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Shares mostly lower in Asia after retreat on Wall Street

Shares were mostly lower in Asia on Wednesday after Wall Street pumped the brakes on its recent rally. Tokyo’s Nikkei 225 index edged higher, while the Shanghai Composite sank 1.6%. Overnight, a late slide in big technology companies left indexes broadly lower, breaking a seven-day winning streak for the S&P 500.

A discouraging lack of progress on talks over more economic aid for the US economy, coupled with worries over the coronavirus pandemic and tensions between the US and China, have prompted investors to sell and lock in profits from recent gains, analysts said.

”When you walk back the market’s expectations of an imminent fiscal deal, it is like poking the balloon with a straight pin as all semblance of near-term optimism gets immediately deflated,” Stephen Innes of AxiCorp said in a commentary.

The Nikkei 225 gained 0.3% to 22,821.28, while Hong Kong’s Hang Seng edged 0.2% lower to 24,841.00. In South Korea, the Kospi slipped 0.1%, to 2,417.12. The Shanghai Composite index lost 53 points to 3,287.13. Australia’s S&P/ASX 200 declined 0.5% to 6,110.70.

Shares fell in Taiwan, India and most of Southeast Asia. Overnight’s reversal left the S&P 500 with a 0.8% loss, at 3,333.69. Drops for big-name technology stocks like Apple and Microsoft, plus losses in health care and communications stocks, outweighed gains in financial, industrial and energy companies.

Tech stocks have far outpaced the rest of the market this year as investors bet they could still thrive in a stay-at-home economy. The pullback ended the S&P 500’s seven-day winning streak. Despite the sell-off, the benchmark index remains within 2% of the all-time high it reached in February, reflecting a stunning turnaround from a nearly 34% tumble in March when the coronavirus pandemic sent stocks into a nosedive.

Investors have grown more confident in recent weeks amid some positive economic data and better-than-expected second-quarter results from companies, suggesting corporate profits could be headed higher in the second half of this year and in 2021.

Unprecedented actions by the Federal Reserve to stabilise markets this spring, including cutting interest rates and ramping up bond purchases, have made stocks attractive relative to other assets and given traders enough confidence to keep snapping up stocks.

Traders are also increasingly optimistic that the many pharmaceutical companies working on ways to treat COVID-19 will deliver a working vaccine in the coming months. The Dow Jones Industrial Average dropped 0.4% to 27,686.91. The Nasdaq composite lost 1.7% to 10,782.82. The Russell 2000 index of small company stocks gave up 0.6%, to 1,575.10.

While talks between Democrats and Republicans on a new economic relief package appear to have stalled, investors are still optimistic both sides will reach an agreement.

The yield on the 10-year Treasury rose to 0.65% from 0.57% late Monday, a big move. The price of gold fell further after breaching $2,000 per ounce earlier last week, giving up $56.20 to $1,890.10. Benchmark US crude oil for September delivery gained 14 cents to $41.75 per barrel in electronic trading on the New York Mercantile Exchange.

It fell 0.8% to settle at $41.61 per barrel on Tuesday. Brent crude oil for October delivery picked up 20 cents to $44.70 per barrel. Overnight, it lost 1.1% to settle at $44.50 per barrel. In currency dealings, the US dollar bought 106.73 Japanese yen, up from 106.51 yen late Tuesday. The euro weakened to $1.1723 from $1.1744.

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Equity MFs see the first outflow in over 4 yrs in July on profit-booking

Equity mutual funds witnessed an outflow of Rs 2,480 crore in July, making it the first withdrawal in more than four years, primarily on profit-booking by investors.

Overall, the mutual fund industry witnessed a net inflow of 89,813 crore across all segments last month, much higher than Rs 7,265 crore seen in June, data by Association of Mutual Funds in India showed on Monday. This inflow could be attributed to infusion in liquid funds and low duration funds.

As per the data, outflow from equity and equity-linked open ended schemes was at Rs 2,480.35 crore in July as compare to an inflow of Rs 240.55 crore in June. Such schemes had attracted Rs 5,256 crore in May, Rs 6,213 crore in April, Rs 11,723 crore in March, Rs 10,796 crore in February and Rs 7,877 crore in January. July 2020 saw the first outflow since March 2016, when equity schemes witnessed a pull out of Rs 1,370 crore.

In July this year, except for equity linked saving schemes (ELSS) and focused fund categories, all the other equity categories witnessed net outflow.

Association of Mutual Funds in India (Amfi) Chief Executive N Venkatesh attributed the outflow from equity-oriented funds to withdrawal from multi-cap and large cap funds due to profit booking by investors.

“Equity-oriented mutual funds witnessed their first major monthly net outflow in a long time. Multi-cap fund category was the worst hit followed by mid-cap and value fund categories,” said Himanshu Srivastava, Associate Director Manager Research at Morningstar India.

This could be largely attributed to investors booking profit given the surge in the equity markets, across market segments, in the recent times, he added.

Multi-cap, midcap, value fund and multi-cap saw outflows to the tune of Rs 1,033 crore, Rs 579 crore, Rs 549 crore and Rs 365 crore, respectively, during the month under review. However, focussed funds attracted Rs 535 crore, while the same for ELSS was Rs 279 crore.

Apart from equity funds, overall hybrid funds saw an outflow of Rs 7,301 crore. With equity markets doing well and stable scenario in the fixed income markets, hybrid schemes too witnessed significant net outflows, with viewing this scenario as a good exit opportunity, Srivastava said.

Within the hybrid schemes, balanced hybrid or aggressive hybrid fund, whose mandate is to invest between 65-80 per cent of assets in equities, witnessed a net outflow of Rs 2,196 crore in July. “This category has been witnessing consistent net outflow for a long time, given the challenging scenario in both equity and debt markets earlier,” he added.

