Equity Market Review

Nifty ended flat for January 2022 after a strong performance in the first half of the month as the Omicron wave, rising bond yields and global equity correction pulled Nifty back to end the month at the 17,340 mark. The BSE Mid-cap index declined 1.4% while the BSE Small-cap index declined 0.8% underperforming Nifty. Global equities fell sharply in January (-5.0% MoM) as the likelihood of potential interest rate hikes by the Fed, higher inflation and geopolitical concerns weighed on the market. Indian equities declined 1.4% ($ terms) outperforming broader markets in January (MSCI APxJ/EM: -4%/-1.9%).

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Debt Market Review

As inflationary pressures across the globe turned out to be more entrenched, Central Banks have been pushed to exit from ultra-easy monetary policies. Crude prices soaring above USD 90/bbl have only added to inflation woes. CPI print in the US for December 2021, came in at almost a 4-decade high print of 7.0%, with core CPI also at multi-year high levels of 5.5%. Against, this backdrop, the FOMC in its January meeting provided a strong hawkish guidance. Quantitative Easing (QE) in the US is expected to end by early March 2022, with the commencement of the rate hiking cycle most likely from the March policy.

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