Here’s breaking down the pre-market actions:
STATE OF THE MARKETS
SGX Nifty signals gap-down start
Nifty futures on the Singapore Exchange traded 188.50 points, or 1.25 per cent, lower at 14,662.50 in signs that Dalal Street was headed for a gap-down start on Friday.
Tech View: Nifty may consolidate around 15K level
Nifty50 on Thursday managed to defend the crucial support at 15,000 level on a closing basis. The index ended up forming an indecisive candle on the daily chart, as intraday recovery got sold into. Analysts expect the index to take support and stabilise around the psychologically important 15,000 mark.
Asian shares fall on rising bond yields
Asian stocks skidded as rising US Treasury yields rattled equity investors while hoisting the dollar to a three-month high. Australian stocks shed 1 per cent, Japan’s Nikkei share average lost 0.7 per cent, shares in Seoul fell 0.24 per cent and E-Mini S&P futures were a touch lower at 0.04 per cent.
Gold sinks to a nine-month low
Gold slumped to a near nine-month low and headed for a third straight weekly decline after Federal Reserve Chair Jerome Powell disappointed investors with his view on rising yields. Spot gold eased 0.2 per cent to $1,693.79 per ounce, having earlier dropped to its lowest since June 8 at $1,688.96.
Dollar bounces as Fed stays dovish course
The dollar held firmly near three-month highs on Friday after surging overnight as Federal Reserve Chair Jerome Powell stuck with dovish rhetoric despite a recent spike in bond market volatility. The dollar index was little changed at 91.660 early in the Asian session after gaining 0.7 per cent overnight.
US 10-year borrowing rate goes negative
The cost of borrowing US 10-year Treasuries in the overnight repurchase, or repo market, went deeply negative, as investors sought to short the notes, causing market stress. Negative rates in the repo market partly reflect uncertainty about how long the US Fed will keep its easy monetary policy. The 10-year cost to borrow repo rate, which is typically positive, has been negative since Monday and hit as low as -4.25% on Thursday.
US stocks settled lower
Wall Street plunged into the red on Thursday, with all three major stock indices closing lower after investors were disappointed by Federal Reserve Chair Jerome Powell’s response to inflation fears. The tech-rich Nasdaq Composite Index was the biggest loser, falling 2.1 percent to end at 12,723.47, off the lowest point of the session. The benchmark Dow Jones Industrial Average shed 1.1 percent to close at 30,924.14, while the broad-based S&P 500 dropped 1.3 percent to 3,768.47.
FIIs buy Rs 2,089 crore worth stocks
Net-net, foreign portfolio investors (FPIs) were buyers of domestic stocks to the tune of Rs 2,088.70 crore, data available with NSE suggested. DIIs were net sellers to the tune of Rs 392.91 crore, data suggests.
MONEY MARKETS
Rupee: The rupee on Thursday declined by 11 paise to close at 72.83 against the US dollar due to a rebound in the greenback in overseas markets and muted domestic equities.
10-year bonds: India 10-year bond yield fell 0.42 per cent to 6.212 after trading in 6.21-6.25 range.
Call rates: The overnight call money rate weighted average stood at 3.19 per cent, according to RBI data. It moved in a range of 1.90-3.50 per cent.
Data/events to watch
- India Foreign Exchange Reserves 26/Feb (05.00 pm)
- Japan Foreign Exchange Reserves Feb (05:20 am)
- UK Halifax House Price Index MoM Feb (02:00 pm)
- US Balance of Trade Jan (07:00 pm)
- US Unemployment Rate Feb (07:00 pm)
- China National People’s Congress
- China Premier Li Keqiang Speech
MACROS
Fed’s Powell says loose credit to stay… US Federal Reserve Chair Jerome Powell on Thursday repeated his pledge to keep credit loose and flowing until Americans are back to work, rebutting investors who have openly doubted he can stick to that promise once the pandemic passes and the economy surges on its own. “I want to be clear about this,” Powell said in anchoring the Fed’s promise to keep its near zero interest rates and monthly bondbuying intact. Even if prices jump as anticipated this spring, “I expect that we will be patient,” and not change monetary policies that need to remain supportive until the economy is “very far along the road to recovery,” Powell said.
