Feds cut rates as anticipated, but is it different this time?

Market Synopsis:

The Indian equity markets continued their upward trajectory, reaching new all-time highs of 25,849.25 while closing the week at 25,790.95, with a net gain of 1.55%. This surge was primarily driven by the U.S. Federal Reserve’s long-awaited decision to lower rates by 50 basis points. This led to Global markets rising.

The rate cut fueled optimism about a smoother economic landing for the United States and signaled potential inflows of foreign institutional investor (FII) funds into India. While the Fed’s dovish action was anticipated and priced in, the previous such rate cut after long periods of high interests in 2007 which was also done on 18 September resulted in a hard landing. This raises concerns about whether this time its different. 

Despite the overall positive market trend, large-cap stocks outperformed their mid-cap and small-cap counterparts. This divergence highlights the market’s preference for larger companies in the current economic climate. 

Lower crude oil prices, the start of a rate reduction cycle, and DII liquidity provided optimism. However, the threat of a looming recession in the United States remains a concern.

• Brent crude: Prices rose slightly to $74.47.
• Rupee: Closed at Rs 83.55 against the US dollar.
• Gold: Rose to settle at Rs 73,632 per 10 grams.
• 10-Year Benchmark G-Sec yield: Was at 6.76%.

Market Watch:

Top Gainers

M&M   7.73%
ICICI Bank 7.05%
Nestle 6.64%

Top Losers

TCS   -5.26%
Grasim   -3.81%
BPCL    -3.24%

Nifty Consumer durables: 1.60%
Nifty Oil & Gas: -1.44%

Major Market Developments:

• ADAG stocks rally upto 48% in a week amid fund raise plans
• VI gives $3.6 Billion in contracts to Nokia, Ericsson & Samsung; to focus on 4G expansion, launch 5G network.
• SEBI allows Mutual Funds with a fixed maturity plan (FMP) in their portfolios with a tenure of more than one year to transact in Credit Default Swaps (CDS).
• NTPC files DRHP for a ₹10,000 crore IPO for its subsidiary NTPC Green Energy. 
• US Fed starts rate cut cycle, cuts 50 BPS, expects to further cut 50 BPS this year, 100 BPS in 2025 and 50 BPS in 2026. Equity markets rise globally.

FII & DII activity (net cash)

FII (Foreign Institutional Investors) – 

• 16th September 2024: -₹1,634.98 crore

• 17th September 2024: -₹2,235.04 crore
• 18th September 2024: -₹1,112.72 crore
• 19th September 2024: +₹482.69 crore
• 20th September 2024: +₹14,064.00 crore

DII (Domestic Institutional Investors) – 

• • 16th September 2024: +₹844.63 crore

  • 17th September 2024: +₹1,501.24 crore
  • 18th September 2024: +₹932.51 crore
  • 19th September 2024: -₹874.15 crore
  • 20th September 2024: -₹4,427.10 crore

Technical Analysis:

This week, the Indian stock market opened at 25,150.50, facing resistance as it attempted to push higher amidst global economic uncertainties. Concerns over the US Fed’s potential rate hike and disappointing Q1 GDP figures from the US kept the market range-bound. Despite a brief breakout above the initial resistance at 25,433, the market struggled to breach the second resistance level at 25,650, with heavyweight stocks underperforming. The market found support at 24,950, closing the week without significant movement, suggesting a cautious sentiment. If the market can gather momentum with high-volume buying, it may indicate a potential upward trend. Overall, while the current indicators reflect a neutral stance, the market remains positioned to challenge its resistance levels.