Global Markets Shrug off US Shutdown

Last week, The United States had its first government shutdown in nearly five years after senators failed to reach a deal to keep the lights on. An effort by Republicans to keep the government open for one month was rejected in a vote after they failed to address Democratic concerns about young undocumented migrants known as Dreamers.

But the government shutdown did not last for long.

Claiming a big win, US President Donald Trump signed a bill to end a three-day government shutdown after striking a deal with Democrats to hold a debate on the future of over 700,000 young undocumented immigrants.

Trump signed a bill into law after the House of Representatives voted 266 to 150 to extend federal funding for another three weeks.

This is the fourth temporary funding bill since October 2017.

The enactment by Trump of the bill allowed the government to reopen fully on Tuesday and keep the lights on through Feb 8, when the Republican-led Congress will have to revisit budget and immigration policy, two disparate issues that have become closely linked.

Senate Democrats dropped their opposition to the plan after receiving a commitment from the ruling Republicans toward securing the fate of hundreds of illegally brought to America as children.

Reportedly, the measure funds the government till 8 February, before which the Democrats and Republicans need to agree to a long- term solution to the government funding and on issues related to illegal immigration.

Claiming victory in his standoff with Democrats, Trump signed the measure into law and government operations would return to normal.

Thousands of federal employees who had been placed on temporary, unpaid leave since last Saturday breathed a sigh of relief.

Further, Trump stated that he will make a long-term deal on immigration only if it is good for the country and will work towards solving the problem, once the government is funded.

Notably, there have been four government shutdowns since 1990. In the last one, in 2013, more than 800,000 government workers were put on temporary leave.

Global financial markets shrugged off the shutdown in the US government and went on to rally soon after the shutdown was resolved. The brief U.S. government shutdown put only a minor dent to equities, with Wall Street rallying to all-time highs overnight following the deal to end the impasse in Washington.

Global indices ended the week on a mixed note. European stocks traded on a mixed note. Germany (DAX) ended with a gain of 1.18% and France (CAC) ended with a gain of 0.64%. The London market (FTSE) was down 0.78%. Asian markets ended the week on a mixed note. The Nikkei Index was down by a percent, the Hang Seng index surged 3.66%, and the Shanghai index soared 3.30%. US markets witnessed buying interest and ended their session with a gain of 2.84%.

Indian Indices Ends Near Life-Time High

Back home, Indian indices traded on a strong note during the week. The BSE Sensex was up 1.52% for the week, while the NSE Nifty was up 1.61%.

IT (+4%), Metals (+3.5%), and Energy (+2.55%) were the biggest gainers for the week. Telecom (-5%) and Auto (-1.20%) were the biggest losers for the week.

In the news about economy, as per the International Monetary Fund (IMF), India is expected to grow at 7.4% of its gross domestic product (GDP) in 2018 as against China's 6.8%. This will make India the fastest growing economy among emerging economies following last year's slowdown due to demonetisation and the implementation of goods and services tax (GST).

In its latest World, Economic Outlook update released on Monday ahead of the World Economic Forum in Davos, the IMF projected India's GDP growth rate at 7.4% in 2018 and 7.8% in 2019.

China, during the same period, is expected to grow at 6.8% and 6.4% respectively.

The aggregate growth forecast for emerging markets and developing economies for 2018 and 2019 remain unchanged, with marked differences in the outlook across regions.

In 2017, China's GDP growth rate of 6.8% was ahead of India's at 6.7%, giving the former the tag of being the fastest growing emerging economy. The Indian economy, which grew at 7.1% in 2016, slowed in 2017 due to demonetisation in November 2016 and GST rollout on 1 July 2017.

From other news, highlighting India is coming out of post Goods and Services Tax (GST) implementation woes, global rating agency, Standard & Poor's (S&P) ratings, in its latest report titled 'APAC Economic Snapshots, January 2018' has said that overall economic risks in India remain low, on the back of pick up in industrial output and bank credit.

However, the rating agency raised concerns over rising crude oil prices, terming it as a 'risk' for the country, as a majority of India's import bill stem from crude oil purchases.

