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Informist, Wednesday, Sep 11, 2024

By Anjana Therese Antony

MUMBAI – The much awaited US inflation data for August is expected to determine investors' trading actions in the Indian stock markets. The data would help participants get some clarity on the US Federal Reserve's interest rate move next week. While a rate cut is widely anticipated, there is no unanimity about the quantum of reduction, with some expecting a 25-basis-point trim and others forecasting a 50 bps cut. Very few expect the Fed to sit tight even if the data show signs of inflation rising, some research analysts at different broking firms said.

"Investors are keeping their fingers crossed for the data to show a further slowdown (in inflation) so that they can bet on more (rate) cuts for the upcoming meetings," a research analyst at a domestic bank-sponsored broking firm said. "Negative data is not expected for now and a major fall is not expected for our market," the analyst added.

According to a Reuters poll, the US CPI is expected to have risen 0.2% in August, unchanged from July. The US CPI data is scheduled to be released at 1800 IST today.

The worst-case scenario for investors now will be zero rate cuts. This can come as a shock, especially for a market which has factored in a 25-bps cut at the Fed's meeting next week. However, analysts said the Indian market will recover in case of corrections from such a "shocker" as the country is a good bet among emerging markets and provides better returns for investors.

Today, the Indian stock market fell prey to a final-hour sell-off to take out profits. Both the Nifty 50 and BSE Sensex closed 0.5% lower at 24918.45 points and 81523.16 points, respectively. The immediate support for the 50-stock index is pegged at 24800-24750 points and resistance in the range of 25000-25150 points, according to technical and derivatives analysts.

Meanwhile, reports said the chances of Vice-President Kamala Harris winning the US presidential election in November brightened after her first debate with her Republican opponent and former president Donald Trump. According to PredictIt, an online marketplace that lets people wager on political events, the value of a contract for Harris winning the election rose to $0.56 from $0.53 on Monday. The equivalent contracts for Trump fell to $0.47 from $0.52, a Dow Jones report said, adding that a higher price indicates greater chances of victory.

Reports also said Harris managed to slam Trump on issues relating to the latter's presidency, including inflation, unemployment, abortion laws, and immigration, giving her an upper hand during the debate. Political stability is important for investors, including in India, and the US presidential election updates are being widely tracked. The US government's policies on outsourcing, along with interest rate decisions, will have an impact on Indian pharmaceutical and information technology companies, which have key operations in the US, analysts said. 

Along with these, the movement in crude oil prices will be monitored by global investors, including those in India. Crude oil prices are trading at their lowest level in nearly three years, weighed down by demand concerns after the Organization of the Petroleum Exporting Countries and its allies trimmed their demand outlook for 2024 and 2025, citing weaker Chinese demand, Pranav Mer, vice-president of research (commodity and currency) at BlinkX, said in a note today. 

However, the fall in crude oil prices is seen to be temporary and is expected to rise in the medium term. "While upstream earnings are currently impacted, with the OPEC+ delaying its planned rise in production, we expect oil prices to rebound to USD75-80/bbl in the near term," brokerage Prabhudas Lilladher said in a report.

Owing to falling crude oil prices, shares of oil and gas companies tumbled today, with Oil and Natural Gas Corp falling over 4% during the day and ending down for the eighth straight session. The Nifty Oil & Gas index was the major sectoral laggard and closed nearly 2% lower, with all its constituents in the red.  End

Edited by Rajeev Pai

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