Month Gone By – Markets (period ended December 31, 2020)
Equity indices globally and domestically recorded new highs in response to sharp moderation in
Coronavirus cases, emergency approvals provided to vaccines and stimulus approval of USD900bn
in USA. The passage of ever looming Brexit deal also provided a closure to the markets.The
optimism reflected in the rising crude oil prices which crossed USD50/bbl for the first time since
March 2020 due to greenshoots of recovery and rising demand as reflected by a steady fall in US
jobless claims in the month of December.
In line with global equities, Indian equities also saw a sharp rally in December (Nifty up 7.8%).
The primary driver for the rally was huge FPI inflows amounting to USD8.4bn, however the rise
has been pretty uneven as analyzed by a further breakup analysis of sectoral indices. While BSE
Realty bolstered by cheaper home loans and stamp duty discount rose by 20.2% for the month,
followed by BSE Metals at 13.5%; BSE Auto and BSE Power remain laggards at 3.4% and 3.1%
The GoI 10Y Benchmark yield fell by 1.5bps to end the month at 5.895%, however the yields had
moved upto to 5.96% during the month. The US 10Y yields were high by 8 bps to end at 0.92%.
INR gained much lost ground owing to strong dollar inflows and weakening DXY and ended the
month at 73.04/USD in December.