Central banks in some of the biggest economies announced their monetary policy decisions last week, keeping the markets on the tenterhooks. Now that most of these highly-anticipated rate decisions are over, investors will be watching out for earnings announcements by some of the major Indian firms and domestic macroeconomic data. Last week, the Bank of Japan eased its grip on its benchmark interest rate, while the Federal Reserve and the European Central Bank hiked theirs by the anticipated figure of 25 basis points.

Investors expect the Federal Reserve to stop raising interest rates after inflation showed more signs of slowing in June. The Commerce Department said that the personal consumption expenditures price index, excluding food and energy, climbed by 0.2% from the previous month while, the annual rate of change in the core PCE (PCE minus food and energy) was 4.1%, down from 4.2% forecasts and the lowest annual rate since September 2021.

Domestic shares will take further cues from the quarterly earnings to be announced this week for NTPC, GAIL, Maruti Suzuki, Ambuja Cements, HPCL, Eicher Motors, Sun Pharma, and SBI while keeping an eye on Indian government finances for June and GST collections, domestic manufacturing PMI for the month of July.

Domestic Markets Last Week:

Stocks market's four-week upswing ended due to selling pressure in index heavyweights. Foreign portfolio investors turning sellers and rising US government bond yields contributed to the indices ending lower. On Friday, the Nifty 50 fell 0.50% to finish at 19,646.05, while the Sensex fell 0.79% to 66,160.20.

Yields rose to a month high for the benchmark 7.26%, 2033 government securities tracking rise in US Treasuries. Last week, yields on benchmark securities rose by 8 basis points to close at 7.1614% on Friday.

Rupee closed at a two-week low as the resurgent dollar, and traders' position adjustments weighed on the currency, while premiums fell in response to an increase in US yields. Earlier in the last week, the rupee hit around 81.70, when the Reserve Bank of India once again stepped in.

Global Markets Last Week:

US stocks closed higher last week after major technology companies’ earnings, economic data, and central bank statements boosted market confidence of a soft landing for the US economy. On Friday, data indicated that the US annual inflation slowed in June, potentially bringing the Federal Reserve closer to finishing its quickest interest rate hike cycle since the 1980s.

US Treasury yields declined on Friday after reaching two-week highs for most maturities in the previous session as data showed June inflation continued to drop but remained decisively above the Federal Reserve's 2% objective. The Bank of Japan's decision to permit Japan's interest rates to climb more freely in accordance with rising inflation and economic growth earlier last week had helped US yields.

US dollar declined marginally as crucial inflation data for June revealed lower-than-expected inflation. The Federal Reserve may not need to pursue aggressive rate increases, which would put pressure on US treasury yields and reduce the dollar's investment appeal.

Corporate Bonds

Secondary Market

Yields were steady and the yield curve flat across tenures last week as the US Fed hiked key funds rate as expected by investors. Trade volume picked up during the week led by mutual funds on buying side and banks continued to sell bonds in the secondary market.

Outlook For This Week

Stocks may track the progress of monsoon, corporate earnings, and crude oil prices this week. Some major companies such as NTPC, Bosch, GAIL, Maruti Suzuki, Ambuja Cements, HPCL, Adani Enterprises, Bharti Airtel, Eicher Motors, Sun Pharma, and SBI will declare their first quarter results.

Indian government bonds will track the US peers and take further cues from domestic and global macroeconomic data.

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