RBI Governor Shaktikanta Das on Wednesday defended the Reserve Bank's handling of the price situation, saying acting prematurely on inflation would have exerted a heavy cost on the economy and citizens. Acknowledging that the inflation target has been missed, Das said the RBI decided to support the economy by not introducing a rate hike in face of a spike in inflation. "We prevented a 'complete collapse of the economy' by keeping rates lower and stayed away from premature tightening," Das said speaking at the annual FIBAC conference of bankers in Mumbai.
'Investors looking at the next 6-12 months can be certain that the Fed will maintain its easing cycle, and we expect the overall environment to be conducive for fixed income investments for portfolio diversification.'
'Our growth in banking, financial services, and insurance (BFSI) is a prime example.'
Within three trading sessions in May, foreign portfolio investors (FPIs) have pumped in Rs 9,461 crore into Indian equities. This follows net inflows worth Rs 7,936 crore in March, and Rs 11,631 crore in April. The trend, analysts said, could continue going ahead as the US Federal Reserve may soon halt its interest rate hike cycle, which will strengthen foreign fund inflows into emerging markets, including India.
Foreign investors were net sellers of domestic debt in October for the first time since the official inclusion of Indian government bonds in the JP Morgan bond indices, with net outflow worth Rs 4,697 crore. This marked the second instance in the current calendar year where foreign portfolio investors (FPIs) were net sellers in a month.
'2025 is the year to build a portfolio for the future. Focus this year should be on valuations and visible growth.'
Invest with a 5 to 7 year horizon so that you are able to ride out price volatility and benefit from the long-term trends of demand and macroeconomic shifts.
The index could be vulnerable to a bigger fall given the present market dynamics.
The market capitalisation of BSE-listed companies reached an all-time high of Rs 261.73 lakh crore on Thursday, helped by a massive rally in the equities where the benchmark Sensex zoomed 958 points to end at a fresh lifetime peak. The 30-share BSE benchmark jumped 958.03 points or 1.63 per cent to settle at its new closing peak of 59,885.36. During the day, it gained 1,029.92 points to touch an intra-day record high of 59,957.25.
'Industrial countries are still struggling, with a few exceptions, to grow and the uncertainty about growth in the US as well the world is probably what impelled the Fed to stay on hold.'
The rate hike in the future is set to be 'calibrated and cautious'.
The RBI under former governor Shaktikanta Das resisted pressures to cut interest rates through 2024 as it kept its 'Arjuna's eye' trained on inflation, but the central bank under a new detail-oriented head will soon have to take a call if it can continue sacrificing growth. Das, a career bureaucrat who in 2016 oversaw Prime Minister Narendra Modi's highly disruptive demonetisation move, left a lasting legacy as he demitted office towards the end of 2024 after expertly navigating monetary policy for six years, the highlight of which was steering India's recovery through the pandemic.
India was less directly affected by the Chinese stock market rout and yuan devaluation that battered currencies and markets in the region.
'The selling in India may emerge as soon as the RBI reverses its interest rate stance.'
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Gold prices have been on an uptrend in the last few months, rising nearly 28 per cent to $2387 per ounce now. This rise in gold price, according to Christopher Wood, global head of equity strategy at Jefferies, is attributed to the demand from China amid lack of investor euphoria as regards the yellow metal. "Recent developments show a distinct lack of investor euphoria as regards gold, the question remains what is driving the current rally.
Corporate bond issuances fell by around 22 per cent in August, despite easing yields as issuers delayed raising funds awaiting the US Federal Reserve to start cutting interest rates from this month. Corporates and financial institutions expect yields to fall further and borrowing costs to become cheaper, said market participants. The US Fed is widely expected to cut interest rates by 25 bps in the 17-18 September meeting, marking the start of a downward interest rate cycle.
A higher-than-expected consumer price inflation (CPI) 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.
"Indian markets (are) well placed to absorb the US Fed rate hike. Gradual approach in future increases augurs well for emerging markets," Economic Affairs Secretary Shaktikanta Das has tweeted.
The barometer S&P BSE Sensex ended at 26,231, up by 517 points or 2%.
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Stock markets would take cues from the biggest event of the week -- the US Fed interest rate decision, besides tracking the trends in global markets and trading activity of foreign investors, analysts said. Last week, a heavy decline in smallcap, midcap firms, foreign fund outflows and elevated crude oil prices in the international market dented investors' sentiments. Experts said equity markets may remain volatile in the near-term amid a host of global central bank's monetary policy decisions lined up during the week.
The demand for gold is expected to take a hit if the price of the yellow metal - which has been hovering around Rs 60,000, a level never seen before - remains elevated. Due to a sharp increase in price in a very short time and the flow of smuggled gold continuing, gold price in Mumbai is quoted at around Rs 59,000 per 10 gram. Typically, overall demand in the January-March and July-September quarters is moderate-to-dull, which is the case in the ongoing period.
World No 1 Sania Mirza was, on Monday, named captain of the Indian team for next year's Fed Cup while two six-member squads were announced by the AITA selection panel for the South Asian Games.
'While Indian markets are indeed not inexpensive, the valuations of largecap stocks are still a considerable distance from being overstretched.'
Inflation is expected to remain low in the near term, in part because of the further declines in energy prices.
Higher levels could not be sustained as participants offloaded their long positions in view of September series expiry.
The US Fed also said that the unemployment rate too would rise to 5.7 per cent.
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If the DMK is able to sustain the momentum until the assembly polls, the AIADMK especially and the PMK and possibly the infant TVK too would find it hard to sign up with the BJP, explains N Sathiya Moorthy.
The US dollar has risen about 15 per cent since mid-2015.
RBI will now increasingly shift focus to domestic parameters
The recent weakness of the rupee has been due to yuan's devaluation.
Equities went into a tailspin on Wednesday after the Reserve Bank surprised the market with a mid-cycle rate hike in a bid to tame soaring inflation.
Indian markets on Thursday shrugged off any negative impact.
Production from many gold producing regions of the world is currently constrained by power shortages; and rapidly inflating development costs are causing the postponement of several otherwise promising development projects around the world.
'Despite the current uncertainties, the long-term outlook remains constructive due to strong fundamentals, government initiatives, and a stable banking sector.'
Hero MotoCorp was the top gainer in the Sensex pack, spurting 4.46 per cent. IndusInd Bank, Tata Motors, Vedanta, SBI, M&M, Sun Pharma, Tata Steel, HDFC and HDFC Bank too rose up to 3.63 per cent.
Stock markets will be driven by domestic inflation data, ongoing quarterly earnings from corporates and global trends this week, analysts said. News flows around the general election would also be tracked by investors, market experts said.
