Sensex at 100,000!

That will be the buzz for the next few days.

Highly regarded strategist Chris Wood of Jefferies has said it is only a matter of time before the Sensex touches the 100,000 level.

There are reasons to be optimistic about India. Capex cycle springs to mind, he said.

Sensex, from its present level of around 60000s, has some distance to go.

Separately, Nifty has been one of the top gainers worldwide in the last year. Probably only Nikkei outdid the Indian share gauge.

With India's rate cycle set to turn and inflation set to ease, markets will have much to cheer for.

Last week's newsletter focused on the Reserve Bank of India withdrawing the 2,000 rupee note. Politics aside, this ended up being a non-event. The news did not trouble the markets.

But what is bound to trouble the market ahead is the surprise reading of the Federal Reserve's favorite inflation gauge, which rose in April.

Markets are now split on whether the Fed will raise rates in June or raise rates in July after skipping a hike next month.

This is bound to have a bearing on the markets as it now digests the prospects for "higher for longer" yet again.

Last week, the markets tracked developments around raising the US debt ceiling. Politicians have been going back and forth on the issue. The hope is that a meaningful deal will be clinched soon before the US government starts to default on its obligations.

IT stocks in the US and India surged thanks to a stellar forecast by Nvidia, which has come to dominate the market for chips used in AI. The company's valuation rose close to the trillion dollar mark after a surge in its shares this week.

The slip by Reserve Bank of India Governor Shaktikanta Das was a sidelight for the week. Instead of saying that MPC's April move was a "pause" and not a "pivot", he said at an industry event that the April decision was a pivot and not a pause.

The RBI tried to control the damage, saying Das misspoke.

But the market is hoping that the slip is Freudian.

Indian Markets Last Week:

Stocks rose 1% for the week to their highest levels since December. On Friday, shares jumped, with the Nifty 50 rising to a five-month high, led by IT stocks and a jump in Reliance Industries. NIFTYIT rose 1.5%. It was a rub-off from the rise in NASDAQ. Reliance Industries jumped nearly 3%.

Government bond yields were only a little changed for the week. They couldn't break the hold of 7% on the 10-year yield. Profit sales brought the 10-year to 7%. The week saw a tug-of-war between the liquidity impact of the withdrawal of the 2,000 rupee note and US politicians' tussle over raising the debt ceiling.

The rupee closed slightly higher on Friday and for the week despite a firm dollar. Strong inflows from foreign funds and exporters helped the rupee notch up marginal gains. The rupee recovered from a near three-month low of 82.85 hit during the week. The market believed the RBI would keep the Indian unit in a tight range around the 82.80-82.85 level. Foreign investors pumped around $4 billion into equities this month.

Global Markets Last Week:

Data released Friday showed that the personal consumption expenditures (PCE) price index, excluding food and energy, increased 4.7% after gaining 4.6% the prior month.

A Commerce Department report said the annual rate of consumer price growth accelerated to 4.4% in April after slowing to 4.2% in March. Expectations were that the pace would slow to 3.9%.

There are more bets that Fed will raise rates on June 14.

The Fed's target rate is now projected to stay above 5% until Dec.13, up from Nov. 1 before the day's data, the FEDWATCH tool indicated.

US Stocks rose. The Dow ended a five-day losing streak, while the Nasdaq and S&P 500 closed at their highest levels since August 2022. IT companies' shares led gains. Nvidia Corp's stock climbed 2.5%, adding to its 24% gain on Thursday.

In a choppy week for trading, US Treasury yields rose, particularly at the short end. The 2-year note yield jumped 5 basis points. Yields were firm throughout the week. Lawmakers' inability to iron out a short agreement for raising the debt ceiling and hawkish comments from Fed officials kept pressure on yields. The continued resilience of the US economy has surprised trades. Expectations of rate cuts by the Fed have gotten pushed back.

