Finance - Stock Market Forecast

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

• Resistance for Nifty 50 is seen at 14,150. For Thursday, Dec 31, Support area is seen at 13,950 — 13,960 and 13,775

• Support levels for Bank Nifty is at 31,350 30,850 and 30,200

• The MSCI Asia Pacific ex-Japan added 0.26%, and the MSCI Emerging Market index gained 0.33%

• Trends on SGX Nifty indicate a modest gap-up opening for Nifty 50 in India. The Nifty futures are trading 0.51% higher at 14,053 on the Singaporean Exchange at 08:00 a.m. I.S.T.

• Contracts tied to U.S. futures edged higher in early morning trade, with Nasdaq, S&P 500 and Dow Jones futures trading in green, alongside a positive start in Asia-Pacific early Thursday morning trade with shares climbing in China and Hong Kong while retreating in Australia, a positive MSCI Asia-Pacific ex-Japan index, a battered U.S. Dollar continued its slide lower to 89.53 with 10-Year Treasury Yield edging higher to 0.925 and Gold futures rising $1,898 on the day, bolstered by a sluggish dollar, indicate a stable-to-positive outlook for Nifty 50 India

• Most global stock markets are closed Friday for New Year’s Day

India Markets

NIFTY 50	OPEN	HIGH	LOW	CLOSE
Wednesday	13,980	13,997	13,864	13,981

Indian stocks advanced for a sixth straight day on Wednesday trade, following Asian peers after University of Oxford and AstraZeneca Plc’s coronavirus vaccine won U.K. approval for EUA

Investors’ sentiments were also boosted by reports that India is planning a spending boost to counter the pandemic’s economic fallout

Nifty 50 opened gap-up and added 49 points, or 0.35%, to 13,981, a new lifetime high, while the BSE Sensex advanced 133 points, or 0.28%, to 47,746

Bajaj Finance Ltd. contributed most to the index’s advance and jumped 2.6%, while Ultratech Cement Ltd. saw the steepest rise, advancing 4.1%

Broader markets mostly out-performed headline peers — Midcap 100 index added 0.22% ; Smallcap 250 index added 0.59% and Nifty 500 added 0.37%

Strategy based indices under-performed benchmark indices — Nifty Alpha 50 added 0.33% and Nifty Alpha Low Volatility 30 added 0.41%

Nifty P/E for Dec 30, 2020 appreciated to 38.45 from 38.31, while Nifty P/B edged higher to 3.96 from 3.94, as recorded by NSE India. Indian equities market may seem overvalued due to high P/E, however the P/B value shows otherwise

Bank Nifty opened positive but failed to surpass the 31,500 mark. It saw the highest daily close of last 218 sessions with a gain of 441 points. The index formed a bearish candle on the daily scale. The index dropped 19 points, or -0.06%, to 31,303

India VIX increased 1.54% to 21.11 from 20.79 levels.

Rising volatility needs to cool down below the 20-19 zone to support the bullish market setup with a higher market base

Overnight Call Money rate weighted average stood at 3.15% as per RBI data. It moved in a range of 1.90 — 3.50% for Dec 29

Yield on the benchmark 10-year government bond increased to 5.95%, while rupee strengthened to 73.1540 against the U.S. dollar

India is set to swing from being a cautious spender in 2020 to opening the fiscal floodgates as Prime Minister Narendra Modi seeks to pull the economy back from the worst of the pandemic

India’s sovereign bond investors are betting that short-term yields would rebound as the central bank soaks up excess cash on signs of an economic recovery

RBL Bank Ltd. and Quantum Asset Management Ltd. are among those forecasting that liquidity tightening by the Reserve Bank of India will lead short end rates to rise faster than the long end – bear flattening the yield curve

There’s growing consensus among traders that the RBI will have to start draining excess cash from the banking system, as abundant liquidity crashed short-term rates and threatened to stoke inflation. Nomura Inc. expects the central bank to start doing so as early as the second quarter of 2021

“Short-end rates, of up to three years maturity, are currently priced aggressively due to excess liquidity and thus carry maximum risk of a reversal,” said Pankaj Pathak, fixed-income fund manager at Quantum Asset Management Ltd. in Mumbai. “The longer segment may continue to get RBI’s support from open market operation purchases and operation twists.”

