PMI Data , Oil Prices and The India – Japan Currency Swap Agreement Drive the Indian Equity Markets

The domestic stock market shrugged off the bears this week and posts biggest weekly gain in 2 years tracking a rebound in the global markets, appreciation in the rupee and slumping of crude oil prices.

Positive cues from global markets on easing concerns over the US-China trade war too buoyed the sentiment. Nifty climbed more than 5% this week, to close at 10553 where as Sensex reclaimed the 35,000-mark and settled at 35,011.65.

 

A Bumper PMI…

The country’s manufacturing sector activity improved in October, as firms scaled up production and employment levels amid strong rise in new business order flows. The seasonally adjusted Nikkei India Manufacturing Purchasing Managers’ Index (PMI) rose to 53.1 in October from 52.2 in September which is quickest rate in four months.

GST Collections and Fiscal Deficit…

Revenue collections under the Goods and Services Tax (GST) crossed the Rs 1 lakh crore mark in October which strongly suggests that collections might be improving, but this will need validation over the next few months. The other worry is the widening fiscal deficit. India’s fiscal deficit has already touched 95.3 per cent of the budgeted estimate in H1 FY19 (versus 91 per cent in H1 FY18), with the government spending at 53 per cent.

 

Wall Street Takes Cheer From Employment Data…

U.S. market indexes ended a three-day winning streak but ended in positive territory for the week.

Year on year, a strong U.S. job growth rebounded sharply in October and wages recorded their largest annual gain in 9-1/2 years, pointing to further labor market tightening that could encourage the Federal Reserve to raise interest rates again in December.

US employment data beat forecasts, showing the creation of 250,000 jobs in October, with the Y-o-Y growth in average earnings crossing above 3 per cent for the first time since 2009.

For the week, the Dow Jones, S&P 500 and Nasdaq Composite are up by 1.5 per cent, 1 per cent and 1.2 per cent respectively.

Year to date, the Nasdaq has gained 5 per cent, the Dow Jones has gained 1.80 per cent and the S&P 500 has  gained  1.01 per cent.

Brazilian Election Results…

Brazilian stocks closed at a record high Thursday, gaining 3.9 per cent in the week after the election of far-right candidate Jair Bolsonaro, the market favourite, as the country’s next president.

Their markets were closed on Friday for a public holiday.

 

Oil Drops As US Considers Granting Some Waivers On Iran Crude Sanctions…

Crude Oil prices posted a fourth consecutive weekly loss, as investors worried about oversupply after the United States plans to allow some countries to continuing buying oil from Iran including Japan, India and South Korea to be granted a waiver. U.S. WTI crude slumped by 6.6 per cent this week where as Brent crude oil has fallen 6 per cent this week and 16 per cent since the beginning of October, when it reached its highest since 2014.

INDIA JAPAN CURRENCY SWAP AGREEMENT…

Finally the INR found some strength last week, after India and Japan concluded a $75bn swap agreement.

This is the third time the two nation’s have signed such an agreement one in 2008 for $3bn and one in 2013 for $50bn.

COMING UP NEXT WEEK…

Next week, the BSE and NSE will conduct a special ‘Muhurat’ trading session between 5 pm – 6.30 pm on Wednesday, November 7 on the auspicious occasion of Diwali. The stock market will remain closed on Thursday, November 8 on account of Hindu’s Happy New Year.

On the global front, the Federal Reserve will be holding its monetary policy meeting next week.