US Fed hikes rates
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.