India's domestic inflation fell to 4.35% in September 2021 from 5.3% seen in August 2021. However, energy inflation was higher at 13.63% amid rising oil & natural gas prices. Sensex & Nifty reacted positive as the inflationary pressures loomed. Last year, inflation was reported higher for the period September 2020-December 2020 which makes the case for higher base effect. RBI in the recent policy-meeting haven't really shown concerns about inflationary pressures rather they want to trim down the excess liquidity that�s in the market. Q2 earnings front, Infosys & Wipro reported better than expected results and digital business for Infosys grew at 40% and now major contributor to the top-line. Margins seen slight dip due to the higher attrition rate in the industry. Infosys raised the revenue growth guidance to 16.5% - 17.5% for Fy22. Going forward, markets will watch for key economic growth and earnings growth indicators and for now worries on inflation will be rain checked.
Nifty is 1700 points away from 20K mark, in August 2021 and September 2021 Nifty added 1350 and 450 points respectively and till now in October (17th October 2021) Nifty gained 700 points i.e 4%. Retail participation has been mind boggling, as per AMFI, the market got support from record monthly inflow of over USD 1 billion funds in September 2021 from retail mutual fund investors. Hence, strong earnings expectations and favourable global cues would boost Nifty to 20K mark, please dont ask about valuations!
In the coming week, domestic investors will watch out for Q2 domestic earnings ICICI Lombard, Tata Elxsi, IDBI Bank and IEX. Global flash PMI levels will be keenly watched.
FIIs/FPIs have invested Rs. 131 billion in September 2021 and Rs. 2.26 billion in October 2021. Foreign Institutional Investors (FIIs) Derivative Statistics have shown a rise in the open interest in stock futures, stock options, index futures and index options. Implied volatility (IV) fell for put options in the last week and IV rose for call options. Fall in IV for put option and rise in IV for call option shows steady support for Nifty at present levels.
Wallstreet indices closed the week on a positive note on the back of strong earnings from banks and upbeat surprise in retail sales data. During the week, Dow Jones gained by 1.58%, Nasdaq up by 2.2%, and S&P 500 rose by 2%.
European markets closed on positive note on Friday taking the positive cues from the US market. Investors also welcomed the news that next week European Union leaders are set to approve emergency measures to provide short-term relief to households and businesses amid an unprecedented energy crisis. During the week, FTSE gained by 2% and DAX rose by 2.51%.
Increasing demand for oil and supply tightness is benefiting oil producers. Brent crude crossed USD 85 mark which was last seen in 2018. Higher natural gas prices and shortage of coal are supporting the oil prices upward rally. During the week, Brent crude prices gained by 4%.
Global Economy
The annual inflation rate in the US edged up to a 13-year high of 5.4% in September 2021 from 5.3% in August 2021 and above market expectations of 5.3%.
The Federal Reserve policymakers have agreed that the tapering emergency pandemic support should start either mid-November 2021 or mid-December 2021, the minutes from the latest FOMC policy-meeting showed. Officials stressed that if the economic recovery remained broadly on track, a gradual tapering process that concluded around the middle of next year would likely be appropriate.
Stocks of crude oil in the US jumped 5.123 million barrels in the week ended 8th October 2021, following a 0.951 million barrels increase in the previous week and well above market expectations of a 0.140 million rise, data from the American Petroleum Institute showed.
The number of Americans filing new claims for unemployment benefits fell to 293,000 in the week ending 9th October 2021, the lowest level since the pandemic hit the US economy in March 2020 and well below market expectations of 319,000.
Industrial output in the Eurozone declined by 1.6% from a month earlier in August 2021, following a revised 1.4% growth in July 2021 and matching market expectations.
The Eurozone trade surplus narrowed sharply to EUR 4.8 billion in August 2021, from EUR 14 billion in the same period last year and well below market expectations of EUR 16.1 billion, mainly due to a 26.6% jump in imports amid a rally in energy prices.
Industrial production in Japan dropped by 3.6% (M-o-M) in August 2021, compared with the flash figure of a 3.2% fall and after a 1.5% decline a month earlier. This marked the second straight month of contraction in industrial output.
China's annual inflation rate unexpectedly edged lower to 0.7% in September 2021 from 0.8% a month earlier and compared with market estimates of 0.9%.
China's trade surplus widened to USD 66.76 billion in September 2021, from USD 35.34 billion in the same month a year earlier and far above market consensus of USD 46.8 billion.
