US Fed meet ahead: What do dimming rate cut hopes mean for Indian stock market?

The FOMC (Federal Open Market Committee) involvement complaint determination is owed connected Wednesday, May 1, followed by Fed Chair Jerome Powell’s property conference.

Also Read: Wall Street week ahead: All eyes connected Federal Reserve’s involvement complaint determination and jobs data

The latest macro information showed ostentation successful the US remains sticky, and the cardinal bank's efforts person not been capable to fetch the desired results.

The US user terms scale (CPI) roseate 0.4 per cent month-on-month (MoM) and 3.5 per cent year-on-year (YoY), supra the Street expectations of 0.3 per cent MoM and 3.4 per cent YoY, according to information released by the Labor Department's Bureau of Labor Statistics connected Wednesday, April 10.

Also Read: US Fed complaint chopped improbable successful June arsenic US ostentation hots up. What this means for Indian investors and what should they do?

Besides, the GDP numbers showed the system slowed importantly during the archetypal quarter, making the concern much analyzable for the Federal Reserve.

Growing astatine the slowest gait successful 2 years, the US GDP accrued astatine a 1.6 per cent annualised complaint successful the January-March 2024 period.

Also Read: US Q1 GDP: At 1.6%, US system grows astatine slowest gait successful 2 years, misses estimates connected crisp uptick successful halfway inflation

Prevailing uncertainty

There is overmuch uncertainty connected the complaint chopped front. The caller flare-up of geopolitical tensions and volatile commodity prices person added to concerns that ostentation volition not travel down wrong the Fed's 2% people anytime soon, starring to a prolonged hold for complaint cuts.

"The US Fed is watching the US economical information and Inflation. It is targeting 2 per cent ostentation this year, but the rising crude lipid prices are not supporting the economy. Rising geopolitical hostility has not cooled down and is rising daily, which means rising commodity prices. Recently, we saw a crisp runup successful commodity prices, peculiarly successful brushed commodities similar cotton, corn, and soya repast and hard commodities similar gold, silver, concern metals and crude oil," Anuj Gupta, the caput of commodities and currencies astatine HDFC Securities, observed.

While the anticipation of complaint cuts looks remote, the hopes of complaint cuts are not gone completely. Some experts anticipation determination could beryllium 2 complaint cuts this year.

"There whitethorn beryllium a complaint cut, perchance precocious successful 2024, arsenic they are looking for a betterment successful the economy. Earlier, they were looking for 3 complaint cuts this year. Still, we anticipation they volition chopped involvement rates astatine slightest 2 times this year. We besides expect a betterment successful the planetary system and governmental stableness arsenic each economies effort to flight these issues. Recently, we saw a betterment successful China, which volition substance the planetary economy," said Gupta.

Naveen Mathur, Director - Commodities & Currencies, Anand Rathi Shares and Stock Brokers said with the Middle East warfare situation raging again, the hazard of Inflationary unit persists amid higher lipid prices, which could pb to a hold successful Interest complaint cuts.

Mathur underscored that too the geopolitical risks, the hazard of shallower economical maturation up is furthering the origin of 'risk aversion sentiments crossed markets'.

Mathur believes the planetary monetary argumentation easing rhythm volition apt get delayed arsenic the maturation and ostentation dynamics successful the US person erstwhile again bolstered the lawsuit for higher for longer rates. Although Inflation is falling, it’s not wholly backmost to people levels.

"While Fed officials are opening to sermon complaint reductions, if ostentation remains supra target, they mightiness tighten monetary argumentation further. Premature easing could spot caller ostentation surprises that whitethorn adjacent necessitate further monetary tightening. On the different side, delaying excessively agelong could determination acold h2o connected economical activity," said Mathur.

What bash dimming complaint chopped hopes mean for the Indian banal market?

The US cardinal slope has been keeping rates higher for implicit a year. However, the longer the Fed leaves involvement rates higher, the much symptom could beryllium inflicted.

"Longer elevated rates volition summation borrowing costs crossed the economy, apt negatively impacting user spending, concern investment, and the lodging market. This year’s commodity marketplace outlook remains highly uncertain. As consumers and businesses conflict with lingering outgo pressures and high-interest rates, subdued planetary economical enactment is acceptable to construe into softer commodity demand," said Mathur.

However, the home marketplace saw singular gains past fiscal twelvemonth contempt involvement rates remaining precocious owed to the robust home economy, beardown enactment from home investors and expectations of complaint cuts.

As Trivesh D., COO astatine Tradejini, pointed out, the Indian banal marketplace saw a 25 per cent summation successful FY24, and the outlook for the existent fiscal twelvemonth besides looks favourable.

Trivesh highlighted that caller investors thin to deliberation they endure during elevated rates, and existing investors benefit, but the information is acold from reality.

"Elevated rates tin beryllium a paradoxical concern for the market. While they mightiness dampen wide maturation and firm net successful the abbreviated term, they besides awesome the Fed's committedness to warring inflation. This tin beryllium affirmative for semipermanent capitalist confidence," said Trivesh.

"For caller investors, higher involvement rates mightiness marque bonds and different fixed-income options much charismatic than stocks. However, established investors tin usage marketplace dips arsenic buying opportunities, focusing connected coagulated companies with beardown fundamentals. In an elevated involvement complaint environment, a strategical attack is key. While book-building and selling during rallies tin beryllium tempting, focusing connected semipermanent worth instauration is often much sustainable," Trivesh said.

India's beardown maturation prospects, coupled with the anticipated stableness of the upcoming elections, paints a affirmative medium-to-long-term representation for the banal market. Domestic capitalist information is besides rising, mitigating immoderate of the concerns surrounding FII outflows.

"I would urge staying invested successful prime Indian equities, utilizing marketplace volatility arsenic an accidental to physique a well-diversified portfolio for the agelong haul," said Trivesh.

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Disclaimer: The views and recommendations supra are those of idiosyncratic analysts, experts and broking companies, not Mint. We counsel investors to cheque with certified experts earlier making immoderate concern decisions.

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Published: 29 Apr 2024, 03:22 PM IST