The report further mentioned about recent growth of industrial sector, noting that Industrial output (and investment more generally) -- the missing piece of the sustainable growth story in recent years -- jumped to a 25-month high in November, led by manufacturing. Besides, the rating agency also highlighted improving bank credit situation to the real economy.

In the news from the IPO space, Apollo Micro Systems made a stellar debut on bourses this week. The scrip of the company, which recently concluded its IPO subscription offer, got listed at Rs 478, a premium of around 74% over its issue price of Rs 275.

Over last two decades, Apollo Micro Systems has developed an established brand name, acceptance and recall value in the defense ESDM sector. It is an electronic, electro-mechanical, engineering designs, manufacturing and supplies company and designs, develops and sells high-performance, mission and time critical solutions to Defense, Space and Home Land Security for Ministry of Defense, government controlled public sector undertakings and private sectors.

Healthy growth in revenues, high return on equity, and strong R&D capabilities are some key factors that stand out for Apollo Micro Systems Ltd.

To know more about the company, you can read our IPO analysis of Apollo Micro Systems Ltd (subscription required).

Nifty 50 Index Ends January Expiry 6% Up
Nifty 50 Index Ends at Life-time High

This week, the Indian stock markets ended its January futures and options (F&O) expiry. Let's have a look at how the Nifty 50 Index performed during the expiry.

It was remarkable expiry for the Indian indices. Except for the initial two days, the bears did not stand a chance. The Nifty rallied one way from the low of 10,405 to cross another landmark figure of 11,000. It tough a life-time high of 11,110 in the last week of the expiry. The index finally ended the January series with a solid 5.65% gains.

Last expiry, we mentioned that the index has broken above its important resistance level of 10,500. This indicated strength in the price action. Our derivative and rollover analysis in Profit Hunter Pro newsletter (subscription required) also suggested positive outlook for the Indian market in the January expiry. As a result, the index rallied nearly 6% to touch a life-time high of 11,110.

But the index rally in the January expiry was quite steep. The RSI indicator is also in its overbought territory. So can we expect a correction in the February expiry or will the index keep going up?

The derivative and rollover data can give us some clue about this. Look out for the detailed analysis on the derivatives data in Monday's Profit Hunter Pro newsletter (subscription required).

COMMODITIES

Gold Trades in an Uptrend

Gold traded on a positive note during the week. On Monday, it opened the session lower but recovered smartly and traded in an uptrend throughout the week. The yellow metal edged up as the US dollar sank to a fresh three-year low. The worries about potential trade wars also led to some risk-aversion trade. Finally, on Thursday, gold continued to trade positive and ended its weekly session with 2.04% gains.

Gold Witnesses Buying Interest

Crude Oil Hits Fresh 3-Year High

Crude oil traded in an uptrend during the week. On Monday, it opened the session higher, but witnessed minor selling towards the end of the session. But this was temporary as the black gold recovered strongly and traded in an uptrend throughout the week. The gains were seen on the back of healthy economic growth as well as the ongoing supply curtailments by a group of exporters, including OPEC and Russia. The buying continued on Thursday as well and the commodity ended its weekly session with 3.66% gains.

Crude Oil Surged 3.5% for the Week

CURRENCIES

Dollar Trades on a Negative Note

The dollar traded on a negative note during the week. On Monday, it opened its weekly session lower, but recovered to end the session in the positive. However, the buying was temporary as the greenback witnessed selling pressure for the remaining day of the week. The rupee strengthened against the dollar on increased selling of the US currency by banks and exporters amid forex inflows. Weakening of dollar against other currencies overseas also supported the rupee. Finally, on Thursday, the currency continued to trade dull and ended the weekly session with loss of 0.30%.

Dollar Ends in the Red

Commodities 19th Jan 25th Jan % Change
Gold/10 gms 29,755 30,361 2.04%
Silver/kg 38,969 39,960 2.54%
Crude Oil/barrel 4,042 4,190 3.66%
Natural Gas/mmBtu 189.50 200.10 5.59%
Currencies 19th Jan 25th Jan % Change
USD / INR 63.89 63.56 -0.52%
EUR / INR 78.39 78.93 0.69%
GBP / INR 88.82 90.68 2.10%
JPY / INR 57.72 58.29 0.99%

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