US Fed hikes rates

Money Times - - Market Review - By Deven­dra A Singh

The Sen­sex de­clined 220.86 points to set­tle at 35742.07 while the Nifty closed at 10754 los­ing 51.45 points for the week that ended on Fri­day, 21 De­cem­ber 2018. Con­sumer in­fla­tion or Con­sumer Price In­dex (CPI) eased to a 17-month low of 2.33% in Novem­ber 2018. Whole­sale in­fla­tion or the Whole­sale Price In­dex (WPI) fell to 4.64% in Novem­ber 2018 from 5.28% in the pre­vi­ous month. In­fla­tion in man­u­fac­tured prod­ucts eased to 4.21% in Novem­ber. Dou­ble-digit in­fla­tion in fuel and power was off­set by eas­ing food prices in Novem­ber. Fall­ing crude oil prices of late have eased in­fla­tion­ary pres­sure on In­dia, who is a ma­jor fuel im­porter. Trade deficit for Novem­ber 2018 nar­rowed down to $16.67 bil­lion due to a fall in gold im­ports. In October 2018, the trade deficit was at $17.13 bil­lion. Gold im­ports dipped 15.59% to $2.76 bil­lion in Novem­ber. The coun­try’s oil im­ports how­ever surged last month to $13.49 bil­lion, up 41.3% from a year ear­lier. In­dia, the world's third-big­gest crude im­porter, buys over 80% of its oil from the over­seas mar­kets. On the GST front, PM Naren­dra Modi said that his gov­ern­ment will tax most goods at be­low 18% in a fur­ther sim­pli­fi­ca­tion of the GST. “To­day, we are ap­proach­ing a stage where 99% items can be brought un­der 18%. We firmly be­lieve that GST must be as sim­ple as pos­si­ble and we are also work­ing con­stantly in that di­rec­tion,” PM Modi said in his speech at an event in Mum­bai. The US Fed­eral Re­serve raised its bench­mark in­ter­est rate by a quar­ter-point to 2.5% from 2.25%. Fed of­fi­cials now fore­cast two hikes next fis­cal year. Fed’s Chair­man Jerome Pow­ell in its re­leased FOMC pol­icy state­ment said that the cen­tral bank will con­tinue trim­ming its balance sheet by $50 bil­lion each month and left open the pos­si­bil­ity that con­tin­ued strong data could force it to raise rates to the point where they start to

brake the econ­omy’s mo­men­tum.

Gross Do­mes­tic Prod­uct (GDP) is fore­cast to grow 2.3% in 2019 and 2% in 2020, slightly weaker than what the Fed an­tic­i­pated pre­vi­ously. The unem­ploy­ment rate, which is cur­rently at a 49-year low of 3.7%, is ex­pected to fall to 3.5% next year and rise slightly in FY20 and FY21. In­fla­tion that sparks the apex bank’s 2% tar­get this year is ex­pected to be lower at 1.9% next year.

Key in­dex ad­vanced on Mon­day, 17 De­cem­ber 2018, on con­sol­i­dated buy­ing by the FIIs. The Sen­sex was up 307.14 points to close at 36270.07.

Key in­dex ral­lied on Tues­day, 18 De­cem­ber 2018, on buy­ing of eq­ui­ties. The Sen­sex was up 77.01 points to close at 36347.08.

Key in­dex closed higher on Wed­nes­day, 19 De­cem­ber 2018, ahead of the gov­ern­ment’s cru­cial GST meet. The Sen­sex was up 137.25 points to close at 36484.33.

Key in­dex fell on Thurs­day, 20 De­cem­ber 2018, on global cues. The Sen­sex was down 52.66 points to close at 36431.67. Key in­dex reg­is­tered a sell-off on Fri­day, 21 De­cem­ber 2018, after the US Fed hiked rates that weak­ened the global mar­ket sen­ti­ment. The Sen­sex was down 689.6 points to set­tle at 35742.07. Na­tional and global macro-eco­nomic fig­ures and news flow from events like Brexit will dic­tate the move­ment of the mar­kets and in­flu­ence in­vestor sen­ti­ment in the near fu­ture. On the Ru­pee sce­nario, mar­ket par­tic­i­pants will closely watch the In­dian ru­pee trend against the US Dol­lar, which is cur­rently hov­er­ing around 70.5. The RBI’s next mon­e­tary pol­icy re­view meet is sched­uled to be held on 5 Fe­bru­ary 2019.

On the global front, United States and other Euro-na­tions’ macro-eco­nomic data for Novem­ber 2018 is sched­uled to be re­leased this week. China’s macro-eco­nomic data for Novem­ber 2018 will be re­leased in the next few weeks.

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