Indian shares hit six-week high, HDFC surge lifts banks

By Ritu,

Capital Sands

Indian shares rose more than 1% on Wednesday to their highest in over six weeks, tracking an improved global mood due to the easing of some coronavirus lockdowns, while a surge in HDFC pulled financial stocks higher.

While India’s own stringent restrictions remain largely in place, signs of easing in Europe and the United States and a return to business in Asia, have bolstered stock markets globally this week.

India’s two main stock indexes were on course for their third straight session of gains, with investors also expecting the government to deliver a long-awaited stimulus package to kick-start the economy.

The NSE Nifty 50 index was up 1.11% at 9,485.4 as of 0612 GMT, while the benchmark S&P BSE Sensex rose 1.06% to 32,451.97.

The Nifty Bank Index rose to its highest in more than a week, buoyed by a 2.8% rise in top private-sector lender HDFC Bank Ltd as well as the Reserve Bank of India’s move to ease the liquidity strain in the mutual funds industry.

Gains, however, were capped by a 6.5% drop in smaller rival Axis Bank Ltd after the lender reported a surprise $182.6 million loss for the fourth quarter due to COVID-19 related provisions, and provided a grim outlook.

“The current stock market direction is a result largely of coordinated moves that we are seeing across the world due to easing restrictions,” said Umesh Mehta, head of research at Samco Securities in Mumbai.

“RBI’s move to assuage the liquidity concerns in mutual funds earlier this week is still supporting banking stocks.”

MSCI’s broadest index of Asia-Pacific shares outside Japan, which rose 0.9%, while oil prices jumped on hopes that demand will pick up.

Investors also awaited for any moves from the U.S. Federal Reserve, which is due to issue a policy statement at the close of its two-day meeting on Wednesday. The European Central Bank meets on Thursday.

EUR/USD: Oversold conditions, Powell may pull it from the multi-year lows

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The world’s most popular currency pair is trading close to the 2019 trough of 1.0879, and a break below this level opens the door to levels last seen in 2017. The main downside driver of euro/dollar has been economic divergence. The US economy enjoys solid growth – with Friday’s jobs report still underpinning the greenback – while the old continent is struggling. Monday’s Sentix Investor Confidence missed with 5.2 points, expressing lower expectations.

The euro has also been suffering from political developments in Germany. Annegret Kramp Karrenbauer resigned from leading Chancellor Angela Merkel’s ruling CDU party and the grand coalition seems vulnerable.

The coronavirus outbreak continues dominating headlines with the death toll topping 1,000. On the other hand, most of China is back to work after extended holidays and the number of new cases has fallen. Stock markets are on the rise and the safe-haven US dollar is edging lower. Nevertheless, EUR/USD’s uptick is minimal – a dead cat bounce. The common currency is exposing its weakness.

The Relative Strength Index on the four-hour chart is well below 30 – indicating oversold conditions and an upcoming bounce. However, this rise may be shortlived as momentum remains to the downside and the pair continues trading below the 50, 100, and 200 Simple Moving Averages.

Some support awaits at the daily trough of 1.0905, which is also the lowest since October. The next level is critical – 1.0879 was the 2019 low. Further down, prices seen back in 2017 await EUR/USD, and these include 1.0810 and 1.0790.

Resistance is at 1.0925, which had a role in October, followed by 1.0940 which provided support earlier in February. Next, we find 1.0965 and 1.0985.

India’s Jan gold imports plunge 48% to four-month low on record prices

By Ritu

Capital Sands

India’s gold imports in January plunged 48% from a year earlier to their lowest in 4 months as a rally in local prices near record highs prompted buyers to curtail purchases, a government source said on Tuesday.

Lower buying by the world’s second biggest consumer of the precious metal could weigh on global prices trading near their highest level in almost seven years, but help New Delhi bring down the trade deficit and support the rupee.

India imported 36.26 tonnes of gold in January, compared with 69.51 tonnes a year earlier, the source said on condition of anonymity, as he was not authorised to speak to media.

