The Sensex and Nifty closed positive week on week on the back of positive sentiments generated by a higher than expected 50bps rate cut by the RBI in its annual policy last week. The sentiment is however cautious on the back of a weakening Rupee, rising bond yields and uncertain global cues. Derivative markets are showing positive trend with a fall in Nifty put option implied volatility and a rise in Nifty index futures open interest.
The Rupee fell over 1.5% against the USD to close at three month highs. Worries on portfolio flows, current account deficit and lack of reforms at the center drove the INR down. Bond yields closed higher on worries of absorption of heavy supply despite the higher than expected rate cut. Global markets faced worries on a fresh sell off due to rising bond yields of Spain and Italy but managed to close positive on good corporate results and rise in German business confidence.
US markets were helped by better than expected results from Microsoft and GE to close positive week on week though a fall in Apple share price by 10% pushed the Nasdaq into marginally negative territory. US markets will maintain their positive momentum on confidence on the economy and on corporate performance. German business confidence came in better than expected leading to a rally in European markets. The largest economy in the Eurozone is showing good strength despite uncertainty surrounding its partner nations.
The Euro closed positive to the USD on the back of improved German confidence index while the Japanese Yen lost close to 0.75% on expectations of further monetary easing by the Bank of Japan. Euro will stabilize at current levels while the Yen will further weaken against the USD in the coming weeks.