Indian Shares Poised for Uptick as Fed Signals Rate Cut
Indian shares set to rise following Fed Chair Powell's hint at rate cuts. GIFT Nifty indicates higher opening, with Asian markets and Wall Street responding positively to the news.
Indian equities are anticipated to commence trading on a positive note this Monday, aligning with other Asian markets following Jerome Powell's indication of impending interest rate reductions. The GIFT Nifty, a derivative of the Nifty 50 index, was observed at 24,902 as of 07:57 a.m. IST, suggesting that the NSE Nifty 50 will initiate above its previous close of 24,823.15 on Friday.
The Nifty 50, India's benchmark stock market index, has experienced a growth of approximately 3% over the past seven sessions, marking its longest rally in 2024. This upward trend has been fueled by increasing expectations of a U.S. rate cut in September and sustained domestic capital inflows.
At the recent Jackson Hole Economic Symposium, an annual gathering of central bankers in Wyoming, Jerome Powell, the Chair of the Federal Reserve, stated, "the time has come for policy to adjust." This statement has solidified anticipations of a rate reduction at the upcoming Fed meeting scheduled for September 17-18, 2024.
Analysts suggest that a rate cut in the United States could potentially attract capital flows into emerging markets like India, potentially supporting a sustained rally in domestic equities. The MSCI Asia ex-Japan index, which tracks large and mid-cap representation across Asian markets excluding Japan, reflected this optimism by rising 0.75% at the opening of Asian markets.
Wall Street equities concluded sharply higher on Friday, responding positively to Powell's remarks. Both foreign institutional investors (FII) and domestic institutional investors (DII) demonstrated confidence in Indian stocks, with net purchases of shares worth approximately 19.44 billion rupees ($232 million) and 28.96 billion rupees, respectively.
"The potential U.S. rate cut could significantly boost capital inflows into emerging markets like India, potentially fueling a sustained rally in domestic equities."
In corporate news, KEC International secured orders valued at 10.79 billion rupees. Dr Reddy's received a U.S. FDA Form 483 with three observations for its Srikakulam plant, a document issued when investigators observe conditions that may violate regulations. The Enforcement Directorate, India's law enforcement agency responsible for economic laws, conducted searches at premises of Religare Enterprises officials. Lemon Tree Hotels signed a license agreement for a 175-room property in Surat, a major city in Gujarat known for its diamond and textile industries.
As the Indian stock market, one of the largest globally by market capitalization, prepares for the week ahead, investors will be closely monitoring global economic signals and their potential impact on domestic equities.
