The Indian markets were in a state of flux, with all-time highs providing a flourish of optimism and a sudden downer to close the week with humility, giving a mere 1% aggregate up-move for the whole week.
What’s up with the market moving this way?
US Fed officials suggested they might reduce the size of future rate hikes. In Jerome Powell’s last speech before the next meeting around December 14, he suggested that the Fed is on track to hike rates by 50 bps, a cooldown from the last four hikes of 75 bps each. This rallied the Nasdaq by 4%, spilling some of that optimism over to our side of the pond
The dollar saw some depreciation as Fed officials signalled slower rate hikes, giving the Indian Rupee the ability to hit 2-week highs
Foreign Institutional Investors came through as they pumped in a net of around Rs. 38,000 crore in November, propelling our markets forward
The markets also questioned if the Fed would actually slow their pace down as consumer spending spiked, and attention moved towards the jobs report, which also continued to remain hot. The two data points aren't indicative of any cool-down in the economy
The downtrend on the last day could be attributed to profit-booking in the auto, finance and FMCG sectors due to all-time highs
Despite slating out an easing of lockdowns and restrictions, an increase in the number of cases prompted tightened restrictions; sparking protests, and fears of continued supply chain issues
Our View 💡: While the markets have been excited about singular data points, looking for a turn in direction for the economy; there are enough contrary indicators to call off a reversal of the current situation. We’re still holding on to our stance of elevated risks at current levels.