Weekly wrap: RBI policy, Covid cases, global cues among major factors in the week

The markets saw another interesting week, with factors such as RBI Policy, Covid-19 cases, macro data steering the course. After a steep fall on Monday on the back of rising cases and weak global cues, the Nifty recovered on Tuesday in anticipation of RBI’s policy decision on Wednesday. Buoyed by RBI’s accommodative stance and robust growth outlook, the index saw gains over Wednesday and Thursday.  However, the indices declined on the last day of the week,  led by decline in private banks as concerns on the bank's asset quality spiked with fresh curbs introduced across states. For the week, the Nifty closed 0.2% lower.

Top gainers and losers

• Nifty Metal was the top index gainer for the week 
• Nifty IT Gains Over 5%, registering its biggest weekly gain since Jan 1
• Nifty Bank was the biggest loser in the week,  down 4.2%. This is the biggest weekly fall in the last eight months

Here is a quick recap of the market moving developments

• RBI keeps repo rate unchanged: As anticipated by the street, the RBI's Monetary Policy Committee (MPC) has kept the repo rate unchanged at 4% in its bi-monthly policy meeting held on April 7th. The decision came as CPI inflation has now remained within RBI’s upper tolerance band of 4-6% in the last three months. The central bank’s stance remains accommodative, for as long as long as it is necessary to revive growth and mitigate the impact of COVID-19 on the economy. Read our analysis
• CARE warns of severe impact on the economy due to rising Covid cases: The new restrictions announced in Maharashtra from April 5 is estimated to result in a loss of Rs 40,000 crore that ends in the current fiscal year, according to estimates by CARE ratings. Maharashtra contributes around 15% of India’s total GDP. Several other states including Gujarat, Punjab, Delhi, and Chhattisgarh, which together contribute around 18% of national GDP have also announced new restrictions including night curfews and capacity limits.
• Banks, NBFC’s under pressure due to worries about asset quality: India’s NBFCs are likely to face sset quality and liquidity risks due to the ongoing second wave of Covid-19 pandemic. This could act to delay recovery in the sector, according to Fitch Ratings. Banks, NBFC stocks have been the biggest losers this week.
• Rupee falls to 8-month low: The rupee has depreciated nearly 2.5% in the week after the RBI announced an aggressive bond buying plan. Investors are selling the rupee as the central bank’s accommodative stance has raised concerns around inflation. Next week, the CPI inflation numbers will be closely tracked by the investors.

Gold prices rebound

Gold prices recovered in the week, supported by a stable US dollar and a fall in 10-year US treasury yields. The US dollar declined to a 2-week low against a basket of currencies, after the new unemployment claims increased for the second straight week. On the other hand, US bond yields declined after the Fed reserve reiterated its dovish policy.

Check out our other analysis on important market developments!

American Jobs Plan and Archegos Saga: Here's Weekly US Markets Update: We saw a wall-street recap of movie Margin Call during the start of the week as firesale of various securities held by a hedge fund (Archegos) spooked investors. Treasury yields remained volatile during the week as bond investors weighed the consequences of more stimulus. However, President Biden's USD 2.25 trillion infrastructure spending proposal stole the spotlight from bears, and markets soared to new highs as macro data indicated faster-than-expected recovery. Read our analysis

Happy week for global markets: Major global markets ended the holiday-shortened week with gains, buoyed by optimism around economic recovery and supportive policy announcements. View summary of global indices last week 

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