Market

SGX Nifty up 45 points; here’s what changed for market while you were sleeping

Domestic stocks look set to open higher, tracking overnight gains on Wall Street. Asian markets traded cautiously positive this morning amid a surge in the delta variant Covid cases and a rise in the dollar. Crude oil prices continued to move higher. Here’s breaking down the pre-market actions:

STATE OF THE MARKETS


SGX Nifty signals a positive start

Nifty futures on the Singapore Exchange traded 43.5 points, or 0.28 per cent, higher at 15,831, signaling that Dalal Street was headed for a positive start on Wednesday.

  • Tech View: Nifty50 on Tuesday formed a bearish candle on the daily chart and negated the formation of higher lows that it was making for the past three sessions.
  • India VIX: The fear gauge shed over 3 per cent to 13 level on Tuesday over its close at 13.40 on Monday.

Asian markets higher in early trade

Asian stocks opened higher on Wednesday as investors took heart from rallies on Wall Street with investors focused on virus cases and key US data this week. MSCI’s broadest index of Asia-Pacific shares outside Japan was up by 0.34 per cent.

  • Japan’s Nikkei inched up 0.04%
  • Korea’s Kospi gained 0.42%
  • Australia’s ASX 200 climbed 0.64%
  • China’s Shanghai Composite jumped 0.42%
  • Hong Kong’s Hang Seng surged 0.52%

US shares gained overnight

US stocks drifted further into record heights in a listless day of trading on Tuesday, lifted by Apple Inc and other technology stocks after an upbeat consumer confidence report. Wall Street waits for the heavyweight economic data coming at the end of the week.

  • Dow Jones inched up 0.03% to 34,292.29
  • S&P 500 gained 0.03% to 4,291.80
  • Nasdaq soared 0.19% to 14,528.33

Dollar drives higher

The dollar clung to recent gains on Wednesday as virus woes raised concerns in a market already on edge ahead of U.S. jobs data seen as crucial to the Federal Reserve’s monetary policy outlook.

  • Dollar Index inched up to 92.062
  • Euro slipped to $1.1902
  • Pound dipped to 1.3852
  • Yen shed to 110.58 per dollar
  • Yuan depreciates to 6.4623 against the greenback

Crude oil prices climb for second day

Oil prices on Wednesday extended the previous day’s small gains after an industry report showed US crude stockpiles fell last week, overriding trader and investor concerns about transportation curbs in some countries as Covid-19 cases surge. Brent crude was 42 cents, or 0.6% at $75.16 a barrel by 0122 GMT, after edging higher on Tuesday. U.S. crude was up 53 cents, or 0.7% at $73.51 a barrel, having risen 0.1% in the previous session.

Q4 earnings today

Ircon International, Swan Energy, Dish TV India, BF Utilities, Prime Focus, Anant Raj, The Andhra Sugars, Jain Irrigation, Sadbhav Engineering and Arshiya are among the companies that will announce their March quarter results today.

FPIs buy shares worth Rs 117 cr

Net-net, foreign portfolio investors (FPIs) turned buyers of domestic stocks to the tune of Rs 116.63 crore, data available with NSE suggested. DIIs, turned buyers to the tune of Rs 1,810.05 crore, data suggests.

MONEY MARKETS

Rupee: The rupee weakened by 4 paise to close at 74.23 against the US currency on Tuesday due to fiscal concerns and a stronger dollar in the overseas market. Losses in the domestic equity markets also weakened the market sentiment.

10-year bonds: India 10-year bond yield shed 0.33 per cent to 6.04 after trading in 6.03 – 6.09 range.

Call rates: The overnight call money rate weighted average stood at 3.13 per cent, according to RBI data. It moved in a range of 1.90-3.40 per cent.

