PUNEET WADHWA
Mumbai, 11April
A higher-than-expected consumer price inflation (CPI) inflation print for March in the US has dashed hopes of an interest rate cut by the US Federal Reserve (US Fed) in June. Analysts now expect the US central bank to start cutting rates in September, provided inflation remains in check and oil prices remain supportive.
The markets, analysts
believe, partially factored in
this possibility. Leading equity
markets across Asia lost ground
on Thursday with Nikkei 225,
Hang Seng and Singapore mar Kkets slipping up to 1 per cent.
Indian markets were closed on
Thursday. Experts believe that
once they open for trade on
Friday, there can be a knee-jerk
reaction at best, post which
there can be arecovery.
“Most Asian markets recovered in trade on Thursday after
an initial negative reaction.
This will hold true for the
Indian markets as well once
they open for trade on Friday.
That said, there are many moving parts to the ‘markets story’
back home, such as oil prices,
geopolitics, general elections
etc. A higher for longer narrative as regards rates has to some
extent been factored in,” said U
R Bhat, co-founder and director
at Alphaniti Fintech.
US consumer inflation in
March, meanwhile, surged to
3.5 per cent from a year ago,
data showed, from 3.2 per cent
in February. On a month-onmonth basis, the rise was 0.4
per cent, which was mostly driven by petrol and shelter costs.
“Rates (in the US) should
remain on hold until
September. Looking into next
year, we still expect Trump to
be inaugurated as the next
President and impose a universal tariff that will lead to a
rebound in inflation during the
course 0f 2025. This should prematurely halt the Fed’s cutting
cycle next year,” said Philip
Marey, senior US strategist at
Rabobank International.
Market direction
Back home, the market direction in the near-term will also be determined by the upcoming results season for the March 2024 quarter (Q4 FY24), outcome of the Lok Sabha elections and the overall market valuation. Earnings growth in India, according to analysts, is showing signs of contraction, with earnings per share (EPS) growth expected to moderate to 5-10 per cent in Q4 FY25 compared to the robust 25 per cent experienced between April and December 2023. As an investment strategy, experts suggest investors remain stock-specific and look for earnings visibility and reasonable valuations.
“We are inclined towards domestically driven sectors such as fast moving consumer goods, infrastructure, cement, and telecom due to their stable demand outlook for FY25 and the potential for reduced operational costs. Additionally, defensive sectors like information technology and pharma offer resilience over the medium-to long-term, owing to their stable margin projections, lower input costs, and potential gains from a stronger dollar,” said Vinod Nair, head of research at Geojit Financial Services.
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