De-escalationandOutlookchange

After a day of heavy escalations between India and China on Tuesday, Wednesday saw the action moving to the diplomatic front as the foreign ministers of the two sides spoke over the phone. Given that the two sides continue to make claims and counter claims, the broader solution remains elusive as of now. Indian assets will continue to track developments on the issue.

Globally the congressional testimony of the Fed Chief continued as he made the plea for more fiscal support to people in hard hit industries. He also reassured that the Fed plans to keep its foot on the gas until it is sure that the US is on the road to recovery. The statement essentially means that rates and liquidity will continue to remain benign for an extended period of time. Though the Fed remarks were conducive for market sentiment, the growing fear on the second wave kept the exuberance in check. The Dow Jones closed with a slight negative and the Hang Seng and Nikkei trade in red in today’s trade. A new bill signed by US President Trump which sanctions Chinese officials for mistreating a section of its population also added to the risk off sentiment as Chinese officials deemed it as interference in their internal matters.

Domestically, the important news today which came before the market opening was from Fitch which has revised its outlook on India to negative from stable while affirming the rating at BBB-. Earlier this month, Moody’s in its rating action had downgraded India’s sovereign rating to Baa3 from Baa2. In the accompanying note for action, the rationale from Fitch is that it sees the Indian GDP contracting by 5% in the fiscal year ending March 21 before rebounding by 9.5% in FY22 driven mostly by low base effect. The rating agency has, thought, acknowledged the fiscal restraint shown by the government amidst the pandemic response.

The G Sec market has opened flat as 10 year benchmark bond trades at 5.85 against the previous close of 5.84. The Indian rupee also opens around the previous close displaying that the market has taken the Fitch action in its stride.