Week Gone by 20.09.24: Benchmarks Break Barriers, Sustained Rally to Record Highs
Sumit Poddar
Founder | Chief Investment Officer| Advisory Board AIF CAT II | Smallcase Fund Manager | Startup | Investor | ex TCS, Aditya Birla | AI enthusiast
Indian stock markets had a strong week, reaching new highs for the second week in a row. This positive trend was mainly due to the US Federal Reserve cutting interest rates by 50 basis points and hinting at more cuts in the future. The rate cut raised fears of a global slowdown, leading some investors to take profits in mid-cap and small-cap stocks.
The S&P BSE Sensex rose 1,653.37 points (1.99%) to 84,544.31, while the Nifty 50 increased by 434.45 points (1.71%) to 25,790.95.
The BSE Mid-Cap index fell 0.16% to 49,163.22, and the BSE Small-Cap index decreased by 0.08% to 57,081.61.
Economy: India's wholesale price index (WPI) inflation dropped to 1.31% in August, down from 2.04% in July, mainly due to lower prices for manufactured goods and food. India's foreign exchange (forex) reserves reached a new all-time high of $689.235 billion for the week ending on September 6, as reported by the Reserve Bank of India (RBI).
The US Federal Reserve cut interest rates by 50 basis points, its first in over four years, to help control inflation. While further cuts are expected, Fed Chair Jerome Powell clarified that rates won't return to the ultra-low levels seen during the pandemic, signaling a cautious approach ahead. Powell indicated that the Fed's neutral rate is expected to be higher than before, signaling a more careful approach to monetary policy moving forward. In August, US consumer prices rose 2.5% year-over-year, the lowest since February 2021, while wholesale prices increased by 0.2%. Retail sales grew 0.1%, indicating strong consumer demand.
In August, Japan's imports went up by 2.3% and exports by 5.6% compared to last year. The Bank of Japan (BoJ), decided to keep the key interest rate unchanged at around 0.25%. Japan's Core CPI, excluding fresh food, increased to 2.8% in August from 2.7% in July, while overall inflation hit 3%. This shows a steady rise in prices, indicating growing inflationary pressure in the economy. In the UK, consumer prices climbed 2.2% year-on-year, and core inflation rose to 3.6%.
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#Weekahead
The domestic stock market is expected to be strong next week due to the US Federal Reserve's recent 50 basis point rate cut, which should lift global markets, including India. While some profit-taking may occur due to high valuations. Investors will keep an eye on the rupee, crude oil prices, and the actions of foreign portfolio investors (FPIs) and domestic institutional investors (DIIs). HSBC India will release its September Flash PMI data on Monday, September 23, 2024.
The United States will release its Q2 GDP growth rate on Thursday, September 26, 2024. The United States will release durable goods orders data for August on Thursday, September 26, 2024, followed by the Core PCE Price Index, personal income, and personal spending data for August on Friday, September 27, 2024.
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