Both domestic and global stock markets surged last week on better economic data and increased positive sentiments among investors. Locally, Nifty50 hit an all-time high after the interim budget projected nominal GDP growth of 10.5 percent for the next financial year starting April, sharply higher than the 8.9 percent projected for 2023-24, and lowered its government borrowing program for 2024-25. US shares also hit record highs as investors cheered the better-than-expected non-farm payrolls released on Friday,

This week, Indian investors will focus on the Reserve Bank of India's monetary policy review. They expect the central bank to leave the Repo Rate unchanged in February but hold the view that it may cut the benchmark rate by 50 basis points this year.

Domestic Markets Last Week

• Stock indices rose last week, snapping a two-week fall. Nifty50 touched an all-time high on Friday, propelled by Oil & gas and IT software firms after the interim budget presented the government's fiscal discipline. Investors believe that a lower fiscal deficit won't raise inflation, allowing the RBI to lower the rate in the year, without hurting growth.
• Government bond yields ended up on Friday after the RBI announced a surprise reverse repo auction with variable rates. Yields eased for the week, tracking US peers for the greater part of trading sessions. On Thursday, yields had dropped to the lowest level since July 18, 2023, after the interim budget announced a lower government borrowing plan of ₹14.13 trillion for the FY25.
• The rupee closed off highs on Friday as banks bought the dollar for oil marketing companies and other importers. Oil prices dipped on Thursday, and importers seized the opportunity to stock up on crude oil. The rupee had strengthened to touch a two-week high on Thursday.

Global Markets Last Week:

• US stocks closed at record highs on Friday, with the S&P 500 setting a new closing record, as investors were encouraged by good earnings and a robust January jobs report. Investors believe that the Federal Reserve may not drop interest rates anytime soon. The three main benchmark indices all gained ground for the fourth week.
• Treasury yields rose on Friday, with the 10-year Treasury yield reaching its highest one-day level since September 2022. The monthly jobs report exceeded expectations, casting doubt on the Federal Reserve's forthcoming interest rate cuts. The number of nonfarm payrolls rose by 353,000 in January. After going up 0.4 percent in December, average hourly wages went up 0.6 percent in January.
• The US dollar index hit a seven-week high on Friday after economic data showed companies adding more jobs than expected in January. Market participants believe that positive jobs data further reduces the expectation that the Federal Reserve will cut interest rates soon. Recently, the dollar has lost value because Treasury yields have been going down. This happened even after Fed Chair Jerome Powell said on Wednesday that a rate cut in March was not expected.

Corporate Bonds

Secondary Market

Yields eased by 7 basis points for 10-year corporate bonds last week after the government announced a lower-than-expected fiscal deficit and investors were on a buying spree. Few pension funds and insurance companies bought long-term papers, while mutual funds bought papers for up to 5 years in the secondary market.

Outlook For This Week

Stocks may open higher on Monday, taking cues from global stock markets, but may remain rangebound during the week ahead of RBI monetary policy. Benchmark bond yields will track movement in crude oil prices and US treasuries on Monday.

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