Fixed income securities or debt funds saw an inflow of Rs 91,392 crore last month compared to Rs 2,862 crore in June. Among fixed-income securities, low duration funds saw an infusion of Rs 14,219 crore, liquid schemes (Rs 14,055 crore) corporate bond funds (Rs 11,910 crore) and banking and PSU funds (Rs 6,323 crore).

However, credit risk funds saw an outflow of Rs 670 crore in the period under review, which was much lower than a withdrawal of Rs 1,494 crore in June, Rs 5,173 crore in May and Rs 19,239 crore in April. Besides, investors are preferring safe haven assets, gold exchange traded funds (ETFs), as such instruments saw an inflow of Rs 921 crore last month as compared to Rs 494 crore witnessed in June. The assets under management of the 45-players mutual fund industry rose to Rs 27.12 lakh crore in July-end from Rs 25.5 lakh crore in June-end.

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Sensex, Nifty end with gains; total market capitalization of BSE firms back to pre-covid levels

Sensex and Nifty regained momentum and ended Thursday’s trading session higher, helped by RBI’s announcements regarding loan restructuring. S&P BSE Sensex ended 362 points or 0.96% higher at 38,025 points, while the 50-stock Nifty managed to close at the 11,200 mark. With the Nifty 50 closing at 11,200 mark, analysts say there could be further upside in the coming sessions. IT Companies and Banking stocks helped lift the Indices higher today. Apart from Nifty PSU Bank, all sectoral indices ended with gains. Nifty IT surged 1.7% while Nifty FMCG and Nifty Metal gained 1.3% each.

BSE market-cap recoups all losses: Market capitalization of all BSE listed firms stood at Rs 149 lakh crore at the end of Thursday’s trading session. Market capitalization of BSE listed firms has reached these levels for the first time since February. During the March mayhem that equity markets witnessed, BSE’s M-Cap dived down to as low as Rs 101 lakh crore.

RBI’s announcements push financials: Banking and finance stocks gained on Thursday after the central bank talked about MSME loan restructuring and did not talk about moratorium extension. “Banking stocks have reacted positively to the outcome despite no rate cut as the feared extension of moratorium has not happened and they will be spared of the requirement of high provisions if by Sept 30, the new committee’s recommendations are implemented,” said Deepak Jasani, Head Retail Research, HDFC Securities.

Top gainers: Tata Steel was up 3.8% as the top Sensex gainer followed by Infosys and HCL Technologies. Among midcaps Tata Consumer Products was up over 8%. Small cap stock Aarti Industries surged 18% during the day’s trade. Birlasoft was the other top gainer.

Top drags: Mahindra & Mahindra along with Bharti Airtel were the worst performing stocks on Sensex. Muthoot Finance and Natco Pharma were worst Midcap performers while JBM Auto and Gulf Oil were the top small cap drags.

What do the charts say: “Markets need to close above 11200 for the uptrend to continue. If we are able to do that tomorrow, we could see a rally all of next week which would take the markets to 11400-11500. The support continues to remain around 10900, which if broken can take us down to 10700,” said Manish Hathiramani, Index Trader and Technical Analyst, Deen Dayal Investments.

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Gold prices inch closer to Rs 55,000 per 10 gm, global gold breaches $2,000; prices may rise more

Gold prices today continued to rally and made a new all-time high of Rs 54,797 per 10 grams, mirroring the rise in overseas gold. In the international market, gold and silver prices are rising at a significant pace, as both metals breached the key level of $2000 and $25, respectively. On MCX, gold October futures rose Rs 246 to hit a record high, while silver September futures fell Rs 186 or 0.27 per cent to rule at Rs 69,611 per kg. Analysts say diminishing hopes of an immediate economic recovery amid rising pandemic cases continue to support gold’s bullish outlook. “More economic stimulus measures from central banks to combat the economic blow due to the pandemic, escalating geopolitical uncertainties and a weaker US dollar will continue to lift gold’s safe-haven appeal and demand for the commodity,” said Hareesh V, Head Commodity Research at Geojit Financial Services.

With today’s rally in gold prices, the yellow metal is now up 42.32 per cent from March lows of Rs 38,500 per 10 grams. While silver prices have climbed up 107 per cent from Rs 33,580 per kg touched in March this year. Silver prices touched a record high of Rs 73,600 per kg in 2011. “Massive explosion in Lebanon raised geopolitical risk, worsening the US-China trade relation, weaker dollar and hopes of more economic stimulus to combat the blow from the COVID-19 crisis boosted the safe-haven metal’s appeal,” said Jigar Trivedi, Fundamental Research Analyst, Anand Rathi Shares and Stock Brokers.

Globally, spot gold hit a record high of $2,030.72 in early Asian trade but later dipped to $2,014.41, with the slight retreat attributed to profit-taking. US gold futures rose 0.7% to $2,032.30, according to a Reuters report. Holdings of SPDR Gold Trust rose 0.8% to 1,257.73 tonnes on Tuesday. “Sentiment is positive and we recommend to buy on dips,” Trivedi added.

Analysts expect a further rally in the gold prices owing to a host of factors. US Treasury Secretary Mnuchin said that negotiators will try to reach an overall agreement on a coronavirus relief bill by the end of this week. The US yields have fallen to their lowest further supporting the gold prices. “Market participants will focus on the service PMI number expected from major economies; if reported weaker than expectations than it will lend further support to metal prices,” said Navneet Damani, VP, Motilal Oswal.

Technical outlook

“Bullish outlook will continue and prices may look towards the next target of $2280 as long as it stays above $1980. However, a direct drop below $1880 could negate the outlook and take prices lower,” added Hareesh V.

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