Good morning!

Last week, financials caused a slump in Indian stock indices, but they still managed to post gains for the week thanks to a recovery in index heavyweights and a reduction in fears over West Asia geopolitical tensions. The rupee strengthened versus the dollar, while the yield on government bonds recouped losses.

In the US, Nasdaq, and S&P 500 both posted their biggest weekly percentage increases since November 2023 after Microsoft and Alphabets posted strong quarterly results. However, important data points released last week hinted that the US Federal Reserve may not cut its interest rates soon. The US personal consumption expenditure price index increased 0.3⁒ in March. Inflation in PCE rose 2.7⁒ annually. The US GDP rose 1.6⁒ annually in January-March 2024, missing Wall Street projections of 2.4⁒.

Market participants will eye the US Federal Open Market Committee policy meeting this week to take fresh cues on the interest rate movements.

Domestic Markets Last Week

• Indian stock indices fell on Friday, driven by financials, but reported weekly gains were aided by a post-results rally in key index constituents and the calming of West Asia concerns. The Nifty 50 and Sensex advanced by roughly 1.25⁒ and 1⁒, respectively, last week. Axis Bank rose 9.83⁒ this week, its highest since October 2022, and was the Nifty 50's top weekly gainer after exceeding earnings expectations in the March quarter.
• Government bond yields eased, correcting early losses, as traders shorted their positions following the decline in rates on US treasury bonds and the domestic weekly auction of government bonds, both of which took place as planned.
• The rupee appreciated weekly against the dollar. With importers and exporters waiting for more clues from US consumption data for March, the rupee fluctuated in a tight band on Friday. Alongside the US GDP data, which grew 3.7⁒ in the January-March quarter, above projections, came the US core personal consumption expenditure data, which excludes food and energy consumption was higher than expected.

Global Markets Last Week

• US benchmark indices snapped several weeks of losses and reported the largest weekly percentage gains since November 2023 last week. While the Nasdaq ended four weeks of losses in a row, the benchmark S&P 500 ended three weeks of losses. US stocks surged Friday, helped by a surge in mega-cap growth IT firms after strong quarterly results from Microsoft and Alphabet, as well as modest inflation data.
• Treasury yields ended up for the week after the US data released last week dashed investors' hopes of any interest rate cuts soon. The US personal consumption expenditure price index rose 0.3⁒ in March, matching the unrevised February gain. PCE inflation increases by 2.7⁒ year-over-year. The US GDP rose 1.6⁒ annually in January-March 2024, missing Wall Street projections of 2.4⁒.
• The US dollar index strengthened against the basket of major currencies on Friday after U.S. inflation data showed little signs of easing, confirming views that the Federal Reserve will delay cutting interest rates until later this year. The dollar hit a 34-year high versus the yen on Friday after the Bank of Japan maintained interest rates after its two-day policy meeting, but it hinted at future rate hikes.

Corporate Bonds

Secondary Market

Yields ended flat for last in the corporate bonds secondary market amid lackluster trade. Market participants awaited the US data on personal consumption expenditure for March, released after market hours on Friday. Mutual funds were trading to churn their portfolios in the shorter-tenure papers.

Outlook For This Week

In a shortened trading week, domestic shares will still be heavily focused on financial results from Indian corporates. Maharashtra Day is a Wednesday, May 1, 2024, when stock exchanges will be closed. Government bonds will be guided by the two-day US Federal Open Market Committee meeting that ends on May 1 and by news from West Asian geopolitical issues.

In Other news

• Foreign exchange reserves drop to a six-week low at $640.33 billion.
• Capex push by govt to propel GDP growth between 7.1-7.4⁒ in FY25: NIPFP
• Lok Sabha polls: Nearly 61⁒ turnout was recorded in the second phase of elections.
• March crude oil imports declined 1.1⁒ to 20.69 million tonnes: Govt.
• FPI limit in G-sec is unchanged at 6⁒ of outstanding stocks of securities: RBI.
• RBI proposes a 'digital view' of loans to ensure transparency to borrowers.
• Basmati rice exports rose 22⁒ till February FY24 on West Asia demand.
• Hamas says it received Israel's response to its ceasefire proposal.
• Blinken meets with Xi as the US pressures China to end support for Russia.
• The US and its allies aim to help Ukraine bolster its defenses after the aid gap.