Stocks cheered on Fed’s stance on rates

US Fed Chairman Powell’s comments have given markets confidence that an interest rate peak is imminent and the Fed may calm rate hikes. Analysts said investors also see some light at the end of the Fed’s tight tunnel.

Powell maintained a strong focus on rolling back inflation, however, experts said markets have taken comfort from the fact that the Fed’s statement was more balanced this time around and the Fed is also becoming increasingly watchful of growth risks.

BofA Securities said the key change in the FOMC statement relative to June was the first sentence: “Recent indicators of spending and production have softened.” He said the rate market saw the meetings as a flaw. Treasury yields fell and the foreign exchange market took over. meeting in their order.

Analysts said the dollar saw profit-booking with the US Fed indicating that it would like to slow down rate hikes in upcoming meetings. Anindya Banerjee, VP, Currency Derivatives & Interest Rate Derivatives at Kotak Securities, said the risk-on mood in equity markets also helped the rupee. Banerjee said USDNR spot ended 14 paise lower at 79.75.

Deepak Jasani, Head of Retail Research at HDFC Securities Ltd, said the US Fed’s remarks indicate the possibility of a slower pace of monetary tightening. The market emphasized Powell’s statement that slowing at the pace of 0.75-percent-point rate growth would likely be appropriate “at some point”. meeting” phase, perhaps assuming that a peak in interest rates is imminent.

Jasani exposed Powell by saying that the Fed’s program to shrink its balance sheet is working and that the markets “should be able to absorb it.”

The market seems to be taking cues from the Fed chief’s observation that, “I don’t think we are in a recession now, the labor market remains tight. To a 50-year low,” said VK Vijayakumar, chief investment strategist at Geojit Financial Services. Level unemployment and job vacancies at historic highs support Fed chief’s confidence about US economy, Vijayakumar said

Fears of recession in the US and other parts of the world have already led to a sharp fall in commodity prices which is positive for India. Analysts said a pick-up in the monsoon would also ease some of the RBI’s pressure.

Siddharth Khemka, Head – Retail Research, Motilal Oswal Financial Services, said, “We expect this to have a positive impact on the RBI MPC, where the latter can moderate its aggression and hike rates by 25 bps in its next MPC. could.”

However, RBI may also have to take into account several other factors such as a weaker rupee, higher crude oil prices, etc.

Akhil Mittal, Senior Fund Manager, Tata Mutual Fund said that the issue of rate hike before the RBI is a bit more complicated in currency terms, where I believe India will have to be on par with global central banks, while our own economy The amount of action to adapt to.

With the easing of inflationary factors, Mittal sees the terminal repo rate in the range of 6%-6.25% for now, and a long-term stagnation thereafter. Mittal is also of the view that the growth situation in India is not as bad as in the West (slowdown expectations are rising in the West) and the RBI may not be immediately pushed to support growth.

Pankaj Pathak Fund Manager Quantum Mutual Fund said, “We expect the RBI’s comments to acknowledge that inflation risks are easing.” Pathak said that from a bond market perspective, most of these are already priced as bond yields have fallen by more than 25 basis points from their recent peak.

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