Data/Events to Watch

  • India Fiscal Deficit May (05:00 pm)
  • India Infrastructure Output YoY May (05:00 pm)
  • India Current Account Q1 (05:30 pm)
  • India External Debt Q1 (05:30 pm)
  • Japan Industrial Production MoM Prel May (05:20 am)
  • China NBS Manufacturing PMI June (06:30 am)
  • Japan Consumer Confidence June (10:30 am)
  • Japan Housing Starts YoY May (10:30 am)
  • UK GDP Growth Rate QoQ Final Q1 (11:30 am)
  • Euro Area Core Inflation Rate YoY Flash June (02:30 pm)
  • US Pending Home Sales MoM May (07:30 pm)

MACROS


India to grow fastest in FY22
India is expected to emerge as one of the fastest expanding economies this year in Asia, next only to China, with economists at HSBC and Barclays pencilling in a return to pre-Covid growth rates by the end of 2021. Projected growth rate at 8% is the second fastest this year in Asia after China. Singapore will be the third fastest expanding at 6.5%. The caveat here is that a lot of India’s growth could be due to the base effect.

Companies take fresh price hikes
Struggling to absorb rising commodity prices and logistics costs, companies across a range of sectors such as automobiles, consumer electronics, and smartphones are increasing prices, some of them for the third time this year. In the past week, automakers such as Maruti Suzuki and Hero Moto-Corp, white goods manufacturers such as Sony, LG and Godrej Appliances, and handset companies such as Xiaomi, Realme and Vivo have either announced or effected price hikes.

India Inc’s earnings upgrade slowing
The broad-based earnings upgrade momentum that started in November 2020 is beginning to wane with upgrades for metal companies camouflaging the broadening cuts elsewhere, according to UBS. The brokerage has retained its 12-month Nifty target at 15,500 which implies a downside from current level of around 15,800. Its stance on Indian equities remains overweight. “Concentrated big upgrades are camouflaging cuts elsewhere. Twenty-two of Nifty-50 stocks are in downgrade mode (vs. 11 a couple months ago),” said UBS.

Cross-margining okayed in commodity derivatives
In a move to deepen the commodity derivatives segment, Sebi has permitted exchanges to offer cross-margining benefits to clients arbitraging between commodity index futures and their underliers, which could slash margins to trade to just one-fourth of that currently chargeable. For trading a commodity or index futures contract a client has to put up a margin to trade, comprising a value at risk (VaR) margin and an extreme loss margin (ELM). Normally VaR is 10% for a commodity futures contract and 7% for an index futures contract. In addition, an extreme loss margin of 1.25% is also applicable on both index and commodity contracts.

Reits, InvITs allowed to tap bond mart
Markets regulator Sebi on Tuesday allowed real estate investment trusts (REITs), infrastructure investment trusts (InvITs) and other specifically created entities in the real estate and infrastructure space with less than a three-year track record to tap the bond market. However, it said such issues should be through the exchange’s bond-trading platform and only institutional investors will be allowed to participate in it. But unlisted entities cannot tap this fund-raising route.

Davids turn the table on Goliaths in M&A
Traditionally, M&A stories are about the big fish gobbling up the small ones. But, a reversal seems to be playing out in the M&A space as startups, who are yet to hit their ‘teens’, are snapping up established giants. Last week, the six-year-old PharmEasy announced that it was scooping up the 26-year-old Thyrocare. Earlier this month, the three-year-old BharatPe and its partner were selected by the RBI to take over the 37-year-old Punjab and Maharashtra Cooperative (PMC) Bank. Investment bankers expect these combinations to continue as more such ‘small-buying-big’ deals will be announced in the coming months.

Credit growth to industrial sectors negative
Credit growth to the industrial sector remained in the negative territory during 2020-21, mainly due to the pandemic and resultant lockdowns, RBI data showed on Tuesday. However, “personal loans continued to grow at robust pace and recorded 13.5% growth (year-on-year) in March 2021; industrial loan growth, on the other hand, remained negative during all quarters of 2020-21”. The RBI further said working capital loans in the form of cash credit, overdraft and demand loans, which accounted for a third of total credit, contracted during 2020-21, indicating the impact of the pandemic.

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