than-expected recovery in demand, most notably outside China
SGX Iron-Ore futures rose to $166.90 per tonne
In India, Spot Gold is trading at INR 45,144 per 10 grams
“While there will be higher inflation in the U.S., it is important to keep in mind that this is first a reflection of the strong growth backdrop and, second, unlikely to last,” Carsten Menke, an analyst at Julius Baer Group Ltd., wrote in a note. “It is not the kind of inflation that will lift safe-haven demand and lead to lastingly higher gold and silver prices.”
Currency Markets
U.S. dollar index, DXY strengthened and remained near four-month peak of 92.83 in early Monday trade, on continued optimism about the U.S. economy
INR strengthened with USD / INR at 72.6480
JPY weakened with USD / JPY at 109.6400
CNY strengthened with USD / CNY at 6.5411
EUR strengthened with EUR / USD at 1.1794
GBP strengthened with EUR / GBP at 0.8551
GBP strengthened with GBP / USD at 1.3789
“The dollar is absolutely critical,” said James Athey, investment director at Aberdeen Standard Investments. “If the dollar starts rallying that becomes a problem. It means commodity weakness and emerging-market weakness and it starts to provide a disinflationary countervailing narrative.”
| 3-Month LIBOR Rate | As on 26 Mar 2021 |
| US DOLLAR | 0.20 per cent |
| Euro | – 0.55 per cent |
| British Pound | 0.09 per cent |
| Swiss Franc | – 0.76 per cent |
| Japanese Yen | – 0.07 per cent |
Bitcoin
Bitcoin / U.S. Dollar declined -1.18% in early Monday trade to $55,157 as of 06:45 a.m. I.S.T.
Bitcoin is seen by some as an appealing digital alternative to gold, or a potential refuge from inflation due to its limited supply
“Bitcoin is extremely sensitive to increased dollar demand,” BofA strategists said in a note on Wednesday. “We estimate a net inflow into Bitcoin of just $93 million would result in price appreciation of 1%, while the similar figure for gold would be closer to $2 billion or 20 times higher. In contrast, the same analysis for the 20-year-plus Treasuries shows that multibillion money flows do not have a significant impact on price, pointing to the much larger and stable nature of the U.S. Treasuries markets.”
Bond Markets
Americas : 10 – Year Govt Bond Yields
United States : 1.65%
Canada : 1.50%
Europe, Middle East & Africa : 10 – Year Govt Bond Yields
Germany : -0.35%
United Kingdom : 0.75%
France : -0.11%
Italy : 0.62%
Netherlands : -0.21%
Asia Pacific : 10 – Year Govt Bond Yields
India : 6.12%
Japan : 0.07%
Australia : 1.65%
Hong Kong : 1.23%
Singapore : 1.60%
South Korea : 2.03%
Fund Flows on NSE, BSE and MSEI — 26 Mar 2021
FII/FPI Net Sell Rs (50.13) Crore in Capital Market
DII Net Buy Rs 1,703.14 Crore in Capital Market
Where We’ve Been Reading —
- Bloomberg
- The Wall Street Journal
- Reuters
- Trading Economics
- Seeking Alpha
- Axios
- Tech Crunch
- NSE Indices India
- Morningstar India
- The Star
- Harvard Business Review
- The Economic Times
