After going tandem in scaling new highs each day for several weeks or even months, the benchmark stock indices in India and the US began to move out of step with each other. While the US indices continued to rise, the Indian indices began to fall after earnings, especially from banks, fell short of investor expectations. The trigger event was the disappointing results from HDFC Bank. In India, foreign funds began to pare back investments. Last week was a truncated one in India, with only three business sessions.

All eyes are now on Finance Minister Nirmala Sitharaman's presentation of the Interim Budget for 2024-25. No big surprises are expected.

Any boost to expenditures for the current financial year will be tracked.

Domestic Markets Last Week

• Share indices fell in a shortened week as disappointing results from IT companies weighed down sentiment. Financial companies' shares stayed weak, and foreign funds remained net sellers. Concerns were that the best of profitability for banking companies was over. Thursday, Tech Mahindra led the losses after reporting a lower-than-expected quarterly profit.
• Government bond yields ended almost flat for the week and down for Thursday, the last trading day of last week, as the weekly auction of government bonds fared better than expectations. Foreign banks were keen investors in bonds last week. They were probably buying for some of their FPI clients.
• The rupee closed a tad lower against the US dollar, and as has been the case for several weeks now, it moved in a very narrow range. The rupee had a downward bias amidst the broader strength of the dollar.

Global Markets Last Week:

• US stocks closed the week higher. On Friday, however, the S&P 500 and the Nasdaq Composite fell, but the Dow index rose to yet another new high. On Friday, the S&P 500 snapped a 5-day run of setting fresh records. The highs were set thanks to rallies in big tech stocks. The market was comforted by the view that the Fed has been successful in taming inflation without causing recessions.
• Treasury yields were up last week as traders remained skeptical about the Fed's rate cuts in March. This is despite the PCE price index, the Federal Reserve's preferred inflation measure, easing to 2.9 percent in December from 3.2 percent, marking the lowest level in almost three years. The 10-year yield rose 1.4 basis points last week.
• The US dollar rose for the fourth week in a row, but it closed slightly down on Friday after December PCE inflation printed along the expected lines and did not alter the market's rate cut expectations. The Fed is expected to cut rates only from the middle of 2024. The markets await key releases this week, including the non-farm payrolls.

Corporate Bonds

Secondary Market

Yields remained flat, and volumes were low as investors avoided big positions in the shortened trading week. Positions were avoided ahead of this week's release of the interim budget.

Outlook For This Week

Domestic stocks will continue to focus on Oct-Dec quarterly results. Markets will take cues from US economic data, Fed meetings, and importantly the Interim Budget of the Modi government. Government bond yields are likely to remain range-bound for the week.

In Other news

• Govt halves support to oil firms defers filling strategic oil reserves.
• Airbus & Tata Group agree on helicopter deal; India, France unveils defense industrial roadmap.
• Window to `conclude India-UK FTA by March closing fast, officials in huddle.
• Mutual fund exposure to corporate bonds was nearly flat in five years.
• SC seeks the Centre's reply by Feb 13 on Kerala's plea against the cap imposed on borrowing.
• Spicejet completes raising of 7.44 bln rupees as part of fundraising plan.
• Air India has operated 41 percent more flights since Tata's takeover.
• US prices rise moderately in December; inflation trending lower.
• Elon Musk Tesla calls back two million cars for US over Autopilot defect
• Salesforce laying off 700 workers in the latest tech industry downsizing.
• H&M to shut a fifth of Spanish stores and lay off 588 workers.