Fed commentary & domestic inflation data will be keenly watched

Global markets bounced back sharply after reports suggesting that Omicron Covid-19 variant is not as fatal as the previous one, however, the uncertainty factors could cap gains in the near term. Market participants will watchout for FED & ECB policy-meeting outcome and domestic inflation data. Domestic industrial output data came in at 3.2% YoY compared to 3.1% growth in previous month as the low base effect wanes. Primary markets will be witnessing 6 fresh IPOs this week, although the sentiment seems to be robust despite the India�s largest IPO i.e Paytm listed on bourses at steep discounted levels.

The Reserve Bank of India held its benchmark repo rate at 4% during its December policy-meeting, as widely expected, saying it was maintaining an accommodative monetary policy stance if necessary to support economic growth and keep inflation within the target. The RBI retained inflation projection at 5.3% for the full year 2021/22. Click here to read our RBI meet analysis.

FIIs/FPIs have sold Rs. 59 billion in November 2021 and Rs. 74 billion in December 2021 (as of 12^th December). Foreign Institutional Investors (FIIs) Derivative Statistics have shown a fall in the open interest (OI) in stock futures, index options, index futures and rise in OI for stock options.

Wallstreet indices closed on positive note as inflation data came in-line with market expectation although the reading is highest since 1982. During the week, Dow Jones & Nasdaq surged, and S&P 500 up by 3.60%.

European markets closed on flat note as investors wait for the ECB policy-meeting outcome which is scheduled to come out this week. Germany�s 3-decade high inflation reading weighed on market sentiment. During the week, DAX up by 3% and FTSE gained by 2.40%.

Global Economy

Annual inflation rate in the US accelerated to 6.8% in November 2021, the highest since June 1982, and in line with forecasts. It marks the 9th consecutive month the inflation stays above the Fed's 2% target.

The US budget deficit widened to USD 191 billion in November 2021, compared with a USD 145.3 billion gap in the same period last year and market expectations of a USD 195 billion gap.

Stocks of crude oil in the US edged down by 0.24 million barrels in the latest week, the second consecutive decline, but well below market forecasts of a 1.705 million drop, data from the EIA Petroleum Status Report showed.

The Japanese economy contracted 3.65 on an annualized basis in Q3 2021, compared with the flash reading of 3% fall and market consensus of a 3.1% fall and following an upwardly revised 2% expansion.

The Euro Area economy advanced 2.2% on quarter in the three months to September 2021, following an upwardly revised 2.2% growth in the previous period, and matching initial estimates.

The IHS Markit Eurozone Construction PMI increased to 53.3 levels in November 2021 from 51.2 levels in October 2021, pointing to the strongest growth in the construction sector since February 2018 amid strengthening demand.

China's consumer price inflation accelerated to 2.3% in November 2021 from 1.5% a month earlier and compared with market consensus of 2.5%. It was the highest rate since August 2020, due to seasonal rising demand, supply constraints, and sporadic COVID-19 outbreaks.

China's trade surplus narrowed to USD 71.7 billion in November 2021 from USD 74.25 billion in the same month a year earlier, and far below market forecasts of USD 82.75 billion. Export growth slowed sharply on the back of a strong yuan, weakening demand due to the emergence of the Omicron COVID-19 variant and higher costs, while imports rose at a faster pace following the easing of the power crunch.

The UK economy expanded 0.9%during Q3, below 1.3% in the previous period and slightly lower than market forecasts of 1%.