Equity Market Review

Markets closed the month of August on a negative note with the S&P BSE Sensex falling by 0.4% while the Nifty50 dipping by 0.9%. BSE Midcap and BSE Smallcap indices underperformed its larger peers. BSE Midcap and BSE Smallcap indices slipped over 1%.

Weak global cues, muted earnings from India Inc., corporate governance issues and currency volatility weighed on the sentiment. However, rollback of surcharge on FPI and slew of government measures to boost the economy later in the month brought some relief to the market.

From the rolling back of high taxes on foreign investors to tweak in FDI norms and on August 30, Finance Minister Nirmala Sitharaman unveiled mega merger plan to help India become a $5 trillion economy and kick start investment cycle. Sitharaman announced a mega-merger in the public sector banking space, amalgamating 10 banks into 4. The consolidation will bring down the total number of public sector banks to 12 from 27.

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Debt Market Review

Indian sovereign bond ended 19 bps higher to 6.37% in August vs 6.56% in July. The Reserve Bank of India said it will transfer Rs 1.76 lakh crore surplus to the government this fiscal, easing worries over the Centre’s fiscal deficit target for this financial year. Meanwhile, the rupee depreciated by 3.65% against the dollar during the month, its steepest monthly decline in six years.

The 10-year benchmark G-Sec yield closed at 6.56%, up by 19 bps from its previous close of 6.37% while that on the short-term 1-year bond ended 20 bps lower at 5.74%. In the corporate bond segment, yields fell across the yield curve over the month. The 10-year AAA bond yield ended flat at 7.45%, while the short-term 1-year AAA bond yield ended 35 bps down at 6.70%.

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