Indian Equity Summary-
· A spectacular comeback by the bulls for the second consecutive week as the benchmark Indices Nifty closed in green, +4.6 % on the back ofØ rally in the IT and the BFSI stocks. Expectations of another fiscal stimulus by the GOI ahead of the festive season , flush in global liquidity and with RBI continuing with its pause stance on the interest rate with the accommodative approach lifted the market sentiment.
· Going forward, global factors like development on the US elections front, decision on US stimulus package, while domestic factors like start ofØ the Q2 corporate earnings season and CPI/IIP data ,moratorium decisions and FII/DII inflows , inflation trajectory and USD/INR rates ; will continue to dictate the trend of the domestic equity market. We expect the trading range for Nifty between 11750-12,200 in the near term. Markets may consolidate within a wider range, demonstrating clearly that a sideways movement is more probable than an outright reversal.
Indian Debt Market-
· Government bond prices ended higher. The yield on the 10-year benchmark 5.77% 2030 paper settled at 5.94% on October 9 compared withØ 6.00% on October 1.
· On expected lines, the Reserve Bank of India (RBI) on October 9, maintained a status quo on key lending rates and kept its policy stanceØ 'accommodative’. The Monetary Policy Committee (MPC) of the RBI took a unanimous decision to keep the repo rate unchanged at 4 percent and reverse the repo rate at 3.35 percent. The RBI said inflation will remain elevated in the September print, but ease gradually towards the target over Q3 and Q4.
· We expect the 10 year benchmark yield to trade between 5.80-6.00% in near term.Ø
Domestic News
· The Reserve Bank of India decided to keep the benchmark interest rate unchanged at 4 percent but maintained an accommodative stance,Ø implying more rate cuts in the future if the need arises to support the economy hit by the COVID-19 crisis. The RBI projected gross domestic product (GDP) contracting by 9.5 per cent in the current financial year amid disruptions caused by coronavirus pandemic which may turn positive in the last quarter (January to March).
· Indian government names Shashanka Bhide, Ashima Goyal, Jayanth Varma as new MPC members.Ø
· India's rupee touched a five-week high of 72.98 per USD, after the Reserve Bank of India left key interest rates unchanged and maintained anØ accommodative monetary policy stance to support the economy hit by the coronavirus crisis.
· The Composite PMI Output Index, which measures combined services and manufacturing output, rose from 46.0 in August to 54.6 in SeptemberØ
International News
· US services PMI rose inched up 57.8 in September from 56.9 in August, with a reading above 50 indicating growth in the serviceØ sector. Economists had expected the index to edge down to 56.3.
· Britain's gross domestic product grew by 8.0 percent in the three months to August 2020, recovering from five consecutive periodsØ of contraction but missing market expectations of an 8.2 percent expansion. The services sector grew by 7.1 percent, production by 9.3 percent and construction by 18.5 percent, as lockdown measures continued to ease.
· Gold settled 1.9% higher at an over two-week high of $1,929 per ounce on Friday, and posting a second weekly gain of 1.6% helpedØ by a weaker dollar amid renewed optimism over a new US corona virus relief package.
· China's service sector registered a strong growth in business activity in September, signaling a further recovery from the coronavirusØ pandemic, survey data from IHS Markit.
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The information and views presented here are prepared by Karvy Private Wealth (a division of Karvy Stock Broking Limited) or other Karvy Group companies. The information contained herein is based upon sources that we consider reliable. We, however, do not vouch for the accuracy or the completeness thereof. This material is for personal information and we are not responsible for any loss incurred based upon it. Karvy Private Wealth is only a distributor of securities and financial market products
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