Indian Weekly Market Update June 19 2009
Global investors remained skeptical about a recovery even after the International Monetary Fund (IMF) upgraded its US GDP growth forecast. IMF now expects the US GDP to contract 2.5 percent in 2009—this is lower than the 2.8 percent decline it had estimated in April 2009. The IMF revised the growth estimate for 2010 to 0.75 percent, up from zero growth earlier. This implies that economic recovery is already underway despite concerns about the rising debt and fiscal deficit. According to IMF estimates, public debt is expected to increase twofold to 75 percent of the GDP, while the fiscal deficit is likely to average 9.0 percent of the GDP during 2009-2011. This increased risks associated with US Treasury bonds as the Dow Jones Industrial Average (DJIA) and FTSE 100 declined 2.95 percent and 2.16 percent, respectively, during the week ended June 19, 2009.
The weaknesses in global economies cast a pall of gloom across Asia, where six out of seven indices ended in the red. China’s Shanghai SE Composite Index (up 4.98 percent) was the lone gainer after World Bank upgraded its economic growth forecast for the country. India’s benchmark index, BSE Sensex, declined 4.7 percent due to profit booking and fear that reforms anticipated in the forthcoming budget would not come through as expected.
The rupee depreciated 1.0 percent during the week as demand for the dollar by oil marketing companies increased in tandem with demand from foreign institutional investors (FII). Crude oil prices slipped 3.5 percent to US$69.55 per barrel after increasing 5.3 percent the previous week. Rising debt levels and soaring fiscal deficit, which could impede for economic recovery triggered a huge sell-off in crude oil.
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