How will the Indian markets likely react to rate cut cues for September? Analysts see positives in the Federal Open Market Committee (FOMC), maintaining the benchmark interest rate at 5.25-5.50 per cent on Wednesday, while also signaling a potential rate cut in September.
The US central bank has kept interest rates steady for the past year, since July 2023. Prior to this, from March 2022 to July 2023, the US Federal Reserve increased interest rates by 525 basis points to manage inflation, which had reached a multi-decade high due to the Ukraine-Russia conflict and COVID restrictions.
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With U.S. retail inflation steadily approaching the Fed’s 2 per cent target in recent months, there is anticipation that the Federal Reserve will begin lowering interest rates from September 2024 to stimulate economic growth. The next FOMC meeting is scheduled for September 17-18.
“Investors should prepare for potential volatility, as the Fed’s commentary on the future economic outlook will be crucial in shaping market expectations,” said Suman Bannerjee, CIO, Hedonova.
How’s Indian market likely to react to Fed rate announcement?
According to Amit Goel, Co-Founder & Chief Global Strategist, Pace 360, the Fed conveying a high probability of a rate cut in its September meeting should have a positive impact on the Indian market.
“This should have a positive impact on the Indian market, which has been hovering near the magical 25K on Nifty for the last few days. We see a high probability of Nifty opening with a gap-up post-FED and continue its march beyond 25K levels,” Goel said.
Furthermore, analysts further anticipate that markets could extend their gains and potentially surpass the 25,000 milestone on the Nifty index.
“Markets could extend their gains and potentially surpass the 25,000 milestone on the Nifty index,” Ajit Mishra- SVP, Research, Religare Broking Ltd said.
Mishra further recommended traders should focus on strategic stock selection and effective trade management, in this environment. This involves identifying stocks with strong fundamentals, robust earnings potential, and favorable technical setups.