Fed Meeting Starting Today, Results Due Tomorrow Overnight

Indian market traded almost flat today and settled with mild gains, in line with our expectation ahead of the FOMC meeting.  The benchmark Nifty index closed up 0.14 per cent or 34 points and in sectoral indices Bank NIFTY, Fin NIFTY, NIFT IT and FMCG index closed marginally higher since the previous day’s close. While, metals index dropped 0.42 per cent on profit taking.

In commodities, WTI Crude oil prices on MCX edged higher at the time ow writing trading at 5960/bbl. Natural gas futures traded up 1.76 per cent at 202.90 while in Bullion both Gold and Silver traded flat, at the time of writing.

Business and Economic Developments

• Tata Power’s solar cell unit in Tamil Nadu to be fully functional by October said the CEO Praveer Sinha

• Torrent Power gets letter of intent (LoI) for procurement of 1,500 MW energy storage capacity from Maharashtra State Electricity Distribution Co

• Mankind Pharma to consider raising funds via NCDs, commercial papers, other debt securities among others on September 20

• Government advises Edible Oil Associations to maintain MRP of oil till availability of edible oil stocks imported at 0 per cent & 12.5 per cent Basic Customs Duty (BCD)

• India’s overall exports, combining merchandise and services, reached USD 65.4 billion in August 2024, reflecting a 2.4 per cent decline compared to the USD 67 billion recorded in the same month last year

• LIC the larger insurance company of India raises its stake in Biocon, a pharma giant from 4.982 per cent to 5.023 per cent.

• GPT Infra bags order worth Rs 204 crore from South eastern Railway

• The FOMC meeting starts from today. The US is expected to cut rates for the first time after it started raising rates post Russia Ukraine conflict. Market expects more than 25 basis point cut in fed funds target rate after weak jobs data along with softening inflation.

Market Outlook

The main theme ahead is the FOMC meeting where the US fed is expected to cut the benchmark target rate by as much as 50 basis point with slowing inflation and weak job market. In the US, the New York Fed's probability model suggests that there is 61.8 per cent probability that the American economy may enter recession in next 12 months. Hence a more demand for rate cuts may arise in coming months. One should note that two consecutive quarter of negative GDP reading is technically called recession and as we move on I personally do not think this recession is going to be severe like the GFC of 2008. If recession comes, it is less likely to hit India much. The only concern globally is the excessive valuation and some terming this as bubble. The US market is trading at 1.96x of GDP and India is trading at 1.3x of GDP while undervalued China is at 0.65x of GDP. Lot of hot money flow has resulted in exponential rise in equities in these two markets and it can be a cause of concern, may be in the short term. The long-term investors SIP investors should stay calm and enjoy every decline as long-term story of India remains intact.

Now from overall market outlook perspective, all depends on Fed meeting. If a 50 bp rate cut by the US or 25 bp cut, how the market shall react. Once the legendary investor, Warren Buffet said, buy the rumour and sell the news. The market across has moved northwards expecting a 50 bp rate cut by the US Fed post CPI data and even if 50 bp cut happens upside may be capped for a day or two or one may see profit taking. A 25 bp rate cut may also shall trigger heavy profit taking of long positions. However, after this liquidation, one might get some better levels to buy.

NIFTY: The market may see a mild positive move initially assuming a positive outcome from the US fed. However, liquidation may be seen a higher level. The boarder range for NIFTY seems from 25500-25300 as of now.

BANK NIFTY: Tomorrow is expiry of bank Nifty weekly option contracts. The Bank Nifty has resistance around the 52300-340 range with immediate support at 52080 levels. The Bank Nifty closing today seem really indecisive today and a break below 52080 levels tomorrow may drag the index towards 51950-900 range.

NIFTY MIDCAP Select Index: The midcap index bounced after taking support at 13205-13210 range and closed at 13283 mark. The immediate resistance for the index is at 13310-315 levels and if the level is taken out, can expect 13340-360 range.

Crude oil MCX: In line with our expectations, crude oil prices bounced back from 5520-30 range to almost 5960 levels, at the time of writing. There is some more room for upside towards the 6050-6100 kind of range which may attract profit taking. From the risk-reward side, crude oil is not the best range now, may be only for scalpers.

Economic Data Calendar for tomorrow 

Also Read: All Eyes On Fed Meeting, Markets May Behave Sideways