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

“Even though valuations are getting high, the uptrend in the market should continue next year,” said Sanjeev Hota, head of research at Sharekhan Ltd. in Mumbai. “The earnings recovery cycle will start next year and there are some tailwinds from the macro side.”

America Markets

U.S.-based Autonomous delivery startup Nuro

U.S. equities climbed on Wednesday trade, as vaccine progress boosted optimism in one of the final trading sessions of 2020

The Nasdaq Composite Index rose 19 points, or 0.2%, to 12,870

The S&P 500 gained 5 points, or 0.1%, to 3,732

Energy and materials shares were the top-performing sectors in the S&P 500, both rising more than 1%

The Dow Jones Industrial Average added 73 points, or 0.2%, to 30,409

Contracts tied to U.S. futures edged higher in early Wednesday trade after U.S. stocks climbed earlier, with small-cap shares outperforming. S&P500 futures is up 0.11%, Dow Jones futures is up 0.15%, while Nasdaq futures is up 0.11%

The yield curve on 10-year U.S. Treasury note steepened to 0.925% in early morning trade, stoked by risk-on sentiments

The U.S. goods trade deficit widened to $84.82 billion in November, from $80.42 billion in the previous month, as per advance estimate, making it the largest trade gap since comparable series began in 1955.

Imports rose 2.6% to $212.0 billion, led by purchases of consumer goods (6.7%), industrial supplies (2.9%), and capital goods (2.0%). Meanwhile, exports increased at a softer 0.8% to $127.2 billion, as higher sales of foods, feeds, & beverages (4.3%) and industrial supplies (1.5%) were partially offset by declines in exports of capital goods (-0.7%) and vehicles (-1.1%)

U.S. initial jobless claims figures are due Thursday

“Investors continue to weigh stimulus hopes against negative pandemic developments,” Tom Essaye, a former Merrill Lynch trader said. “Markets have aggressively priced in a lot of positive resolution to these events (and more) in 2021.”

Asia-Pacific Markets

Disinfecting at the Shanghai Stock Exchange

Most Asian stocks advanced in early Thursday trade, in curtailed trading on the last day of 2020

Shares rose in Hong Kong and China. They fell in Australia

Japan’s Nikkei 225 and Topix 500 are closed for a holiday

South Korea’s Kospi is shut for a holiday

In Hong Kong, Hang Seng added 0.41% to 27,260 while Hang Seng China Enterprises added 0.79% to 10,746

In China, CSI 300 added 1.52% to 5,192 and Shanghai Composite added 1.19% to 3,455

Australia’s S&P/ASX 200 dropped -0.63% to 6,640

Overall, MSCI Asia-Pacific gained 1.10%

China’s official manufacturing Purchasing Manager’s Index (PMI) fell to 51.9 in December from 52.1 in November, data from the National Bureau of Statistics (NBS) showed on Thursday, remaining above the 50-point mark that separates growth from contraction

China’s vast industrial sector has staged an impressive recovery from the coronavirus shock on the back of surprisingly strong exports

The Chinese economy is expected to expand around 2% for the full year – the weakest in over three decades but still much stronger than other major economies struggling to contain new infections

China has seen a strong improvement in retail sales driven by firm demand for autos and communication equipment

EU Markets

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

European stocks ticked lower and lacked direction on Wednesday trade, amid increased optimism about an economic recovery

The pan-European Stoxx Europe 600 slipped -0.13% to 399, after rising for four consecutive days and Stoxx 50 declined -0.15% to close at 3,576

Travel and leisure companies advanced in Europe after the U.K. approved a coronavirus shot by AstraZeneca Plc and the University of Oxford

Germany’s DAX30 dropped -0.31% to 13,718

London’s FTSE 100 dropped -0.44% to 6,573

France’s CAC40 added 0.02 to 5,612

Denmark’s OMX Copenhagen 20 added 0.01% to 1,475

Italy’s FTSE MIB added 0.28% to 22,322

Britain has become the first country to approve a Covid vaccine developed by AstraZeneca and Oxford University, a vaccine that is especially important for developing nations as it can be stored in fridge temperature

