Ind-Ra: Eyes on Central Banks- ECB, FED and RBI

As the euphoria over the union budget moderates, both rupee and bond market are likely to focus more on fundamentals as also global developments, says India Ratings and Research (Ind-Ra). Global capital markets will be closely watching European Central Bank's(ECB) monetary policy meeting on 10 March 2016 as the expectation of a further policy stimulus has already built-up. On the other hand, next week's US Fed meeting amid strong US labour market data and mixed commentaries on state of economy from important voting members is also a key determinant for global markets.

Notwithstanding the cheer evident in domestic financial markets post the budget, an improvement in the domestic macro environment and fundamentals is likely to be much more gradual. However, an improvement in investor confidence (primarily domestic) and renewed hope for the Reserve Bank of India's (RBI) accommodative monetary policy stance to boost growth would support markets. Overall, the 10-year benchmark G-sec yield might stay between 7.58%-7.68% in the coming week, while the rupee is likely to trade between 66.95-67.65/USD.

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