In value terms, January imports totalled $1.58 billion, down from last year’s $2.31 billion, he said. Consumers are struggling to adjust with higher prices. They have risen too much, too fast.

Gold futures in India hit a record high 41,293 rupees per 10 grams in January after rising nearly a quarter in 2019.

The weak demand forced dealers to offer as much $13 an ounce discount over official domestic prices in January, the highest in nearly three months. The domestic price includes a 12.5% import tax and 3% sales tax. India’s gold consumption in 2019 fell 9% from the previous year to 690.4 tonnes, the lowest since 2016, the World Gold Council (WGC) said last week.

India’s gold imports could fall below 40 tonnes in February as prices are still elevated, said a Mumbai-based dealer with a gold importing bank, which would mark a drop from last year’s 77.64 tonnes.

GBP/USD hits 7 week low amid Brexit uncertainty, USD strength

By Ritu,

Capital Sands

GBP/USD has resumed its falls and hit the lowest since mid-December after the EU and the UK laid out different views for post-Brexit relations, raising the odds of no deal. The US dollar is gaining amid upbeat data.

On its way down, pound/dollar fell below the 50, 100, and 200 Simple Moving Averages on the four-hour chart. Moreover, it dropped below the uptrend support line that had accompanied it since mid-January and momentum turned positive.

However, the Relative Strength Index is close to 30 – near oversold conditions. This development implies that an upside correction may be coming soon. A correction could be temporary.

GBP/USD continues battling 1.2955, the low point in January. Further down, 1.29 is a round level and also worked as support in mid-December. It is followed by 1.2875, 1.2820, and 1.2775.

Looking up, resistance awaits at 1.2975, which was a cushion in late January. Next, 1.3010 is a veteran resistance line, and it is followed by 1.3035, which held GBP/US down in late January. 1.3075, 1.3110, and 1.3175 are next.

Putin speeds up Russian political shake-up, details new power centre

By Ritu,

Capital Sands

President Vladimir Putin accelerated a shake-up of Russia’s political system on Monday, submitting a constitutional reform blueprint to parliament that will create a new centre of power outside the presidency.

Putin also replaced Prosecutor General Yuri Chaika, who had held the role since 2006, a move suggesting his planned changes could reach beyond the political system and the government.

In a surprise move, Putin announced plans for reforms last week. Long-time ally Dmitry Medvedev then resigned as prime minister along with the government, saying he wanted to allow room for the president to make the changes.

Putin’s proposed changes are widely seen as giving him scope to retain influence once his term expires in 2024 though he said at the weekend he did not favour the Soviet-era practice of having leaders for life who die in office.

In one of the biggest changes, the status of the State Council, now a low-profile body that advises the president, would for the first time be enshrined in the constitution.

Putin, 67, has not disclosed what he plans to do once he leaves the Kremlin. One option could be to head the beefed-up State Council once he leaves the presidency.

Under his proposals, the president would pick the make-up of the State Council which would be handed broader powers to “determine the main directions of domestic and foreign policy.”

His changes also envisage preventing any future president serving more than two terms. Putin first became president in 2000 and is now in his fourth term as head of state.

World’s richest 2000 people hold more than poorest 4.6 billion combined: Oxfam

By Ritu,

Capital Sands

The world’s richest 2,153 people controlled more money than the poorest 4.6 billion combined in 2019, while unpaid or underpaid work by women and girls adds three times more to the global economy each year than the technology industry, Oxfam said on Monday.

The Nairobi-headquartered charity said in a report released ahead of the annual World Economic Forum of political and business leaders in Davos, Switzerland, that women around the world work 12.5 billion hours combined each day without pay or recognition.

In its “Time to Care” report, Oxfam said it estimated that unpaid care work by women added at least $10.8 trillion a year in value to the world economy – three times more than the tech industry.

It is important for us to underscore that the hidden engine of the economy that we see is really the unpaid care work of women. And that needs to change,” Amitabh Behar, CEO of Oxfam India, told in an interview.

