Stocks continued to break records last week.

For three days in a row, the benchmark indices hit new record highs. Sensex and Nifty crossed the key levels of 67,900 and 20,200, respectively. The week also saw inflation in India printing slightly below market expectations but still running high when compared with the Reserve Bank of India’s targets.

However, central banks in India and the US are expected to keep interest rates on hold. The currency market was unnerved by the rise in trade deficit late on Friday. India reported a higher-than-expected merchandise trade deficit of $24.16 billion in August.

Indian Markets Last Week:

Stock indices surged to record highs this week. Both the benchmark indices, the Nifty-50 and the Sensex, rose nearly 2% this week. Nifty first crossed 20000 and then 20200. Small-cap and mid-cap stocks closed lower amid debate they are due for correction. Concerns over inflation and oil prices also weighed on them. IT shares were up on view the Fed will pause interest rate hikes. The shares rose Friday due to a rise in auto shares, led by Bajaj Auto.

Yields rose sharply on Friday, reversing the trend seen on Thursday, owing to disappointment at the weekly auction where the cutoff yields were higher than expected. Earlier in the week, yields fell on hopes of the imminent inclusion of Indian bonds in global bond indices. Yields closed higher for the week.

Rupee posted losses for the week due to high oil prices and persistent demand for the greenback from importers. The rupee’s fall was limited by the continued rise in domestic equities. The market’s attention is now on the upcoming Fed meeting.

Global Markets Last Week:

US stocks ended substantially lower led by chip manufacturers on worries about sluggish consumer demand. Shares of Applied Materials, Lam Research, and KLA Corp all fell by over 4% after TSMC asked its key vendors to delay deliveries. Auto shares fell as the United Auto Workers union went on strike at General Motors, Ford, and Chrysler facilities amid concerns over auto companies chip demand.

US Treasury yields rose on Friday after recent economic data raised concerns about the outlook for interest rates from the US Federal Reserve. The benchmark treasuries had weakened after the US Labour Department released reports on Friday that showed US import and export prices that exceeded investors’ expectations.

US dollar fell on Friday after data showed a drop in consumer optimism, but dollar index reported ninth straight weekly gains on overall positive economic data. Market participants will seek more clarity on the US Federal Reserve's interest rate outlook at their policy meeting this week with expectation that the Fed will keep interest rate unchanged.

Corporate Bonds

Secondary Market

Yields ended up 3-4 basis points across tenures on a weekly basis despite a decline on Thursday mirroring government bonds. Merchant bankers and few corporates sold in the secondary market amid fresh supply of bonds in the primary market, while mutual funds bought short tenure bonds.

Outlook For This Week

Stocks are expected to have a slow start this week as investors will await global and domestic cues to determine the direction of the market. Government bond yields are likely to be steady, while Rupee may continue to remain rangebound this week.

Market participants will closely monitor global crude oil prices and the US Fed’s interest rate decision on Sep 20 this week.

On the home-front, market participants will track the special session of Parliament convened by the government this week for any important announcements.

In Other News

• Windfall tax on crude oil hiked to ₹10,000 per tonne, export duty on ATF reduced to ₹3.5/litre
• India's forex reserves hit 11-week low; declines $4.9 billion to $593.90 billion
• India's exports shrink 6.9% in August; trade deficit hits 10-month high
• Oil sears to 10-month high, set for weekly gain; Brent scores $94/bbl
• Audi exec says lower tax on imported EVs will help test India market
• India plans crucial test in crewed space mission by October
• India approves purchase of defence equipment worth $5.4 bln
• FIIs invest ₹164 cr in Indian equities as Sensex, Nifty scale lifetime highs
• Tata Steel signs 500 million pound-deal with UK govt for Port Talbot plant
• Information and Broadcasting Ministry working on new Broadcasting Services Bill
• HDFC Bank enters into co-lending partnership with CreditWise Capital
• United Auto Workers union go on historic strike on 'Big Three' firms
• NABARD to launch maiden social sector bonds Sep 29
• RBI annual financial inclusion index 60.1 in Mar vs 56.4 yr ago