Most of India, especially north, faced either the fury or at least the specter of the flood last week, with monsoon rains suddenly gathering pace. The deluge of foreign fund inflows into Indian equities also continued for most of the week. Foreign investors purchased close to $640 million of Indian equities in the first three trading sessions last week.

Rupee too has strengthened. Fear that the Reserve Bank of India may restrict further appreciation of the local currency, however, capped the gains.

This week, the focus will be on interest rate decisions by some of the world's largest economies and earnings reports by domestic companies. On July 25 and 26, the US Federal Reserve will decide on monetary policy, while on July 27 the European Central Bank will do the same, and on July 28, the Bank of Japan will announce its rate decision.

Indian Markets Last Week:

Stocks ended the week with modest gains, rising for the fourth consecutive week. The Sensex closed above 66,600, whereas the Nifty settled slightly just below 19,750. In four out of the five trading sessions, the benchmark indices inched upward last week. IT stocks dragged the market lower on Friday after leading software services provider Infosys lowered its revenue outlook and signalled weakness in client spending.

Yields on benchmark bonds reached a session high of 7.10% on Friday. Still, they ended flat at 7.0784%, despite a rise in supply following the government bond auction, as investors shifted their attention to the upcoming policy decision from the US Federal Reserve.

The rupee strengthened for a second week in a row as foreign inflows continued to invest in local stocks for the early part of the week. However, gains were capped on concerns that the central bank will restrict the currency's appreciation. The rupee closed at 81.9450 per dollar.

Global Markets Last Week:

US stocks finished mixed on Friday, with the Dow Jones Industrial Average seeing its longest climb in over six years. Nearly 1% gains in Procter & Gamble and Nand Chevron boosted the blue-chip index. On Friday, trading was volatile due to the monthly options expiration and the anticipated special rebalancing of the multi-trillion-dollar Nasdaq 100 after trading hours. This week Nasdaq lost 0.6% of its value, while the Dow gained 2.1%, the S&P 500 only gained 0.7%.

US treasury yields ended the week marginally higher on Friday as investors digested a slew of economic data that sent conflicting signals about the Federal Reserve’s likely stance on future interest rates. The yield curve has widened, and investors believe inversion of the curve between two-year & ten-year notes is a prominent economic indicator of an impending recession.

US Dollar rose for a fourth consecutive trading day, reaching a new weekly high. The yen's decline to a 1-1/2 week low against the dollar on Friday bolstered advances in the dollar. The dollar receives additional support from the view that the Federal Reserve will raise the fed funds rate by 25 basis points at the upcoming FOMC meeting this week.

Corporate Bonds

Bond Issuances of the Past Week

Secondary Market

Yields remained unchanged and trade was dull for the corporate bonds last week due to lack of fresh cues. There were a limited number of mutual funds actively trading in shorter tenure papers.

Outlook For This Week

Stock market activity will likely be shaped by earnings reports from domestic companies and the F&O expiry. Local fixed income, currency, and stock markets will keep a close tab on interest rate decisions from major economies including the US Federal Reserve, the Bank of Japan, and the European Central Bank. Market participants expect the US Fed and ECB to raise rates 25 basis points rate on Wednesday, while Bank of Japan may hold key policy rates in July.

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