Of US Economic Data, Bandhan Bank IPO, and Other Top Stories during the Week

The US economy grew in the fourth quarter at a faster pace than last estimated. The rise was seen on the back of an upward revision to household spending on services and a smaller drag from inventories.

The Commerce Department in its third GDP estimate said that gross domestic product expanded at a 2.9% annual rate in the final three months of 2017, instead of the previously reported 2.5%. That was a slight moderation from the third quarter's brisk 3.2% pace.

An alternate measure of growth, gross domestic income (GDI), rose at a 0.9% rate in the October-December period.

The average of GDP and GDI, also referred to as gross domestic output and considered a better measure of economic activity, increased at a 1.9% rate in the fourth quarter. This was against a 2.8% rate of increase in the prior period.

Falling retail sales in February, weak housing data, and rising trade deficit meant the US economic activity slowing down in the first quarter. However, analysts were of the view that the economy will hit the Trump administration's 3% annual growth target this year, driven by a US $1.5 trillion income tax cut package and a planned increase in government spending.

The estimate could keep the door open to slightly more aggressive interest rate increases from the Federal Reserve this year.

Note that the US central bank raised rates last week and forecast at least two more hikes for 2018. It also lifted its economic growth projections for this year and 2019.

With the US economy chugging along for many months, the Fed is now gradually easing off the stimulus it provides to the economy by raising interest rates to more normal levels.

How does a US interest rate hike affect Indian investors?

The instant effect is foreign money moving out of India's vaults. This means a slight correction in the share market in India, albeit temporarily.

While this might provide a good buying opportunity in long-term stocks, the main thing to look forward would be capex and earnings trends.

In the end, Indian investors are better off staying informed about the corporate earnings revival than Fed rate hikes.

Global indices witnessed selling pressure during the week. European stocks traded on a mixed note. Germany (DAX) ended with cut of 2.31%, France (CAC) ended with loss of 1.77%, and the London market (FTSE) was up 0.37%. Asian markets ended the week on a negative note. The Nikkei Index was down 1.04%, the Hang Seng Index ended down 4.62%, and the Shanghai Index was down 3.94%. US markets traded in the red and ended their session with a loss of 5.64%.

Indian Indices End the Week 1% Higher

Back home, the Indian indices ended their weekly session on a positive note. The BSE Sensex was up 1.14% for the week, while the NSE Nifty was up 1.23%.

In the news from the IPO space, Kolkata-based private lender Bandhan Bank made a stellar debut on bourses this week. The scrip of the company, which recently concluded its IPO subscription offer, got listed at Rs 499, a 33% premium to its issue price of Rs 375.

Moving on, the Rs 40.2 billion initial public offering (IPO) of ICICI Securities could only manage 78% subscription on the last day of its issue on Monday.

However, including anchor allotment, the issue received a total of 87.9% subscription.

In a statement, the company has successfully closed its proposed offer for sale (OFS) and has raised around Rs 35 billion. Out of this, around Rs 17.17 billion was raised from anchor investors.

The company's announcement meant it lowered the issue size to sail through. This is third subsidiary firm from the ICICI group to hit the market in past two years. The QIB portion was fully subscribed, but the quota for retail investors (88%) and non-institutional investors (33%) remained undersubscribed.

Overall, this was the fourth issue of the ICICI Group after ICICI Bank, ICICI Prudential Life and ICICI Lombard General Insurance.

In the news from macroeconomic space, in order to ease the pressure on the local bond markets, the Central government will borrow Rs 2.88 trillion in the April-September period of 2018-19 (H1FY19), which is lesser than Rs 3.72 trillion it had borrowed during the same period of FY18.

The borrowing for the first half of 2018-19 works out to 47.6% of budgeted gross market borrowing which is much lower than the average of 60-65% in the last five years.

Department of Economic Affairs (DEA) Secretary Subhash Chandra Garg has said that the government will also come out with inflation indexed bonds linked to consumer price index (CPI) inflation. He also informed that the government will introduce a new bucket of bonds with a duration of one to four years, indicating its willingness to borrow more through short-term securities.

Besides, he noted that the budgeted gross borrowing through G-Secs for fiscal 2018-19 was Rs 6.05 trillion which would be used to fund the fiscal deficit of 3.3% of GDP.

The government also plans to reduce the G-Sec buyback by Rs 250 billion in the next fiscal. In addition to this, he said that the government will withdraw up to Rs 1 trillion from the National Small Savings Fund (NSSF) -- Rs 250 billion more than in the current financial year -- to fund the fiscal deficit.

He added that this could reduce the overall market borrowing programme of the government for the entire fiscal.

Nifty 50 Index Trades on a Positive Note
Nifty 50 Index Trades Volatile

It was a short trading week for the Indian stock markets. The Nifty 50 Index traded on a positive note during the week.

On Monday, it opened the session down, but witnessed solid buying interest to end the session 133 points up. Subsequently, the positive momentum continued for the next trading session. But the index slipped 63 points down on the futures and options (F&O) expiry day. The index finally ended the weekly session 1.23% up.

Last week, we saw the index closing below its 200 day moving average (DMA), which acted as a good support in the past. But now the 200 DMA is acting as a good resistance (previous support act as a resistance post the break-out)

This week, the 10,000-10,100 zone which acted as a good support in the past saved the index from dropping further down.

So can the index hold this support zone in the week to come or will it break out of the zone to continue sliding down? The derivative and rollover data can shed some light on this. Read our detailed analysis on the derivatives data in Monday's Profit Hunter Pro newsletter (subscription required). To subscribe, click here.

COMMODITIES

Gold Witnesses Selling pressure

Gold traded on a negative note during the week. On Monday, it opened the session lower and recovered a bit but ended the session marginally down. The yellow metal couldn't hold up for long and slipped lower to trade in a downtrend for the rest of the week. The selling was seen on the back of weak trends in the overseas market. It finally ended its weekly session with a cut of 1.25%.

Gold Ends in the Red

Crude Trades in a Downtrend

Crude oil witnessed selling pressure during the week. On Monday, it opened the session marginally up but slipped lower to trade in a downtrend throughout the week. The commodity witnessed selling as speculators reduced their bets owing to a weak global trend. The black gold finally ended its weekly session 1.90% down.

Crude Oil Plunges 2% for the Week

CURRENCIES

Dollar Trades on a Positive Note

The dollar traded on a positive note during the week. On Monday, it opened its weekly session lower and continued to slip down until mid-week. The currency witnessed a solid buying interest towards the end of the week but ended the weekly session marginally up. The dollar rose due to month-end demand from importers and banks.

Dollar Ends Marginally Up

Commodities 23rd Mar 28th Mar % Change
Gold/10 gms 30,907 30,521 -1.25%
Silver/kg 38,874 38,308 -1.46%
Crude Oil/barrel 4,266 4,185 -1.90%
Natural Gas/mmBtu 173.00 176.60 2.08%
Currencies 23rd Mar 28th Mar % Change
USD / INR 65.30 65.36 0.10%
EUR / INR 80.67 81.11 0.55%
GBP / INR 92.25 92.53 0.30%
JPY / INR 62.23 61.76 -0.76%

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