The dollar rose for the third straight week. After the latest reading on inflation, markets were forced to bet again on a higher-for-longer interest rate stance. For most of the week, as was the last week, the safe haven appeal kept the dollar up.

Corporate Bonds

Bond Issuances Of The Past Week

• HDFC raised ₹36.35 billion via 10-year NCDs at 7.65%.
• IRFC raised ₹25 billion via 41-months bonds at 7.23%.
• National Housing Bank raised ₹20 billion via 37-month bonds at 7.22%.
• ONGC Petro Additions raised ₹7 billion via 18-month NCDs at 8.12%.
• Edelweiss Asset Reconstruction Co raised ₹6.50 billion via 15-month NCDs at 14.5%.
• Axis Finance raised ₹5 billion via 5-year NCDs at 7.95%.
• Bajaj Housing Finance raised ₹5 billion via 3-year NCDs at 7.78%.
• IIFL Home Finance raised ₹3.20 billion via 3-year NCDs at 8.5%.
• Cholamandalam Investment and Finance Co raised ₹3 billion via 84-month NCDs at 8.7422%.
• Aadhar Housing Finance raised ₹2.75 billion via 3-year NCDs at 8.5%.
• Tata Projects raised ₹2.50 billion via 35-month NCDs at 8.18%.
• L&T Finance raised ₹2.50 billion via 10-year NCDs at 7.85%.
• Fedbank Financial Services raised ₹2 billion via 6-year 11-month NCDs at 9.00%.
• Sundaram Home Finance raised ₹2 billion via 24-month NCDs at 7.84%.
• IIFL Samasta Finance raised ₹1.50 billion via 42-month NCDs at 10%.
• L&T Finance raised ₹1.42 billion via 5-year NCDs at 7.90%.
• JM Financial Credit Solutions raised ₹1 billion via 2-year 11-month NCDs at 9.00%

Secondary Market

Yields eased 3 to 5 basis points for shorter tenure bonds as liquidity expected to improve in near future on withdrawal of ₹2,000 notes. Trade remained subdued largely and yields steady for 10-year bonds on lack of fresh cues.

Outlook For This Week

Stocks are expected to rise as crucial resistance levels are breached. New highs are expected to be reached soon, as the consolidation phase may be over. Bond yields are likely to remain in a tight range. So would the rupee, with the RBI's indirect actions in the market keeping it so. US markets are closed Monday. Indian markets will avoid taking significant positions at the start of the week, preferring to ape US markets' reaction if US politicians break the deadlock over debt ceiling discussions.

In Other News

• BSP, TDP, JD(S) oppose boycott of Parliament building inauguration.
• SC rejects plea seeking inauguration of new Parliament by president.
• IMD retains the normal monsoon rain forecast despite the looming El Nino.
• Sitharaman reviews G20 finance panel progress ahead of Jul meet.
• Withdrawal of 2,000-rupee notes not demonetization, RBI tells HC.
• HDFC plans up to 100-bln-rupee mega bond sale next week.
• SBI economic report projects Jan-Mar GDP growth at 5.5%, FY23 at 7%.
• US consumer spending picks up on the back of wage growth.
• Five bankers to face interview on June 1 for RBI deputy governor's post.
• RBI Das says shouldn't be surprised if FY23 growth is higher than 7%.
• May CPI inflation is likely to be lower than Apr, says RBI governor Das.
• Biden sounds hopeful on debt ceiling, Treasury warns of a June 5 default.
• Brazil's Lula speaks to Putin, declines an invitation to visit Russia.

News Events This, Next Week

May 29: US markets closed for Memorial Day

May 31: GDP for Jan-Mar, by NSO.

May 31: Provisional Annual Estimates of GDP for 2022-23 (Apr-Mar), byNSO.

May 31: Government finances for 2022-23 (Apr-Mar), by CGA.

May 31: Core sector output for April, by Office of the Economic Adviser.

May 31: CPI for Industrial Workers for April, by Labour Bureau.