The Indian equity market rebounded after 5 consecutive days of decline on Friday, as a pullback in U.S Treasury yields from on-year highs calmed nerves. The Sensex and Nifty ended the week nearly 2% lower, owing to a pullback witnessed on Friday. Value buying emerged on the final day of the week, as the Sensex and Nifty corrected by more than 4% in the last 5 sessions.
The indices had posted continuous declines in the first four days of the week, as rising in US 10-year treasury yields, and increasing Covid-19 cases weighed. Newsflow about long-term bond yields, FTSE Rebalancing, US FOMC Meet outcome, bank privatisation, rise in Covid-19 cases, FII flows and ongoing IPO’s dominated investors’ sentiments.
Sensex ends the week 1.8% lower
- The Sensex ended the week 1.8% lower, thanks to the rally on Friday. Concerns around the increase in US treasury yields, rise in Covid-19 cases across India, volatile crude oil prices and weak global cues spooked investors in the last five sessions. This is the first weekly loss in three weeks.
Top gainers and losers
- Nifty FMCG Index was the only major gainer in the week (up 2.9%). FMCG giants HUL & ITC emerge top gainers this week. ITC soars 8.6%, owing to newsflow around demerger and upgrade by Morgan Stanley.
- Nifty Realty, Nifty Pharma and Nifty Bank emerge as the biggest losers in the week.
Here is a quick recap of the market moving developments:
- Bank Privatisation: Banking services got impacted in the week, as PSU bank employees staged a two-day strike (March 15-16, 2021) in response to the government’s intent to privatise PSBs. On Thursday, the finance minister said that not all banks will be privatised and wherever it happens, the interest of the employees will be protected. The strike was triggered by the government's plan to privatise two public sector banks as part of its ambitious disinvestment plan.
- FOMC Meet outcome: Federal Reserve continued to maintain a dovish stance to boost the economic recovery, and kept the overnight benchmark interest rates at near-zero levels. The Fed expects inflation to rise to 2.4% this year, above the central bank’s 2% target. However, the FPMC noted that the temporary surge that will not change the Fed’s pledge to keep its benchmark overnight interest rate near zero, in a bid to help economic recovery.
- US Treasury Yields remain volatile: US 10-year yields jumped to a one-year high of 1.749%, after the Federal Reserve raised its growth and inflation forecasts. However, the yields pulled back on Friday, after the Fed reiterated that it will continue its bond purchasing program to inject liquidity. There were concerns that the US Federal Reserve will have to taper its bond purchases and consider interest rate hikes due to rise in inflation, similar to ‘taper tantrum’ witnessed in 2013.
- FTSE rebalancing: In its semi-annual rebalancing announced in February, FTSE (Financial Times Stock Exchange) added Reliance Industries Partly Paid (RIL PP) stock to the large-cap group. FTSE rebalancing is considered significant for stocks as these influence the fund allocation by global investors as per stock weightage.Stocks see inflows or outflows when their weight is increased or decreased in such indices. According to estimates by analysts, Indian stocks will see an inflow of close to $900 million following the rebalancing. The table below shows stocks that will benefit from rebalancing.
- IPO euphoria continues: The primary markets continued to witness heavy traction, with high profile IPOs in the week. Anupam Rasayan (44 times), Laxmi Organic (107 times), Craftsman Automation (3.82 times), Kalyan Jewellers (2.6 times), Nazara Technologies (176 times) and Suryoday SFB (2.37 times) had aimed to raise money in the week. Easy Trip Planners listed at a premium of 14% over issue price on Friday.
Gold prices continued to drop in the first four days of the week, on the back of rise in US Treasury yields. Gold prices have been on the decline amid optimism of a faster global recovery, fueled by vaccine rollouts and hopes of more stimulus. This has led to a risk-on sentiment among investors, leading them to move away from the yellow metal. The precious metal has fallen sharply from its August highs of ₹56,200.
Check out our other analysis on important market developments!
US Treasury Yield soars to one-year high: The concern is that the US Federal Reserve will have to taper its bond purchases and consider interest rate hikes due to rise in inflation, similar to ‘taper tantrum’ witnessed in 2013. ‘Taper tantrum’ is a phrase used to describe the surge in the U.S Treasury yields in 2013. The surge had come after the Fed’s announcement of future tapering of its policy of quantitative easing, inroder to reduce liquidity in the economy. Read our analysis here
How global and Indian markets fared in 2021: Key equity market indices in the USA ended higher in February. After registering notable gains in the first 20 days, indices in the US markets fell in the last 10 days of the months. Here’s our analysis.
Nifty Q3 earnings review: Most of the companies in the Nifty 50 index have reported better-than-estimated results in Oct-Dec 20 period, signalling that Nifty companies have left pandemic blues behind. Check our detailed review.
What kept US market investors busy in the week: The global markets were mixed in the week, with most of the major markets closing with gains as macroeconomic data indicating recovery, and progress on the vaccine rollout supported investor sentiment. However, rising global yields, soaring crude oil prices and expectations of inflation capped gains. Read our analysis for the previous week