Indian equity benchmark indices, Nifty50 and BSE Sensex, are expected to see a gap-up opening on Monday after US Federal Reserve chairman Jerome Powell indicated that the central bank may cut rates in its September policy review.Analysts suggest that domestic equity markets may respond positively to signals of a possible US Federal Reserve rate reduction, whilst investors remain watchful of the approaching deadline for supplementary US tariffs on Indian products in the upcoming shortened trading week. Favourable international indicators may offer backing, following substantial gains in US markets and weakening of the dollar index after Powell signalled possible rate reductions during his Jackson Hole Symposium address, analysts say.Additionally, market movements during the week will be influenced by foreign investor activities, international market developments and scheduled economic data releases such as GDP growth numbers.Last week witnessed the BSE benchmark advancing by 709.19 points or 0.87%, whilst the Nifty registered gains of 238.8 points or 0.96%.
What Fed’s Powell indicated on rate cut
Jerome Powell suggested on Friday that interest rates might be reduced during the September central bank meeting. He adopted a careful approach, avoiding definite promises about rate cuts. His statement recognised growing worries about jobs whilst noting ongoing inflation concerns.“While the labor market appears to be in balance, it is a curious kind of balance that results from a marked slowing in both the supply of and demand for workers. This unusual situation suggests that downside risks to employment are rising, and if those risks materialize, they can do so quickly in the form of sharply higher layoffs and rising unemployment,” Powell said.“At the same time, GDP growth has slowed, notably in the first half of this year, to a pace of 1.2%, roughly half the 2.5% pace in 2024. The decline in growth has largely reflected a slowdown in consumer spending, as with the labor market. Some of the slowing in GDP likely reflects slower growth of supply or potential output.“We continue to believe that monetary policy must be forward looking and consider the lags its effects on the economy. For this reason, our policy actions depend on the economic outlook and the balance of risks to that outlook,” he said.
How will Indian stock markets react?
According to Sunny Agrawal, Head – Fundamental Research at SBI Securities, Indian stock markets are expected to react positively on Monday. “Powell indicates conditions ‘may warrant’ interest rate cuts as the situation suggests downside risks to employment rising. This is likely to put pressure on the dollar and augur well for riskier asset classes – EMs like India and commodities. Metals and IT stocks are likely to react positively in the trade on Monday,” Agarwal told TOI.Dr VK Vijayakumar, Chief Investment Strategist, Geojit Investments Limited said the stock market’s upside may be muted to US President Donald Trump’s lingering tariffs.“Fed chief Powell’s speech at Jackson Hole indicates a rate cut in September. His remark that ‘there is a downside risk to unemployment and shifting risk balance may warrant policy adjustment’ clearly indicates a rate cut in September. The US markets have responded with rise in stock prices and decline in bond yields. The Indian market, too, may respond positively on Monday, but here tariff concerns are likely to weigh on markets more,” he told TOI.Siddhartha Khemka, who leads Research at the Wealth Management division of Motilal Oswal Financial Services Ltd, said, “We expect Indian equities to remain supported by optimism around GST 2.0 reforms and domestic macro strength. Globally, clarity on US tariff actions against India and upcoming GDP data from both India and the US will shape investor sentiment”.(Disclaimer: Recommendations and views on the stock market and other asset classes given by experts are their own. These opinions do not represent the views of The Times of India)
