Weekly Market Review: US Fed Interest Rate Cut Steals The Show

It was a big week for the markets, not just in India but globally. All markets were in a wait-and-watch mode because we had the biggest macro event of the year. Perhaps the biggest macro event of the last three years lined, i.e. 'The Fed Outcome' with a debate around 25 bps or 50 bps rate cut with majorly pencilling in 25 bps cut.

Jumping to what was the outcome, we had the hawkish cut with an unexpected 50 bps, along with the fact that the next few rate cuts will be slower and lower by around 25 bps only.

Post the FOMC Meeting, the US market did see some profit booking as was expected after a 50 bps rate cut and a similar situation was seen in Indian markets as well with profit booking on cards, and the situation was such that the Nifty Midcap 100 Index was down nearly 2 per cent.

Looking at the bigger picture, we believe that for markets, this is a goldilocks kind of scenario because the US economy is resilient with no fear of recession, although there might be a bit of a slowdown, and at the same time, there is going to be rate cuts so that is a big positive. Another positive factor to track is the Dollar Yen.

During the week, the 140 levels were breached again, but after the FOMC Meeting, there was a massive rally happening around 143.5, which has likely lowered the risk of carry trade unwinding for global markets.

Talking about the performance of Indian Markets in comparison to other global markets post the FOMC Meeting was a rank underperformer on account of profit booking with PSU stocks, particularly in sectors like defence, railways, and NBFCs being hit hard with stock prices falling nearly 6 per cent in some cases. However, large caps continue to outperform, which helped the market scale to new highs. 

The initial sense is valuation concerns among small & midcap stocks after the kind of rally seen and domestic institutions holding cash reserves at elevated levels, a sign of some caution. However, in hindsight, every correction in the past has presented a strong buying opportunity in high-quality stocks for long-term investors. 

How Did the Markets Fare Last Week?

On a weekly basis ended on Friday, the Indian benchmark indices ended in green. Sensex and Nifty were up 2.0 per cent each, while Midcaps were down 0.2 per cent.

What Might Keep the Markets Busy Into the Next Week?

With the US FOMC event out of the way, investors will monitor the key macroeconomic cues from the regions. Data points like S&P Global Composite & Manufacturing PMI, Fed Officials Speech, Q2 GDP Nos., and Initial Jobless Claims will be important to track.

On the domestic front, Bank Loan Growth, FX Reserves, HSBC Composite, Manufacturing & Services PMI will keep investors busy. Given the kind of volatility, Indian markets are likely to take cues as to how global markets are performing.

Crude and FII Flows

Brent Crude Oil prices continue to recover from their multi-year low and trade at USD 74.67/bbl. On the other hand, FIIs were net buyers for the week.

Sector in Focus

Realty, financials and consumption remained in focus during the week.

Stocks That Made Headlines During The Week

IIFL Finance:

• The Reserve Bank of India (RBI) has lifted the restrictions imposed on the gold loan business of IIFL Finance. These restrictions were earlier imposed on 4th March 2024, which prohibited the company from sanctioning, disbursing, or assigning/securitising/selling any of its gold loans. 

• The RBI’s decision is effective immediately and allows IIFL Finance to resume the sanctioning, disbursal, assignment, securitization, and sale of gold loans in compliance with all relevant laws and regulations.

Reliance Infra:

• The Board at its meeting held on 19th September, has approved issue of up to 12.56 crore equity shares of the company and/or warrants convertible into equity shares at an Issue Price of Rs 240 per share through preferential allotment. 

• Further, the board also approved raising of funds aggregating up to Rs 3,000 crore through issue of equity shares or any other eligible securities by way of qualified institutional placement. 

AU Bank:

• AU Small Finance Bank and Niva Bupa have joined hands to prioritize customer health. Through this partnership, the Bank’s new and existing customers, including those from former Fincare SFB branches, can now access Niva Bupa’s extensive range of retail as well as group health insurance products, encompassing health, personal accident and critical illness plans across the 2,414 touchpoints in India.

Infosys:

• Infosys announced that it is extending its strategic collaboration with Posti, the leading delivery and logistics services provider in Finland, Sweden, and the Baltics. As part of the engagement, Infosys will help Posti enhance customer experience and operational efficiency while continuing to innovate, scale, and grow its IT operations.

Nazara Technologies:

• Nazara Technologies announced its largest fund raise to boost its growth trajectory. The company’s board has approved a preferential equity issue to raise Rs 900 crore, subject to shareholder and regulatory approvals. 

• This capital infusion will fuel strategic acquisitions, fund business expansion, and enhance the company’s ability to seize new growth opportunities.

GE T&D:

• On 18th September 2024, GE T&D’s promoters Grid Equipments Private Ltd and GE Grid Alliance B.V. (formerly Alstom Grid Holding B.V.), announced a proposed offer for sale (OFS).

• The floor price of the offer will be Rs 1,400 per equity share. The OFS involves up to 11.7% of the company’s equity share capital amounting to 30 million shares with each share having a face value of Rs 2.

Aditya Birla Capital:

• Aditya Birla Capital has received a ‘no objection’ letter from the Reserve Bank of India (RBI) for the proposed amalgamation of Aditya Birla Finance Ltd with the parent company. 

Vakrangee:

• Vakrangee announced a strategic corporate agency tie-up with Star Health & Allied Insurance Co. Ltd. (Star Health Insurance), India’s largest retail health insurance company. This partnership aims to provide easy access to comprehensive health insurance products through Vakrangee Kendra network across the Country.

Torrent Power:

• The company has received Letter of Intent (LOI) from Maharashtra State Electricity Distribution Co. Ltd (MSEDCL) for procurement of 1,500 MW Energy Storage Capacity from Pumped Hydro Storage Project. Under the Pumped Hydro Energy Storage Facility Agreement (PHESFA), the Company shall make available to MSEDCL a contracted capacity of 1,500 MW capable of scheduled discharge of 8 hours (with maximum continuous 5 hours) per day. The input energy for charging shall be provided by MSEDCL.

SKF India:

• The Board of Directors of SKF has decided to initiate a separation of its Automotive business with the objective of a separate listing on Nasdaq Stockholm through a Lex Asea distribution to its shareholders. The intention is to list the Automotive business on Nasdaq Stockholm during H1CY26.

Closing Thoughts

Investment success comes from regular discipline, effort and long term outlook!

Disclaimer: The Free Press Journal assumes no liability for loss or damage, including, but not limited to, lost profits, that may result directly or indirectly from the use or reliance on the opinions, news, investigations, analyses, prices or other information offered in this article.