China Woes and US Rates Direct Markets...

Global markets faced a lot of ups and downs this week amid many reforms and developments. Estimates of US interest rate hike, the Bank of England's monetary policy decision, and China's measures to stimulate growth were the most talked affairs.

Global market participants are eagerly awaiting next week's Federal Reserve policy meeting. Many uncertainties remain over whether the Fed will raise interest rates or hold fire owing to the recent market meltdown. Global stock markets took cues from estimates put forth by market observers and traded mixed for the entire week.

In the UK on Thursday, the Bank of England (BOE) kept interest rates on hold. Concerns about the UK's economic recovery and external factors including the global stock market turmoil encouraged the decision. The bank also lowered its estimate for UK third quarter economic growth to 0.6% from the earlier 0.7%, citing the latest run of poor manufacturing and industrial production figures.

Added to all this were the mounting implications of slowing growth in China. Data released during the week showed that consumer inflation in China had accelerated in August, rising 2% from a year earlier. Most of the increases came from rising food prices. China's finance ministry said that it is going to roll out a more forceful fiscal policy and allocate more funds to infrastructure projects. The ministry also proposed tax cuts for small businesses. With this, Asian stock markets closed their session on a mixed note.

Choppy trades for Indian indices

Indian stock markets were packed with volatility the entire week. In the eight trading sessions so far this month, the benchmark BSE Sensex declined by 2.5% after trading positively during the early trades. The uneven pattern was due to the turmoil in the global economy coupled with some domestic factors. Most of the movement was seen on estimates of Index of Industrial Production (IIP) data that was going to be released on Friday.

Industrial growth in July stood at a reasonable level of 4.2%, slightly down from 4.4% in the previous month. Manufacturing grew by 4.7% as against the contraction of 0.3% a year ago. Mining output rose by 1.3% against 0.1% and electricity 3.5% against 0.1%. Volatile capital goods was up by 10.6% against a contraction of 3% a year ago. However, the growth was not broad based as it came primarily from manufacturing, which accounts for 75% of the IIP.

The domestic markets closed their trading session below the dotted line. While the BSE-Sensex closed marginally lower by 12 points, the NSE-Nifty was up by 2 points. That said, both the S&P BSE Midcap and the S&P BSE Smallcap indices gathered steam and were up by 0.2% and 0.7% respectively. Sectoral indices closed the day on a mixed note. Realty and IT stocks witnessed the majority of the buying activity while metal, capital goods, and oil and gas were at the receiving end.

Bulls Chip In At Lows

The index bounced back after coming very close to two key support levels we mentioned last week. The election result day top of 7,563 and the 38.2% retracement level of the upmove from August 2013 to March 2015 to 7,591 restricted the bearish advance as bulls chipped in. The intraday RSI in bullish territory suggests that the pullback can continue. However, bulls may face immediate resistance around the levels of 7,850, 7,930 and at 8,065. Immediate support for the index is at 7,680 and 7,540.

COMMODITIES

Gold

MCX Gold October opened the session at 26,580. It traded positively during the start of the week. This was on the back of buying positions to meet rising seasonal demand in domestic markets. Gold gave up its gains due to the massive surge in the US stocks. The fall was also in line with a weak global trend. The rupee strengthening against the dollar and making imports cheaper also influenced gold prices. During the end of the week, the precious metal traded near its one-month low on concerns over the estimates of US interest rate hike. The contract traded at a high of 26,607 before finally closing the session at 25,967.    

Gold Witness Downtrend

Silver

Silver traded on a volatile note for the week. The contract for December opened the session at 35,470. During the start of the week, silver prices witnessed a downtrend. This was because of the weak cues from overseas markets. Investors also weighed on the decisions of the US interest rate hike. Some relief was seen on Wednesday as speculators widened positions amid a firm trend overseas. The December contract was trading higher by 0.5% by these cues. The trend continued till the end of the week. The contract traded at a week low of 34,551 and settled at 34,975 on Friday.

Crude Oil

Crude oil prices traded on a choppy note during the week. The rise in global production kept oil prices subdued. Investors were looking ahead for the release of US stockpiles report. Prices edged higher mid-week. This was witnessed as market men widened their positions on positive cues from Asian markets. On Friday, prices fell more than 2% on concerns over global oversupply, the Chinese economy, and Saudi Arabia dismissing the idea of an oil producer summit. The September contract opened on Monday at 3,093 and closed the Friday session at 3,000, touching a high of 3,095.

Crude Oil Witness Volatility

Natural Gas

Natural gas was trading on a weak note on Monday. This was on the back of participants weighing on weather forecasts to access the supply and demand levels. Prices settled down 2.4% on Wednesday. This was after investors looked ahead to fresh weekly information on US gas inventories. Coming to the end of the week, prices rose after data showed that supplies increased less than expected last week. The MCX September contract opened the week at 178.80. It traded at a low of 176.60 and finally closed the Friday session at 179.90.

CURRENCIES

INR/USD

USD traded on an encouraging note during the early week. Demand for the dollar rose due to oil-related problems in Iran and massive selling by foreign portfolio investors in the stock market. However, it reversed these early gains as Asian equities stumbled and put Japanese currency in favour. Finally, on Friday, the greenback capped much of its losses and gained momentum. On Monday, the rupee opened the session at 66.90 against the US dollar and settled at 66.75 to close the week.

See-saw Pattern For USD/INR

INR/EUR

Euro started the week on a firm note. Some of these early gains were due to the China driven panic that disturbed markets around the world. Further, the European Central Bank warned that the falling oil prices and global developments could drag the eurozone back in to deflation in the coming months. Euro traded on a volatile note after this announcement. On Friday, euro traded on an encouraging note. On Monday, it opened at 74.59 against the INR. It reached a high of 75.37 and a low of 74.12 and closed the week at 75.16.

INR/GBP

GBP against INR opened at 101.61. GBP witnessed a firm trend for the entire week. It pulled away from a four-month low against the dollar on Monday. However, it still stood lower than two weeks ago. The gauge on when the Bank of England will raise interest rates also weighed on investors sentiments. Doubts were further added for this due to a disappointing report last week from Britain's dominant service sector, which grew at its weakest pace over two years. On Thursday, the pound surged after the Bank of England left its monetary policy unchanged. Finally, on Friday, the GBP traded positively against the INR and ended the week at 102.83.

INR/JPY

JPY against INR started the week at 56.01. Yen traded on a firm note against the dollar during the early week. This was witnessed on the back of a fall in Asian equities and investors finding a safe haven in JPY. During the end of the week, JPY continued to trade negatively due to quantitative easing by the Bank of Japan. JPY against INR traded at a low of 54.92 and a high of 56.40. Finally, on Friday, it stood at 55.34 against the rupee.

Commodities 4th Sept 11th Sept % Change
Gold 26,532.00 25,967.00 -2.13%
Silver 34,715.00 34,975.00 0.74%
Natural Gas 178.40 179.90 0.84%
Crude Oil 3,110.00 3,000.00 -3.54%
Currencies 4th Sept 11th Sept % Change
INR / USD 66.77 66.75 0.03%
INR / EUR 74.35 75.16 -1.08%
INR / GBP 101.62 102.83 -1.19%
INR / JPY 56.04 55.34 1.25%

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