To highlight the level of inequality in the global economy, Behar cited the case of a woman called Buchu Devi in India who spends 16 to 17 hours a day doing work like fetching water after trekking 3km, cooking, preparing her children for school and working in a poorly paid job.

“And on the one hand you see the billionaires who are all assembling at Davos with their personal planes, personal jets, super rich lifestyles,” he said.

Behar said that to remedy this, governments should make sure above all that the rich pay their taxes, which should then be used to pay for amenities such as clean water, healthcare and better quality schools.

Fines for European privacy breaches reach 114 million euros: report

By Ritu,

Capital Sands

European regulators have imposed 114 million euros ($126 million) in fines for data breaches since tougher privacy rules came into force in mid-2018, with approaches varying widely from country to country.

A report by law firm DLA Piper said France has imposed the biggest single fine – of 50 million euros against Google while the Netherlands, Britain and Germany led in terms of the number of data breach notifications.

The General Data Protection Regulation was introduced in an effort to safeguard sensitive personal information and prescribes stiff penalties if companies lose control of data or process it without proper consent.

It is enforced by a patchwork of national data protection offices across the 28-member European Union, with responsibility falling disproportionately on Ireland – the ‘lead’ regulator for Silicon Valley giants that have based their European operations there, such as Facebook.

The fines to date pale in comparison to multibillion-euro penalties imposed in EU anti-trust cases, but they are likely to rise over time as appeals and litigation subject the sanctions to scrutiny and create legal precedents.

Pound Falls After Weak U.K. Retail Boosts Prospect of Rate Cut

By Ritu,

Capital Sands

The pound slipped after U.K. retail sales data unexpectedly fell in December, increasing the chances that the Bank of England may cut a key interest rate this month.

Sterling dropped 0.2% to $1.3049 and declined against all its Group-of-10 peers as the volume of goods sold in stores and online fell 0.6% in December, confounding expectations of a 0.6% increase. Money markets are pricing a 75% chance of a rate cut on Jan. 30, compared with 62% on Thursday.

Markets are now turning their attention to impending purchasing managers’ indexes for further signs of the BOE’s direction.

“Clearly, there is a chance for a decent rebound of the PMIs next week and this may stay the BOE’s hand,” said Valentin Marinov, a strategist at Credit Agricole  SA. “That said, following this week’s weaker CPI and retail sales, the bar for stable rates is getting very high.”

Traders had been speculating that the central bank will cut rates at Mark Carney’s last monetary policy decision as BOE governor after a flurry of dovish comments from policy makers. The yield on 10-year U.K. government bonds was down three basis points at 0.61%, falling a sixth day and on course for its longest streak since August.

BJP’s OBC meet to begin in Patna today, all eyes on Mahagathbandhan vote bank

By Ritu,

Capital Sands

 

Sensex gained 1,000 points in 36 sessions to scale Mt 42K; over 300 stocks up 10-100%

By Ritu

Capital Sands

The Sensex crossed 42,000 for the first time as it touched 42,059 in the morning trade on January 16. It took 36 sessions for the index to make the journey from 41,000 (first hit on November 26) to 42,000, but the big movers were the small & midcap stocks.

The Sensex added 1,000 points, rising 2.4 percent, but the BSE Midcap index rose 4.8 percent and the BSE Small-cap index rallied by more than 8 percent in the same period.

The rally can be attributed to positive global cues, reforms initiated by the government to combat falling growth and expectations of reforms from the Budget that will be presented on February 1.

Small & midcaps seem to be getting the maximum attention as most of the stocks in the broader market space have been giving double-digit returns from November 26, 2019.

The global investment bank Morgan Stanley said in a report the trend could well favour quality midcaps in 2020.

Morgan Stanley said it was backing three themes for 2020:

a) domestic cyclical outperform defensives,

b) value and growth stocks beat quality stocks,

c) mid-caps lead the largecaps.

Investor wealth soared by over Rs 6 lakh crore in a buoyant equity market. The market capitalisation of BSE-listed firms soared from Rs 153.70 lakh crore on November 26 to Rs 159.74 lakh crore on January 15, 2020.