US Fed Stands Pat on Interest Rates

The Federal Reserve left the US interest rate unchanged. While this move was widely anticipated, what took the market by surprise were the forward looking statements and the cautious approach of Janet Yellen.

The US Fed not only left the rates untouched but also signalled that it would expect to raise its benchmark rate just twice this year. This was as against the four interest rate hikes this year predicted earlier.

Further, the Fed stated that it expects the economy to expand 2.2% in 2016. This was 0.2 percentage point less than the projection made in December.

Fed Chair Janet Yellen noted that the fate of the US economy is now deeply intertwined with what happens in the rest of the world. Further, she stated that labour market indicator suggests that the economy had yet to absorb the surplus of workers. Also, it was reported that slow growth overseas has hurt US exports.

The above announcements echoed a recovery in US stock markets. The S&P 500 Index gained 0.66% to close at its highest since December 31.

In another development, the Bank of Japan (BoJ) maintained its commitment to raise its monetary base by 80 trillion yen annually. Further, it kept its benchmark rate at minus 0.1%. However, BoJ Governor Haruhiko Kuroda stated that the bank would tweak the negative rate policy to ease the burden on some commercial banks.

Some relief was found as the BoJ exempted money reserve funds (MRFs) from the negative rate. This was seen as the bank seeks to placate some institutional investors who are unhappy with the measure.

The BoJ statement noted that exports and production have been sluggish. Moreover, it noted that inflation expectations have weakened recently.

The central bank concluded that it will examine risks to economic activity and prices, and take additional easing measures if it is judged necessary to achieve the price stability target.

Bank of England (BoE) in its monetary policy meeting agreed to maintain the benchmark rate at 0.5%. The policy committee also voted unanimously to maintain the stock of purchased assets financed by the issuance of central bank reserves at 375 billion pounds.

The BoE noted that uncertainty stemming from Britain's referendum on its European Union (EU) membership may hold back investment and economic growth.

For the week, global markets traded on a positive note after tracking the above developments. Asian markets traded in the green with shares in China leading the region. The Straits Times was up by 2.76%, while Hang Seng was up 2.34% and China's Shanghai Composite was up 5.19%. In European markets the CAC 40 was down by 0.67% for the week, while Germany's DAX was up 1.22% and London's FTSE 100 was up 0.81%. Markets in the US also traded in the green with Nasdaq Composite up by 2.42% for the week.

Indian markets log third straight weekly gain

Back home, Indian markets ended the week on a positive note. For the week, the BSE Sensex rose 0.9% and the NSE Nifty climbed 1.2%. The most buying interest was seen in the banking and IT sectors. Pharma, on the other hand, tanked 5% on downgrades and USFDA concerns (subscription required).

During the week it was reported that GSM mobile operators added 72.5 lakh subscribers in February. Post this, the overall user base in telecom space now stands at 768 million.

After been badly hit in 2012, the telecom sector has bounced back with a revival in subscriber additions. However, do telecom sector fare well on the investment front? Click here to find out (subscription required).

In another development, the government in its effort to improve the ease of doing business in the country, has introduced a bill in the Lok Sabha to further amend the Companies Act. Arun Jaitley, while presenting the Union Budget 2016-17, said the proposed bill to amend the Companies Act 2013 will remove the difficulties and impediments to ease of doing business. He added that the bill would also improve the enabling environment for start-ups and the registration of companies will also be done in one day.

Indian Indices Continue Their Uptrend

The index remianed in a tight range for second week in a row after a big move of 450 points in the first week of March. The index has ended the week at the higher end of the 7,400-7,600 range. This suggests that bulls are in a stronger position now and if the breakout sustains then they can push the index further up in the near term. However, they just have a short three day week as markets will be shut on Thursday and Friday in the coming week.

COMMODITIES

Gold reined by US Federal Reserve policy meeting

Gold traded on a mixed note during the week. On Monday, it opened its session in the red. Prices dropped as market participants trimmed their positions amid a weakening global trend. Further, the yellow metal continued to witness selling pressure midweek. It dropped to its lowest in almost two weeks as investors looked ahead on the upcoming US Federal Reserve policy meeting. However, gold drifted northwards and went on to trade in the green during the end of the week. Prices zoomed on Thursday after the US Federal Reserve scaled back its projection for interest rate hikes this year. As a result, gold witnessed buying interest as a safe-haven asset. Positive trades were also seen on Friday as dollar ended its session on a firm note. The MCX Gold April contract opened the session at 29,398.00/10 grams. It traded at a high of 29,600.00/10 grams before finally closing the session at 29,131.00/10 grams.

