Volatility continued to plague the Indian markets as stocks reacted to a mix of opposing global developments. Key barometer indices suffered a second straight weekly loss. The week started on a positive note in the wake of US President Donald Trump stating that Phase 1 of the trade deal with China would be signed on 15 January. Investors across the globe heaved a sigh of relief at signs of tensions abating between the two nations that have been embroiled in a trade war for the last two years. Giving further boost to sentiment was an announcement by the Indian finance minister that underscored the country’s commitment to becoming a $5 trillion economy. The government has unveiled a massive Rs 102 lakh crore infrastructure investment plan for the next five years. However, 3rd January 2019 saw a sell-off across the globe as geopolitical tensions flared after a US air strike in Iraq killed a top Iranian commander. Small and mid-cap stocks outperformed the Sensex while the benchmark Nifty had settled at a record high during the week. For the week ended 3rd January 2020, the Sensex fell 110.53 points or 0.27 per cent to settle at 41,464.61. The Nifty 50 index declined 19.15 points or 0.16% to settle at 12,226.65. The BSE Mid-Cap index gained 185.33 points or 1.24% to settle at 15,114.55. The BSE Small-Cap index rose 441.08 points or 3.25 per cent to settle at 13,988.89.

Macro-economic developments

Macro-economic numbers announced during the week were mixed leading to further market volatility. The IHS Nikkei India Manufacturing Purchasing Managers' Index rose to 52.7 in December 2019 from 51.2 in November 2019. The reading was the highest since May 2019. India's factory activity expanded at its fastest pace in seven months in December 2019 as a jump in new orders prompted companies to ramp up production. Meanwhile, the country’s core sector growth contracted for the fourth consecutive month in November 2019. However, the pace of contraction slowed to 1.5 per cent from 5.8 per cent in October 2019 due to a growth in the output of fertilizer, cement and refinery products, raising expectations of industrial production moving into the positive territory.

Global Developments

While global investors were largely positive during the week, sentiment took a nosedive after a US air strike killed key Iranian and Iraqi military personnel, raising concerns that escalating Middle East tensions may disrupt peace in the region. Additionally, concerns over a disruption in oil supplies pushed crude prices upwards. In the commodities market, Brent crude futures spiked by nearly $3/barrel to hit a high of $69.16/barrel, the highest since 17 September 2019.