Mr. Mitul Shah - Head of Research at Reliance Securities.
Indian equities ended lower for the 5th consecutive session. Nifty was down 0.4%. Broader markets however ended slightly higher as Nifty Mid Cap and Nifty Small Cap were up 0.1% and 0.4% respectively. Most sectoral indices ended in the negative zone. Nifty Metal (+1.8%) and Nifty Consumer Durables (+0.8%) were the major gainers. Nifty PSU Bank was the major laggard, falling 1.2% followed by Nifty Media and Nifty Bank which were lower by 1.2% and 0.9% respectively.
U.S. equities rose led by a rally in bank stocks, as some traders anticipated that financial-sector distress could remain contained and leave the Federal Reserve free to focus on tackling inflation. Over the past week, the collapse of Silicon Valley Bank and the shutdowns of Signature Bank and Silvergate Capital heaped new fears of financial strain on top of investors' yearlong pre-occupation with inflation. The S&P 500 rose 1.6%, the Dow Jones added 1.1% and the tech-centric Nasdaq climbed 2.1%. The yield on the benchmark 10-year Treasury note climbed to 3.633%, from 3.515% a day earlier. The CPI inflation rose 6% YoY in February, down from the 6.4% gain in the prior month. It was the smallest increase since September 2021. Core CPI was up 5.5% YoY. All eyes will now be on the Fed's March 21-22 meeting.
Globally, the crisis in the US banking system has roiled markets with the banking sector coming under pressure across markets on fears of contagion. Markets are concerned over the health of the financial system reiterated by rating agency Moody's cutting its outlook on the US banking system from stable to negative. The collapse of Silicon Valley Bank following losses in its bond portfolio is the biggest bank failure since the global financial crisis and has sent shockwaves through the banking sector. The US CPI though lower, remains well above the Fed's 2% target. This coupled with the stronger than expected February jobs report implies continuation of the rate hiking cycle. The India Feb CPI at 6.44% was lower than 6.52% seen in January, but higher than consensus estimates of 6.30%-6.35%. Persistent cereal and milk inflation is a cause for concern and is likely to be on RBI's mind ahead of the next MPC meeting in April. The higher than normal temperatures and the forecast of unseasonal rains across large swathes of India are likely to impact crops which should keep food inflation higher in the coming months. The Feb WPI cooled down further to 3.85% from 4.73% in Jan and was also lower than the estimates. The WPI data suggests that some respite can be expected on the manufactured goods inflation in CPI in the coming months.