Despite mixed signals after the US Federal Reserve’s cuts of 25 basis points on September 17, the markets praise the possibility of two more cuts-which stretch up to a total of 50 basis points-which are expected to be good for emerging markets such as India. At a press conference after the policy meeting in September, Fed chairman Jerome Powell noted that the labor market is cooling down. However, he emphasized that sticky inflation remains an important risk and that the central bank has the difficult task of balancing the developing, complicated situation. Despite Powell’s cautious tone, a large part of the market expects the Fed to lower in October and December. According to Reuters, the CME Fedwatch instrument suggests that the market currently price in a 90 percent chance of a Fed cut in October and a 65 percent probability of another cut in December. Meanwhile, the Reserve Bank of India (RBI) will announce its policy decision on October 1, and given the favorable growth inflation situation, it is expected to maintain a status quo on policy rates and attitude. Impact on the stock portfolio while the market expects two more cuts in the rate this year, experts say the Fed is non-involved and will consider the incoming data before the policy housing is decided. “Chairman Jerome Powell said that there are two-sided risks-on the hand of inflation and disadvantage of employment. He is not someone who will bend to political pressure; he tends to follow the data and is wary of rate cuts,” said UK VIJayakumar, head investment strategist at Geojit Investments. Although the Fed defense rates are further, it is unlikely to significantly affect the RBI’s decision and the portfolio of Indian investors. “It will not have much impact. Historically, the rate decisions of India are more driven by domestic factors than by what the Fed does. The US has problems such as the Lehman crisis aftermath or unemployment, which is not relevant here,” G. Chokelingam, founder and head of research at Equinomics Research Private Limited. “Similarly, Indian macro parameters don’t really affect them. The only time you see some correlation is when the global economy enters a deflationary phase and collapses oil prices – then both cycles can be somewhat aligned,” Chokelingam said. According to Joseph Thomas, the head of research and an economist at Emkay Wealth Management, there is a high probability that the FOMC could lower the Fed fund rate by another 50 basis points or even 75 basis points over the next few months. This Fed’s reaction is the result of the recognition that inflation is less worrying compared to the challenges for US economic growth. However, Thomas said that the rate decision, as far as MPC is concerned, will be based solely on domestic economic realities, rather than events elsewhere. “A rate cut can only be expected of the RBI if the requirements of economic growth justify it and not otherwise. With a much weaker currency, the probability that the RBI cut is further further is very slim, unless or to serious challenges for the growth,” Thomas said. On the other hand, Sujan Hajra, chief economist and executive director at Anand Rathi Group, believes that the Federal Reserve’s further action is likely to allow RBI further space for at least a 25 BPS interest rate cut. “Although the Indian rupee has written off significantly against the US dollar, even if the dollar index is to a low of the year, the RBI may find some ease to loosen the interest rate as inflation is still below the target, and the GST rate can take it further,” Hajra said. Further rate cuts by the US Fed can lead foreign investors to re -evaluate their attitude about India, which may cause a rally in the Indian stock market. Foreign institutional investors have been selling Indian shares in the cash segment since July due to poor earnings, protracted valuations, the weakness of the rupee and tariff -related uncertainties. The Fed and the RBI mainly focus on household factors to lower rates. However, a strong decline in US benchmarks could weaken the dollar, comforting the RBI to further lower the rates without worrying a lot about the health of the Indian rupee. In that case, rate -sensitive sectors, such as banking, cars and real estate, can see traction, which can affect the market sentiment in a positive way. Read all market -related news here read more stories by Nishant Kumar Disclaimer: This story is for educational purposes only. The views and recommendations expressed are those of individual analysts or brokerage firms, not coin. We advise investors to consult with certified experts before making investment decisions, as market conditions can change quickly and conditions can vary.
Market price in more US Fed rate cuts: What it means for your stock portfolio before RBI MPC meeting