Gold Trades on a Mixed Note

Silver mimics gold

Silver traded in tandem with gold during the week. It opened its session on a negative note on Monday. Losses were seen amid a downtrend in precious metals overseas. Similar trades were seen midweek as silver continued to trade in the red. However, prices rose during the end of the week after the outcome of US Federal Reserve policy meeting. Finally, silver maintained its uptrend on Friday and ended the week on a positive note. The contract for May opened the session at 37,505.00/kg. It traded at a week low of 36,855.00/kg and settled at 37,756.00/kg on Friday.

Crude oil rises on upcoming output freeze talks

Crude oil also traded on a mixed note during the week. While it opened its session higher on Monday, it failed to hold on to those gains and ended the day in the red. Prices fell as global supply glut coupled with slowing economic growth weighed on prices. Also, a weak trend in Asian markets extended this fall. Going forward, the Organisation of the Petroleum Exporting Countries (OPEC) said that demand for its crude would be less than expected in 2016. This announcement kept crude oil prices in the negative territory on Tuesday. However, these losses were reversed midweek as oil prices rose as inventory data showed that US crude stockpiles rose less than expected last week. Crude oil gained momentum during the end of the week and continued to trade on a positive note. The rally was supported by a plan among some of the world's biggest producers to meet next month to discuss supporting the market. It was reported that OPEC and non-OPEC producers including the top two exporters, Saudi Arabia and Russia, will hold talks on April 17 in Qatar over a plan to freeze output. The data supported the uptrend in prices and crude oil ended its session in the green on Friday. The MCX March contract opened on Monday at 2,583.00/barrel and closed the Friday session at 2,627.00/barrel.

Crude Oil Inch Upwards

Natural gas trades in the green

Natural gas traded on a positive note during the week. While the commodity witnessed some losses on Monday, it gained momentum during the following days. Prices rose on Tuesday as investors widened their positions for natural gas. The uptrend was also seen midweek. Finally, natural gas traded in the green on Friday to end the session on a positive note. The MCX March contract opened the week at 122.50/mmBtu and finally closed the Friday session at 127.30/mmBtu.

CURRENCIES

USD guided by central bank's policy decisions

The dollar witnessed mixed trades during the week. On Monday, it stood firm against a basket of major currencies. Most of this buying interest came as investors looked ahead for the upcoming Japanese and US central bank policy meetings. Also, increased demand for the dollar from banks and exporters supported this rally. However, it witnessed losses midweek as the BoJ stood pat on its interest rates. Also, the fresh selling of the dollar by banks and exporters ahead of the Federal Reserve's policy announcement extended this downtrend. On Monday, the rupee opened the session at 67.19 against the US dollar and settled at 66.60 to close the week.

USD Witness Downtrend

Euro trades in the green

The euro traded on a positive note during the week. On Monday, it extended its rally that was witnessed during the last week. One shall note that the euro hovered near a three-week high last week after the ECB cut its main interest rate from 0.05% to 0%. Come midweek, the euro witnessed slight losses. However, these losses were recovered as the euro inched northwards during the end of the week. On Monday, the euro opened at 75.49 against the INR. It reached a high of 75.73 and a low of 74.70 and closed the week at 75.08 against the INR.

Sterling held high by BoE policy decision

The pound traded on a mixed note during the week. It opened its session in the green on Monday. Going forward, it witnessed volatility ahead of the BoE policy decision that was to be announced this week. Finally, it received major boost after the Bank of England on Thursday kept interest rates steady. On Monday, GBP opened at 96.70 against INR. It touched a low of 95.00 and closed the week at 96.21.

Yen stands tall

The yen witnessed buying interest during the week. It gained much after the BoJ held policy steady on Tuesday. Similar trades were seen midweek. The perceived safe-haven yen stood firm as against the dollar ahead of the Federal Reserve policy meeting. Finally, on Friday the yen continued its rally to end its session on a positive note. JPY against INR traded at a low of 58.90 and a high of 60.06. Finally, it stood at 59.73 against the rupee to end its session.

Commodities 11th March 18th March % Change
Gold/10 gms 29,500.00 29,131.00 -1.25%
Silver/kg 37,610.00 37,756.00 0.38%
Crude Oil/barrel 2,595.00 2,627.00 1.23%
Natural Gas/mmBtu 123.30 127.30 3.24%
Currencies 11th March 18th March % Change
INR / USD 67.26 66.60 0.98%
INR / EUR 74.60 75.08 -0.64%
INR / GBP 96.20 96.21 -0.01%
INR / JPY 59.14 59.73 -0.99%

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