Nifty and Sensex closed down by over 0.5% week on week on the back of budget reactions, roll back of railway fare hikes, worries on domestic political situation, weak rupee, report on coal mining license loss to the exchequer and weak global cues. Broad markets however closed positive indicating underlying strength in the market. Derivative markets went into the expiry week on a firm note with implied volatility on Nifty index options closing down week on week.
The Rupee fell by close to 2% week on week on worries of a rising current account deficit and a sharp rise in fiscal deficit for 2011-12. Weak equity markets added to the sentiments on the rupee. RBI was not seen in the market and added to the fall. The outlook for the Rupee is not very bearish as equity market sentiments are likely to improve going forward and the Rupee will trend up again. The range for the Rupee is at Rs 48-Rs 52 to the USD in the coming months.
Global equities closed down week on week on the back of profit taking at higher levels of indices. Mixed economic data with China manufacturing showing contraction while US employment and existing home sale numbers showed an improving economy. The USD lost ground last week even as equities fell, indication a positive correlation between the two. The USD will look to regain its strength in the coming weeks helping equities higher.