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Informist, Thursday, Sep 12, 2024

By Anjana Therese Antony

MUMBAI – With investors now factoring in a 25-basis-point cut in interest rates in the US, analysts say the near-term upside might be limited for Indian equities, particularly until the outcome of the US Federal Reserve's policy meeting next week. Benchmark indices may hit new record highs in the next session too, though the pace of rise will be slower than today. 

"All major data are out, and the market has factored in a 25-bps cut in the coming meeting ... as far as (negative) surprises come, our market should continue to rise but at a slower pace," a research analyst at a broking firm said. Though weak US economic data has led to a sell-off in global markets recently, the largely in-line US August inflation data released on Wednesday cheered investors. Immediate support for the Nifty 50 is seen at 25300-25270 points and resistance at 25450-25500 points. 

Today, the Nifty 50 and the Sensex ended nearly 2% higher each at record closing highs of 25388.90 points and 82962.71 points, respectively. The 50-stock index hit an all-time intraday high of 25433.35 points and the 30-stock index hit a lifetime high of 83116.19 points.

Meanwhile, India's inflation print for August, released post market hours today, was largely unchanged from the previous month at 3.65%. This is the second straight time that the CPI inflation print has been below the Reserve Bank of India's target of 4%. The apex bank, on multiple occasions, has said that its decision on rate cuts would be based on key economic data, including CPI, and not on the rate path in the US. 

"Indian interest rates have broadly moved in lockstep with the Fed funds rate. We expect interest rates in India to trend down over the next one year, with the speed and magnitude depending on global macro and monetary policy environment," Vinay Paharia, chief investment officer at PGIM India Mutual Fund, said in a report. Paharia also said that the fall in interest rates was a material valuation tailwind for high-growth companies as the re-adjustment of valuation starts to taper off with lower interest rates.

The US rate-cut exuberance is likely to keep information technology stocks higher in the coming sessions too, according to analysts. Higher interest rates in the US had impacted discretionary spending by major US clients of Indian IT companies, dealing a hit to their financial performance. However, increasing hope of a rate cut in the US is having a ripple effect on Indian IT stocks, like their US counterparts. 

Also, signs of recovery in rural demand, a good monsoon, and strong festival season demand are expected to keep fast-moving consumer goods stocks a preferred pick of investors in the near term. Today, the Nifty FMCG closed 1.2% higher, up for the fourth consecutive session.  End

Edited by Avishek Dutta

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