Domestic stock prices fell for the week, mirroring the global trend. Small and mid-cap stocks experienced the worst week in 15 months. Last week, US inflation and producer prices came in higher than expected, causing government bond yields to rise on the view that the US central bank may not cut interest rates as early as June. Foreign banks and exporters sold dollars to cut losses, resulting in the rupee falling week-on-week for the first time since mid-February. Investors will take fresh cues from the US Federal Reserve policy decision to be released on March 20. Most investors believe the Fed may decide to keep interest rates higher for longer or reduce the number of rate cuts it plans to make this year.

Domestic Markets Last Week

• Indian stocks fell for the week after the Nifty50 index rose to an all-time high on Monday. On Friday, information technology shares led the decline in blue-chip indexes on concerns about the postponement of US rate cuts. Small and mid-cap stocks also declined as the results of stress tests for mutual funds gradually became available. Small and mid-cap indexes witnessed the worst week in 15 months as worries about overvaluation grew.
• Government bond yields rose by three basis points by the end of the week, tracking a sharp rise in US treasury yields after higher-than-expected US inflation numbers and producers' prices. Investors believe the US Federal Reserve may not lower its key interest rates by June, which caused yields to rise.
• The rupee fell on Friday, following a drop in Asian peers. US treasury yields rose in response to data indicating that inflation in the world's largest economy could remain sticky. This is the first week-on-week drop for the local unit since mid-February. Foreign banks and exporters helped the rupee cut losses by selling dollars.

Global Markets Last Week:

• US stocks dipped Friday, led by technology mega-caps as investors considered next week's Federal Reserve meeting. Major US indexes fell slightly last week after higher-than-expected inflation figures, and traders have reduced Fed rate cut bets for June. The S&P 500 technology index fell 1.3 percent, leading the sector to fall. The semiconductor index fell 0.5 percent on Friday, its worst weekly drop since early January.
• Treasury yield hit its highest level in three weeks on Friday. A mixed set of data showed that the economy was still strong, which made people think that the Federal Reserve would cut interest rates by a lesser margin this year. The 10-year treasury yield was up to 4.310 percent, the highest since Feb 22.
• The US dollar hit its highest level in over a week on Friday after a mixed set of data showed that the U.S. economy remained stable with some areas of weakness. On Friday, data showed that the US industrial sector was strong. Output rose by 0.8 percent last month after falling by 1.1 percent the month before, which was later revised downwards.

Corporate Bonds

Secondary Market

Yields were stagnant, and trade volumes were subpar on the corporate bond secondary market last week, as traders refrained from placing fresh bets as we near the end of the fiscal year. Some mutual funds were seen trading in the shorter tenure papers while other participants remained on the sidelines.

Outlook For This Week

Indian stock markets are expected to be volatile this week, with indications coming from global trends, crude oil prices, and the rupee's movement versus the dollar. The local currency unit is expected to be range-bound, with the US Federal Reserve's policy decision serving as the primary trigger this week. While the US central bank is likely to hold interest rates steady at its policy meeting, market players will be watching Fed Chair Powell's statements to predict the future path of interest rates.

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