US S&P500 futures erased early Monday losses, but Asian shares are still trading in the red on concerns over fresh spread of Covid-19. Nifty futures trading in Singapore, on the other hand, suggested a positive start for domestic stocks. But will such gains sustain?

Here’s breaking down the pre-market actions.

STATE OF THE MARKETS

SGX Nifty signals positive start

Nifty futures on the Singapore Exchange traded 61 points, or 0.60 per cent higher at 10,206.20, in signs that Dalal Street was headed for a positive start on Monday.

Tech view: Nifty outlook positive

Nifty50 on Friday topped the 10,200 level. Analysts said the index has the potential to hit the recent high of 10,338 and even 10,550 level in the short run. The 10,100 level will be the immediate support for Nifty50 to watch out for this week, they said.

Asian shares open lower

Japan’s Nikkei 225 index was down 0.55 per cent or 123.92 points at 22,354.87 in early trade, while the broader Topix index fell 0.37 percent or 5.93 points to 1,576.87. Hong Kong’s Hang Seng slipped 0.47 per cent, or 115.36 points, to 24,528.53. China’s Shanghai Composite flat, inching 0.73 points lower to 2,966.90.

Oil prices edge up on tight supplies

Oil prices nudged higher on Monday on tighter supplies from major producers, but concerns that a record rise in global coronavirus cases could curb a recovery in fuel demand checked gains. Brent crude rose 9 cents, or 0.2 per cent, to $42.28 a barrel, while US crude was at $39.76 a barrel, up 1 cent.

US stocks ended mixed on Friday

US stocks gave up their earlier gains to close mixed as market sentiment was dented by concerns over a resurgence in coronavirus infections across the country. On Friday, the Dow Jones Industrial Average fell 208.64 points, or 0.80 per cent, to 25,871.46. The S&P500 index fell 17.42 points, or 0.56 per cent, to 3,097.92. The Nasdaq Composite Index was up 3.07 points, or 0.03 per cent, to 9,946.12

Q4 results today

Dhanlaxmi Bank, GTL, Kirloskar Industries, Info Edge (India), NDTV, Onmobile Global and Skipper are scheduled to announce their March quarter earnings on Monday.

FIIs buy Rs 1,237 cr worth of stocks

Net-net, foreign portfolio investors (FPIs) were buyers of domestic stocks to the tune of Rs 1,237 crore, data available with NSE suggested. DIIs were net sellers to the tune of Rs 880.66 crore, data suggests.

MONEY MARKETS

Rupee: The rupee settled 6 paise lower at 76.20 against the US dollar on Friday as strengthening of the US currency and rising COVID-19 cases weighed on investor sentiment.

10-year bonds: India 10-year bond yield rose 0.46 per cent to 5.84 after trading in 5.82-5.85 range.

Call rates: The overnight call money rate weighted average stood at 3.59 per cent, according to RBI data. It moved in a range of 1.80-4.05 per cent.

DATA/EVENTS TO WATCH

  • Q4 Earnings: Info Edge I Dhanlaxmi Bank I NDTV
  • China Prime Loan Rate (07.00 am)
  • US May Existing Home Sales (07.30 pm)
  • Euro Area June Consumer Confidence (07.30 pm)
  • ECB Lane Speech (10.00 pm)
  • EU-China Summit

MACROS

Red-flagged accounts leave banks in soup… Banks are in a major dilemma over a directive from RBI that lenders should decide whether loan accounts that had been ‘red-flagged’ as suspicious over six months ago are fraudulent or not. If banks do not classify these loans as a fraud, they risk being pulled up for being lenient. If they do, they must set aside provisions for 100% of the loan amount within a year, even if a large part of the loan is recoverable. Also, the fraud tag makes it difficult to sell an otherwise sound business.

Bid to replace Chinese imports… India is looking to plug loopholes as it seeks to reduce import dependence on China. Prime Minister Narendra Modi on Saturday met ministers and top officials from infrastructure and commerce ministries to discuss ways to boost local manufacturing and exports amid continuing tensions with China. The routing of Chinese goods to India through their common trade partners, inversion in duty structures and the exploitation of ambiguities in origin rules have all come under the government’s scanner. The exercise is to check if these agreements are leading to preferential rates being lower on finished products than the intermediate or raw material.

Corp bond mart back in business… Investors are warming up to corporate bonds again, after a temporary freeze following the sudden closure of half a dozen mutual fund schemes by Franklin Templeton. Yields for papers of PFC, REC and HDFC have plunged as much as 35 basis points since June 8, the day the government lifted most of the restrictions on economic activities, leading to demand revival, and as a further reduction in interest rates appeared imminent. Falling bond yields mean higher prices for the papers.

Mumbai flat prices down 8-12%… Residential prices in Mumbai, the country’s most expensive property market, have started cracking in the midst of the Covid-19 crisis as uncertainty looms over the economic fallout of the pandemic and rising job losses. After a long-drawn tug of war between developers who were resisting price reduction and homebuyers seeking affordability, the market has now turned in buyers’ favour. While quoted brochure prices of apartments continue to be the same, rates have eased 8-12% in most micro markets of the city, brokers and consultants said.

Investors turn to penny stocks to fight boredom… Several micro-cap stocks, which remained mostly dormant for over two years, have seen a sudden resurgence in activity since the beginning of April. The unexpected interest in these stocks has got little to do with their prospects, which in fact, have got bleaker amid the downturn. With people being confined to their houses during the nationwide lockdown, several of them are finding time to test their fortunes in the stock market. For many of them day trading is a way to escape boredom, while loss of jobs and salary cuts that may have prompted others to punt on the markets.

Financials lose clout in Nifty… The stock market selloff has weakened the influence of banks and financials in Nifty. The financial sector, which has dominated the benchmark index for the last 12 years, has lost nearly 11% weight in the index since the beginning of the year to 31.13% currently. Telecom has more than doubled its weight to 3.44% since December 2018 bottom of 1.5%. The surge in oil-to-telecom major RIL has also been because of the developments in the telecom business. The auto sector, which had a weight of 11.8% in December 2016, is currently at its lowest in a decade at 5.54%.

Few stocks driving up indices… Since they touched their multi-year lows on March 23, Sensex and Nifty have both rallied about 34%. Sensex has gained 8,750 points, or 33.7 per cent, while Nifty has rallied 2,634 points or 34.6 per cent as of Friday’s close. However, the rally in the indices has been riding on just a handful of stocks. Half of Sensex’s gain has come on the back of just three stocks — RIL, HDFC Bank and Infosys, while for Nifty, five stocks, HDFC and ICICI Bank, along with the three mentioned earlier, have contributed 52% of its gain. Market players are not comfortable with such a concentrated rally.

Zerodha may get $1 billion valuation… Discount brokerage Zerodha will spend Rs 60-65 crore to buy back Esops this year at a self-assessed enterprise value of Rs 7,000 crore, or around $1 billion. This is significant because it’s the first time that a valuation is being ascribed to Zerodha, which has never picked up external capital. The buyback is intended to provide senior management and long-term staffers with liquidity options as Zerodha celebrates its 10th anniversary later this year

J&L pulls whitening products… Johnson & Johnson has initiated a complete recall of all its fairness products. Distributors in India received a mail from J&J on the recall, which has come just days after J&J said it is exiting the face whitening portfolio in Asia and Middle East. The US company’s decision had come in the wake of continuing anti-racism protests and activism, triggered by police killing of an African-American, George Floyd.



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