Dalal Street veteran S Naren has a word of caution for investors jumping into equities at the first sign of a rally. "Valuations are looking fair now because you have the top five stocks that are costly and the rest of the market may be cheap," says he. There will be times when central banks will try to cut accommodation and reduce liquidity, because it cannot be a one-way street. At that point, many investors will face a lot of pain. The answer, he says, therefore should be to follow asset allocation techniques right from now and actually cut equity allocations if the market gets extended due to more central bank accommodation. Sounds like a timely warning!
MARKET CUES: Where do we stand >>>  | Nifty futures on the Singapore Exchange traded 38.15 points, or 0.38 per cent lower at 10,104.20 in signs that Dalal Street was headed for a negative start on Thursday. |
| Analysts says the domestic market is seeing good buying momentum in many midcap stocks since last few days and as a result, market breadth continued to favour advancing counters. Nifty is facing resistance around the 200 EMA on the weekly chart, restricting the upside momentum. |
| Asian stocks saw modest declines after the Federal Reserve painted a long road ahead for repairing the economic damage from Covid-19. Equity benchmarks in Japan and Australian saw declines of about 1%, while Hong Kong and China dipped and Korea traded flat. |
| Wall Street stocks finished mostly lower overnight following a volatile session as the Fed vowed to keep interest rates low due to shaky economic outlook. Tech-rich Nasdaq finished 0.7 per cent higher at its third straight record close and first time above 10,000 points. But Dow tumbled 1 per cent and the broad-based S&P500 shed half a per cent. |
| The rupee pared early gains to settle on a flat note at 75.59 against the US dollar on Wednesday ahead of the US Fed's money policy decision. |
| The dollar fell to three-month troughs against the euro, sterling and Swiss franc and slid to a three-week low against the yen after the Fed held rates. The euro, the pound and the Swiss franc all hit fresh three-month highs. |
| Oil prices fell in early trade on Thursday on worries about slow demand growth with coronavirus cases rising. WTI crude futures fell 2.2% to $38.74 a barrel while Brent futures slipped 2.0% to $40.88. |
| Gold prices rose to a one-week high on Wednesday on expectations that the US Federal Reserve would roll out further measures to aid an economic recovery. Spot gold rose 0.4 per cent to $1,720.92 an ounce, after a more than 1 per cent jump in the previous session. |
| LOOK WHO'S |  |
Fed sees no rate hike till 2020…The US Fed says it will keep buying bonds to maintain low borrowing rates and support the US economy in the midst of a recession. And it says nearly all the Fed's policymakers foresee no rate hike through 2022. The Fed has cut its benchmark short-term rate to near zero. Keeping its rate ultra-low for over two more years could make it easier for consumers and businesses to borrow and spend enough to sustain an economy depressed by business shutdowns and high unemployment.
Read More S&P rating booster for bonds, rupee… S&P Global Ratings Wednesday brightened up a rather careworn Indian summer, endorsing New Delhi's ability to regain over the long term its leadership status as a global growth powerhouse that deserved to draw more foreign funds than any other competing destination. The affirmation of North Block's long-term ratings by S&P should prompt more global fund inflows into Asia's third biggest economy, where assets remain relatively inexpensive despite their recent climb from late-March lows. The immediate impact of S&P's stamp of approval on India's long-term prospects will likely be felt in the bond and currency markets.
Read More Forex reserves set to hit record… India's foreign exchange reserves are likely to touch the magic half-a-trillion mark for the first time in next few weeks as robust foreign fund flows amid a raging pandemic drives the country towards a momentous milestone. India has already leapfrogged Russia and South Korea to become the third-biggest holder of reserves after China and Japan, and will consolidate its position further when it reaches the $500 billion mark.
Read More Now, TPG in queue for R-Jio stake… US-based TPG Capital is in active discussions with Jio Platforms as investors seek to buy into Mukesh Ambani's telecom-technology-commerce triple play, said people in the know. If a deal happens, TPG would join bulge-bracket American private equity peers KKR, Silver Lake and General Atlantic in picking up a stake in the Reliance Industries unit. TPG is an investor in several top global technology disruptors such as Uber, AirBnB and SurveyMonkey.
Read More | AND WHO'S |  |
New tax worries haunt FPIs… Fresh tax worries are cropping up for India's foreign portfolio investors that are structured as trusts and associations of persons, this time on the dividend front. Several such FPIs, including sovereign wealth funds, could end up paying 43% tax on dividend received from listed companies because they are not eligible for benefits under the Double Tax Avoidance Agreements. According to experts, only funds that are taxable entities in their home jurisdictions can avail of the treaty benefits.
Read More Pentup demand drives sales… The first week of Unlock 1.0 beginning June 1 saw most firms resume business quickly with pent-up demand helping sales, though supply side constraints including labour shortages and inadequate credit held back a faster reopening, according to a quick survey done by CII on 51 companies. A majority of those surveyed across India indicated a rise of more than 25% in production compared with levels during the lockdown. The sales pickup has also been in the same range with 31% respondents indicating 25-50% rise from the lockdown.
Read More Lockdown to contract India growth 3.7%…The lockdown to contain the Covid-19 outbreak has taken a heavy toll on India's economy, which could contract 3.7% in this financial year, the OECD said. It expects a deeper contraction of 7.3% in India in the event of a second wave of the pandemic. The intergovernmental organisation's interim Economic Outlook released in March had forecast India's gross domestic product to expand 5.1% in fiscal 2021. he latest report projects a strong recovery in the next financial year to 7.9% in a 'single-hit' scenario and 8.1% in a 'double-hit' scenario.
Read More Meanwhile... Debt funds may need to hold more g-sec… Debt mutual funds may be mandated to hold more government bonds incrementally to overcome liquidity challenges from sudden redemptions, as was evident in the recent Franklin Templeton case, an RBI research paper said. The central bank also observed that NBFCs could face liquidity pressures while meeting repayments in commercial papers and bonds the next few months, and that they may need to borrow from banks to meet the gap.
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