Last week, Indian stocks surged, propelled by optimism fuelled by the prospect of sustained rate cuts from the Federal Reserve. US Federal Reserve Chair Powell's reassuring tone echoed through global markets after he said there would be three rate cuts this year. Investors anticipated that India's central bank would follow suit later in the year. However, the rupee tumbled against the dollar, triggered by the unexpected resilience of the US job market and robust gains in the dollar against other currencies.

Meanwhile, in the US, stocks soared, bolstered by the Federal Reserve's steadfast commitment to potential rate cuts, while Treasury yields ebbed as investors wagered on impending monetary policy adjustments despite mounting inflationary pressures. The US dollar, riding on divergent central bank policies, continued its ascent, underlining the intricate dance of global economic forces.

Domestic Markets Last Week

• Indian stocks rose on Friday and registered weekly gains, aided by investor expectations that the Federal Reserve will maintain its rate-cutting stance this year. Both benchmarks gained approximately 0.3⁒ last week, led by Auto and real estate stocks. The Federal Reserve Chair Powell's dovish commentary boosted domestic rate-sensitive industries, such as auto and real estate, in anticipation that India's central bank will begin rate cuts in the second half of the calendar year.
• Government bond yields fell for the week as a state government auction startled the market with plans for another record debt sale in the holiday-shortened final week of the current fiscal year. The rupee's slide to a record low had dampened investor appetite. State governments' auction plan to raise a record ₹600.32 billion in bonds on Tuesday after selling ₹502 billion and ₹240 billion rupees in two separate auctions last week.
• The rupee hit a record low against the U.S. dollar on Friday after the US jobless numbers came in lower than expected. The rupee also lost value because of a rise in the dollar index and a lack of large dollar inflows. The US Labor Department's initial claims for state unemployment benefits fell by 2,000 to 210,000 for the week ended Mar 16, 2024.

Global Markets Last Week:

• US stocks ended up last week. The S&P 500 index posted its largest weekly percentage gain of 2024 after the Federal Reserve maintained its forecast for three interest rate cuts by the end of the year. The Nasdaq gained on Friday, led by semiconductor stocks. Earlier this week, the US central bank held rates steady but indicated it was still on course for three rate cuts this year.
• Treasury yield fell last week as investors bet June would see the US Federal Reserve interest rate cuts despite rising inflation data. The Federal Reserve Chair Jerome Powell told reporters that inflation was tracking the central bank's predictions, reviving market expectations of at least three rate cuts in 2024 starting in June. Yields rose earlier in March as February inflation data exceeded expectations in both the consumer and producer price indexes.
• The US dollar reported gains for the second week in a row after a rate hike in Japan provided the yen with some breathing space and a surprise rate cut by Switzerland, pointing out the Federal Reserve's interest rate policy difference with other central banks. Last week, the dollar was up 1.5⁒ against the yen. It had been getting close to levels that caused Japan to step in 2022.

Corporate Bonds

Secondary Market

Yields remained steady last week, and trade volumes were low as investors ventured to purchase fresh issuances in the primary market. Few mutual funds were actively churning their portfolios, and some pension funds purchased long-term securities ahead of the fiscal year's end this week.

Outlook For This Week

The Indian stock market is anticipated to remain choppy in the shortened week, with markets being shut on Monday for the Holi, and then again on Friday for Good Friday. The dollar index and crude oil prices will most likely influence the rupee's movement. Government bonds are expected to trade in a range before the state government securities auction on Tuesday.

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