The 27-nation EU and China announced the political approval of a long-sought, in the works since 2013, agreement to open the Chinese market further to EU investors, marking an economic victory for both sides

The breakthrough in negotiations on an EU-China investment accord signals the bloc’s determination to focus on economic opportunities in Asia even amid criticism of Beijing’s record on human rights. The accord could enter into force in early 2022, according to EU officials

“We are open for business but we are attached to reciprocity, level playing field & values,” European Commission President Ursula von der Leyen said in a post on Twitter on Wednesday. “Today, the EU & China concluded in principle negotiations on an investment agreement.”

“We are going to keep getting this push-pull, vaccine versus virus, politics versus economics, for a while yet,” said Altaf Kassam, head of investment strategy for State Street Global Advisors in Europe. “November was a great month for markets and there was always going to be a pause for breath. December seems to be just that.”

Oil & Natural Gas Markets

Crude-oil held on to its early gains in early Thursday trade after API data showed stocks of crude oil in the U.S. declined by 4.8 million barrels in the week ended December 25th, marking the first fall in inventories since the week ended November 6th

WTI Crude is trading unchanged at $48.24 per barrel

Brent Crude is trading unchanged at $51.42 per barrel

Natural Gas futures rose to $2.444/MMBtu

Natural-gas prices witnessed their second consecutive big monthly drop, stung by forecasts of warmer-than-expected weather that are denting demand for the heating fuel

On MCX-India, Crude oil futures weakened to 3,510 on Wednesday trade

On MCX-India, Natural gas futures settled at 179/MMBtu on Wednesday trade

“There are headwinds for upward price improvement as the market is readying for OPEC to go ahead and put more barrels – 500,000 barrels a day – on the market,” said John Kilduff, a partner at Again Capital LLC

Commodities Markets

Gold ticked higher in early Thursday trade, bolstered by sluggish dollar

U.S. Gold futures (Comex) strengthened to $1,898 an ounce

Silver futures (Comex) strengthened to $26.65 an ounce

Copper futures (Comex) strengthened to $3.5695 per pound

In India, Spot Gold steadied at INR 49,526 per 10 grams

“The economy remains fragile and the post-pandemic recovery will be gradual at best,” Credit Suisse analyst Fahad Tariq said. “We think any near-term pullback in gold prices due to Covid-19 vaccine approvals and rollout is a good entry point.”

India — NCDEX Agridex

Agricultural futures index tracking the performance of the 10 liquid commodities was up 0.15%, trading at 1,156.10 ; with major demand seen for Castor Seed and Soy Bean futures on Wednesday trade

Currency Markets

The U.S. dollar index, DXY continued to slide in early Thursday trade at 89.534, weakening to the lowest in 2 1/2 years as vaccine progress boosted optimism in one of the final trading sessions of the year

INR strengthened with USD / INR at 73.1540

JPY strengthened with USD / JPY at 102.9700

CNY strengthened with USD / CNY at 6.5243

EUR strengthened with EUR / USD at 1.2305

A listless dollar helped the euro stand firm at a 32-month high of $1.2298

GBP strengthened with EUR / GBP at 0.9042

GBP strengthened with GBP / USD at 1.3610

The pound inched higher after the U.K. Parliament approved Prime Minister Boris Johnson’s post-Brexit trade deal

Bitcoin, the world’s largest cryptocurrency, surged above $28,000 on Wednesday to a record high. In December alone, Bitcoin has surged more than 40%, putting it on track for its biggest monthly gain since 2019.

“While a growing institutional presence has been part of the narrative of the current bull run, we may see increased retail interest in Bitcoin as a form of digital gold,” Paolo Ardoino, chief technology officer of crypto exchange Bitfinex said.

*3-Month LIBOR Rate*	*As on 30 Dec 2020*
U.S. DOLLAR	0.24 per cent
Euro	– 0.56 per cent
British Pound	0.02 per cent
Swiss Franc	– 0.79 per cent
Japanese Yen	– 0.09 per cent