The proverbial “Sell in May and Go Away” did not work this time as it was a month for the equity markets as global equities set record highs in both developed and emerging markets. UK General elections will benefit emerging economies like India as investment destinations.

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The rupee’s stability and moderate growth combined with low inflation will certainly be an important factor in favour of Indian markets as seen by the performance of mid-cap stocks.

Bond market continued its optimistic rally well into the week although bond prices traded in a narrow range seeking fresh triggers while also anticipating the Reserve Bank of India (RBI)’s Monetary Policy Committee (MPC) meeting next week. Although RBI is widely expected to maintain status-quo on rates, a less hawkish guidance is expected.The fourth quarter GDP data at 6.1% and full-year number at 7.1% was disappointing.  

Bond yields managed to hover at the lower end of the range with a good bid-to-cover interest in the weekly auctions. Spread compression and increasing volumes in the trading segment suggest revival of interest. Money market rates remained flat for a major part of the week with ample systemic liquidity. The rupee traded in a narrow range and may continue to remain less volatile.

Rate decisions in Australia and European Central Bank apart from RBI’s MPC decision will be the key events for the week. Bond yields should drift tad higher as profit-taking should be seen at current levels. The new benchmark security may trade in the 6.65-6.75% range.

The writer is executive director, Lakshmi Vilas Bank