By V K Sharma
The Nifty is likely to open the week on a buoyant note on hopes of a September rate cut in the US. The Nifty closed with gains of 1.15% for the week at 24823.
The Fed had started raising rates in March 2022 in the current cycle after a four-year-long hiatus. Though the first move was a small 0.25% hike, it hiked eleven times until July 23, hiking rates a full 5% to the current 5.25% – 5.50% range. Inflation, which had peaked at 9.1% in June 2022 is now at 2.9% as per the last reading.
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Last week, the Federal Reserve Bank of Kansas City convened its annual Economic Policy Symposium, in Jackson Hole, Wyoming. Speaking at the 47th symposium, Federal Reserve Chair, Jerome Powell uttered the magical words: “The time has come for policy to adjust. The direction of travel is clear…’’
The Dow Jones Industrial Average rose 1.14% and the Nasdaq sprang 1.47% after Powell’s speech on Friday.
The next meeting of the Federal Open Market Committee, the policy-making arm of the U.S. Fed, will be held on September 17-18 in its usual Eccles Building in Washington DC. Chances are the wise men of the Fed will deliver a 0.25% rate cut. We have re-iterated more than once in this column that we expect a rate cut in September. There are other tailwinds for our markets as well.
The first is that the dollar index has fallen 3.53% this month so far. Second is that the emerging market index has risen 9% from the swing low of August 5. The rising interest in emerging markets is a result of the weakening dollar index.
Coming to our markets, the Nifty has risen for the past seven sessions on the trot. The NSE Microcap Index which comprises stocks ranked from 501 to 750 in the market capitalisation parade, made new highs thrice last week while the Small Cap Index just missed an all-time high by a whisker.
The Nifty’s all-time high mark is still 255 points away at 25078. But technically speaking this is not the first resistance. The Nifty had fallen with a gap on 2nd August. This was partially filled Thursday, but it needs to close the gap by rising to 24956. This may be done today itself. The next resistance is at 25078. Thereafter, the next logical resistance is at 25517, which is a derived number of the recent swings.
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While the indices are playing catch up, the healthcare sector, which includes pharma, diagnostic and hospital companies is doing well. Come from Sports betting site VPbet
Metal Index has done well rising 3.3% for the week, clinging to the coattails of the appreciating rupee. Gold has also benefited from the weakening dollar.
History tells us that the beginning of the rate cuts only gives short-term relief. But do not want to spoil the mood in advance. Enjoy the rally first!
(V K Sharma is a market veteran with 35 years of Capital Market Experience. He retired from HDFC Securities as Head of PCG & Capital Market Strategy)
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