Last week, Indian stock indices hit a record high. Favorable macroeconomic indicators, a fall in oil prices, a comfortable victory for the BJP in three states, and the Reserve Bank of India's decision to keep its key interest rates unchanged fuelled the longest winning streak for the indices in the past three years.

On Friday, the RBI raised its growth projections for FY24 from 6.5⁒ to 7⁒. The central bank avoided making any big announcements in its last policy of the calendar year but signaled the policy stance will continue until the retail inflation comes back to the 4⁒ target on a durable basis.

US shares were volatile during the week but notched up gains in the end. US treasury yields also witnessed an uptick after strong jobs data and a fall in the unemployment rate for November.

This week, the rally in stocks is expected to continue, while the rupee is likely to move in a narrow band.

Domestic Markets Last Week:

Stock indices hit fresh highs as state poll victory for the BJP led to assurance of policy continuity at the Centre. This was further buttressed by higher-than-expected GDP growth, a fall in oil prices, and the Reserve Bank of India staying pat on its interest rates. The blue-chip indices have now risen for six weeks in a row, the longest winning streak in the past three years.

Yields fell marginally every week despite an uptick on Friday. Investors now await more clarity on the comments from Governor Das that the liquidity problems in the last two months did not warrant the open market sale of bonds.

The rupee reported a weekly loss of 0.1⁒ against the dollar following the muted movements of its Asian counterparts. The Indian currency was range-bound throughout the week as investors focused on the US labor market report released on Friday.

Global Markets Last Week:

US stocks rose on Friday led by energy and technology companies in a volatile trade. The Wall Street indices hit a four-month high after the US jobs data boosted investor optimism about a soft landing for the economy.

Treasury yields surged after the better-than-expected November job report as traders tempered their hopes that the Federal Reserve could lower interest rates as soon as March. The unemployment rate fell to 3.7⁒ and the Labor Department report indicated that nonfarm payrolls expanded by 1,99,000 jobs in November after rising by 150,000 jobs in October.

The US dollar was up against the major currencies after robust November jobs data and as the unemployment rate fell to 3.7⁒. Investors see this as labor market strength and now don't expect the US Federal Reserve to lower interest rates in the first quarter of 2024.

Corporate Bonds

Secondary Market

Yields remained steady for most of the week amid lackluster trade as investors preferred to purchase a fresh supply of corporate bonds in the primary market. Market participants did not react strongly to the RBI's policy as the decisions were in line with expectations.

Outlook For This Week

Stocks may continue to rally tracking the surge in US markets last week. The rupee is expected to weaken this week but is likely to be in a tight range. Government bond yields may inch up on Monday after better-than-expected US job data on Friday. Markets will take further cues from inflation data to be released later this week.

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