Global Markets

• Concerns over the credit worthiness of Euro-nation economies such as Greece, Portuguese, Spain etc weighed heavily on the markets during
  the week. Countries such as Greece and Portuguese whose fiscal deficit has touched 12.78% and 9.3% respectively in 2009 pledged to take stringent action to reduce the fiscal burden over the coming year. The above also resulted in driving US 10 year yields down for a fifth straight week, as the same drove investors to the safety of US treasury.
• The unemployment rate in the U.S. unexpectedly dropped to 9.7 percent in January, indicating the labor market may be poised to climb out of its deepest slump since World War II. Manufacturers hired more workers for the first time in three years, increased hours and raised pay which could potentially lift consumer spending and sustain growth. There are indications that companies are rebuilding industrial capacity by investing in machinery and equipment to meet growing demand which in turn may spur further hiring.

Indian Equity Markets

• The key benchmark indices tripped as Europe's sovereign debt and a decline in commodity and energy prices raised fresh concerns over the global economic recovery. The BSE Sensex fell below the psychological 16,000 mark and declined by 3.47% with the BSE mid cap and BSE Small cap outperforming the broader markets.
• The HSBC Markit Purchasing Managers' Index (PMI) rose to 57.7 in January 2010, its strongest reading since August 2008 and up from 55.6 in December 2009. The growth in manufacturing activity has been driven by a sharp rise in new export orders that are supporting a recovery in the industrial sector.
• Exports continued to rebound, rising an annual 9.3% in December’09 to $14.6 billion, their second consecutive monthly rise. Imports increased by 27.2% in December’09 from a year earlier to $24.75 billion while the trade deficit shrunk by a little over 28 percent to $76.24 billion for the April- December 2009 period

Outlook: The markets would take cues from global developments. Expectations that the dollar carry trade, which fuelled a rally in emerging
market stocks in the past one year, may pause for a while may further affect stocks. The release of GDP numbers and IIP data would be closely watched.

Indian Fixed Income Markets

• The 10 year bond prices declined, pushing yields to their highest in three weeks as concerns over the government borrowing in the up coming financial year accompanied with a rising inflationary scenario and a likely pick up in credit weighed on the markets. Resulting from the above management of the government could be more challenging.
• The government sold the Rs 8000 cr of GOI bonds at an auction, the last of its planned Rs 4.51 trillion of sales for the current fiscal. The auction was for 7.02% GOI 2016, 6.35% GOI 2020 and 8.24% GOI 2027 securities. The cut –off yield was at 7.5071%, 7.6777% and 8.3228% respectively. The auction was fully subscribed and there was no devolvement on primary dealers.
• Annual food inflation rose for the second week on the trot, affirming RBI's fears of a spill-over into other commodities and services and mounting pressure on the government to take more measures to arrest prices. Food inflation rose to 17.56 per cent for the week ended January 23 from 17.4 per cent in the previous week

Outlook: With prevailing concerns over the current fiscal deficit, the market would take cues from the upcoming budget.

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