EPFO to offer 8.5% interest for FY21… Amid declining interest rates, the Employees Provident Fund Organisation has managed to hold on to an 8.5% rate for the current financial year, providing relief to its nearly five crore active subscribers. Many will be hit hard by the government’s move to tax returns if contributions top Rs 2.5 lakh annually. The retirement savings agency has relied on the stock market to offer higher returns. “For FY 2021, EPFO decided to liquidate investment and the interest rate recommended is a result of combined income from interest received from debt investment as well as income realised from equity investment,” an official statement said.
Opec output cuts to push fuel prices… The Opec+ grouping of major oil-producing countries on Thursday extended the current production cuts to April, a move that is likely to send fuel prices hurtling towards new records, with petrol hitting Rs 100 per litre mark in large parts of the country, unless taxes are reduced. The decision dashed the government’s hope of higher production from next month, which would have eased upward pressure on pump prices and the need to cut taxes.
RBI may get active in forex market… The central bank might just tiptoe into the forex market next fiscal, in sharp contrast with its loud and visible presence through FY21, as it gets ready to tackle a very different set of challenges — of higher imports and mounting debt costs. So, instead of enhancing the export edge, RBI altered policy stance will primarily seek to prevent the rupee from falling, and make imports affordable. “We think RBI is likely to have more degrees of freedom to manage its forex strategy in FY21-22,” said Rahul Bajoria, chief India economist at Barclays Capital.
Foreign equity flows shoot up 40%… Foreign equity inflows shot up 40% to $52.9 billion, with gross FDI rising over 22% to $67.5 billion during April-December 2020, on the back of deals in the digital space such as those involving Reliance Jio. Net inflows were 30% higher at $48.5 billion as disinvestments in Indian ventures went up by a third to $19.1 billion, RBI data showed. Although the government is yet to release the sector and country-specific details, it attributed the increase to steps taken by it.
Bond sales held up on yield spike… The northward trajectory in bond yields in the market that matters has roiled stocks from Jakarta to Jo’burg. But equities aren’t the only asset classes dented in this latest episode of portfolio churning: Two Indian state companies cancelled their bond sales on Thursday after local yields surged, mimicking the hardening trend stateside. So, IRFC and National Cooperative Development Corporation decided to cancel sales on a day the benchmark yield climbed to 6.26%, within touching distance of the Covid-era peak of 6.30%.
Unemployent rate drops below 7%… India’s unemployment rate in February stood at 6.9%, much lower than 7.8% in February 2020, returning to pre-Covid levels. However, the rate inched up from 6.53% in January. “The unemployment rate has recovered to its pre-lockdown levels, ” the CMIE said, adding that recovery in the labour force participation rate and the employment rate remained significantly lower than before the lockdown. CMIE data shows the labour participation rate was 40.5% in February 2021, slightly lower than the 40.6% recorded in January 2021 and 42.6% in February 2020.
Bengaluru best India city to live in… Bengaluru ranks first in the 2020 ‘Ease of Living’ index, which lists 49 Indian cities with population of over one million people, pushing previous topper Pune to number two. Among 62 cities with population less than a million, Shimla is the most liveable, followed by Bhubaneswar, according to a Urban Development Ministry report released on Thursday. Among mega cities, Chennai, Coimbatore and Navi Mumbai rank first, second and third where “quality of life” is considered, while Bengaluru, Delhi and Pune are the top rankers on the “economic ability” list. Among smaller cities, Panaji, Tumkuru, Vellore, and Tirupur, Gurugram, Kochi top.
Banks may seek extension of IBC suspension… Bankers are worried that there will be a flood of applications at the NCLT after the government suspension of insolvency proceedings ends on March 25 this year. Some resolution cases like Future Retail could get derailed if operational creditors initiate insolvency proceedings. A section of bankers feels that the government can use the leeway under the amendment and extend the suspension up to June 2021.