Domestic markets are expected to open on a flat to positive note on Monday, thanks to the US Fed chief signalling an imminent rate cut. The US Fed Chair Jerome Powell on Friday signalled that the central bank would cut its interest rate in the September meeting.
Gift Nifty at 24,950 against. Nifty futures (Aug) close of 24,854 and 24,965 signals a flattish beginning for the domestic markets.
Powell made a crucial speech that laid the groundwork for future interest rate reductions. Powell said, “The time has come for policy to adjust”. Analysts expect a 50 basis points cut soon.
The Indian market would react on the Fed Chair’s comments over the US economy and inflation outlook at the Jackson Hole Economic Symposium, said analysts. However, equities in the Asia-Pacific region are mixed. Japan equities, in fact, are down nearly one per cent. However, the Singapore, Australia and Taiwan markets are up about half a per cent in early deals on Monday.
Viram Shah, CEO, Vested Finance, said: “Powell’s comments about cutting interest rates raise hopes that the US central bank will start reducing policy rates from September onwards. Equity markets generally benefit from rate cuts as lower interest rates will spur spending and give a boost to the economy. The US market has already bounced higher, and others may follow suit.”
Shah added that this shift by the Fed could also influence the Reserve Bank of India (RBI) to consider cutting interest rates sooner than previously expected. He emphasised that lower borrowing costs would likely encourage companies to restart their capital expenditure plans, as the cost of capital decreases.
“The pivot by the US Fed is also an indication that RBI may also start thinking about cutting interest rates sooner than earlier expectations. This may also encourage companies to restart their capex plans as the cost of capital will go down,” Shah said.
According to SBI Securities, on the data front, consumer confidence data, weekly jobless claims and PCE are the key data releases in US next week while India 1QFY25 GDP data will be released on August 30. “With lack of any major domestic trigger, the Indian market will continue to take cues from the global markets, apart from seeing news driven stock specific action,” it added.