Feb 03 2018

Rupee logs biggest weekly fall in 12-weeks

 Weekly Synopsis


Date:- 03rd February 2018


Markets from 29th January 2018 to 02nd February 2018:-


Indian Rupee:-


  • The Indian rupee posted its biggest weekly decline in 12 weeks against the dollar, as domestic sentiment took a beating following the next fiscal year’s federal budget that was announced on Thursday. For the week, rupee ended 0.80% lower against the greenback. The rupee closes yesterday at 64.0550 against the previous weekly close of 63.5450 on January 25th, 2018 to a greenback. It trades in a weekly range between 63.48 to 64.19 against the greenback.


  • India’s foreign exchange reserves hit a record high for the sixth straight week at $417.79 billion as of Jan. 26, from $414.78 billion in the previous week, the central bank said yesterday. The reserves also posted a rise for the seventh week. The increase was due to a rise in foreign currency assets to $393.74 billion from $390.77 billion in the previous week, according to the data from the Reserve Bank of India.


  • India has upwardly revised its fiscal deficit target to 3.5 percent of gross domestic product (GDP) for the 2017/18 fiscal year, Finance Minister Arun Jaitley told parliament earlier while unveiling the federal budget for the next fiscal year.


  • India’s federal government rationalized the capital gains structure, saying it plans to re-introduce long-term capital gains tax on equities with some conditions. Long-term capital gains tax is usually charged if an asset is held for more than one year and then sold for a gain. From the next fiscal year that starts Apr. 1, long-term capital gains tax will be levied at a rate of 10% of over 100,000 rupees, Finance Minister Arun Jaitley said while announcing the federal budget in parliament. Equity investments till Jan. 31 will be grandfathered from a tax perspective, he added.


  • India reported a fiscal deficit of 6.21 trillion rupees ($97.27 billion) for April-December or 113.6 percent of the budgeted target for the current fiscal year that ends in March.


Global Market:-


  • The dollar rose sharply against a basket of major currencies buoyed by a bullish US jobs reported which stoked investor expectations for a faster pace of monetary policy tightening. The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, rose to 89.16. The Labor Department said Friday, U.S. non-farm payrolls rose by 200,000 jobs in January. That beat economists’ forecasts for 184,000 new jobs. While unemployed remained at unchanged on the prior month at 4.1%.


  • Manufacturing activity in the U.S. fell less than expected in January, boosting optimism over the American economy, according to an industry report released on Thursday. The Institute for Supply Management (ISM) said its index of manufacturing activity decreased to 59.1 last month from December’s reading of 59.7. Analysts had forecast the index to drop to 58.8.


  • At the conclusion of its two-day policy meet, the Federal Reserve held main rates in a range between 1.25% and 1.50%, but its economic outlook hinted at possibilities of a rate hike as soon as in March. The central bank said it expected inflation on a 12-month basis to “move up this year and to stabilize” around the 2% annual target, adding, economic conditions are expected to evolve in a manner that will warrant “further gradual” rate increases.


  • British manufacturing lost some of its recent strong momentum last month as factories were held back by overall weakness in the economy in the run-up to Brexit, a survey showed on Thursday. The IHS Markit/CIPS manufacturing purchasing managers’ index (PMI) dropped to 55.3 in January, its lowest since June 2017, though still well above its long-run average of 51.7.


  • Consumer price inflation (CPI) in the euro zone eased slightly in January, diminishing pressure on the European Central Bank to move forward with further removal of monetary accommodation, official preliminary data showed on Wednesday. In a report, Euro-stat said consumer price inflation rose by a seasonally adjusted 1.3% in January, in line with expectations and compared to a 1.4% advance in the prior month.


  • All three major U.S. stock indexes tumbled Friday with the Dow seeing its worst percentage drop since June 2016 as climbing bond yields prompted a selloff in equities. The Dow Jones Industrial Average fell 665.75 points, or 2.54 percent, to 25,520.96, the S&P 500 lost 59.98 points, or 2.13 percent, to 2,762 and the Nasdaq Composite dropped 144.92 points, or 1.96 percent, to 7,240.95.


  • European markets finished broadly lower on Friday with shares in Germany leading the region. The DAX is down 1.68% while France’s CAC 40 is off 1.64% and London’s FTSE 100 is lower by 0.63%.


Local Market:-


  • Indian shares slumped more than 2 percent on Friday, posting their biggest fall in nearly 15 months, as the long-term capital gains tax on equity investments dampened sentiment amid lingering worries of the country’s central bank turning hawkish.


  • The BSE index ended 2.34 percent lower at 35,066.75, while the broader NSE index closed 2.33 percent lower at 10,760.60, posting their biggest daily loss since November 2016.


  • Both indexes dropped 2.7 percent each for the week, their biggest weekly percentage drop since August 2017.