Markets look for steady level as Donald Trump's actions create turmoil
Subscribe to enjoy similar stories. Dear reader, Last week, I wrote about market trends being dependent on follow-up action from participants. The action was half-hearted as traded turnover fell over a cliff.
The index futures weekly turnover was a meagre 8,14,108 lots, constituting no more than two trading sessions. The last three sessions of the week saw delivery segment clock turnover of under ₹1 trillion consecutively. This is worrying.
Admittedly, Friday's RBI policy announcement on interest rates played a major role in this reticence. The 25 basis point (bps) rate cut was met with nervousness as the markets fell on Friday. Indian 10-year benchmark bond yields spiked after the rate cut was announced.
Yields spike when bond prices fall. Bond traders were not entirely convinced of future rate cuts. Coming as it does, the first rate cut after almost five years, the nervousness is noteworthy.
Do remember what I wrote last week. The government intends to borrow ₹11.54 trillion in the coming fiscal year. It depends upon the cheque-writer whether to deploy the money or not.
Bond markets seem to be indicating the real cost of funds will stay elevated. Notwithstanding the headline coupon (interest) rates, fresh loans may not be available to all and sundry borrowers at those reduced rates. That means the natural fallout for the markets will mean increased action on interest rate-sensitive stocks.
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