Hold on to Your Hats: Fed Stays Put, Cuts Coming, and Gold Shines Bright! | Weekly Update March 23rd  

Hello Readers!  

This week seemed even more colourful than the upcoming festival of Holi with the fed rates staying unchanged, discussions of three, instead of two cuts on the horizon and gold’s new record high! Let’s break it down; But first, here are some market updates.

🧾In this Article 

• Weekly Market Wrap-up 
• Technical Stock Pick
• Quick bites 
• Stocks in News 
• Sustainability Corner 
• IPO corner 
• Cover story: Hold on to Your Hats: Fed Stays Put, Cuts Coming, and Gold Shines Bright! 

 Key events 

📈 Weekly Update 

This week, Dalal Street witnessed a period of correction, with both the Sensex and Nifty experiencing significant declines. The Sensex closed 1.99% lower at 72,643.43, shedding a total of 1475.96 points. The Nifty followed suit, falling 2.09% to settle at 22,023.35, a loss of 470.2 points. While the overall sentiment leaned bearish, there were a few bright spots and interesting trends to unpack. 

Winners and Losers: 

Even amidst the correction, some stocks managed to defy the downtrend and emerge as winners. The IT giant, TCS (₹4238.8) gained 2.61% this week, reflecting continued investor confidence in the technology sector. Similarly, the FMCG giant, Nestle India (₹2,630), lived up to its reputation for resilience during market volatility, closing at ₹2,630 with a gain of 1.87%. The telecom sector also surprised with Bharti Airtel (₹1,222.7) gaining 1.77%. The life insurance sector found some support with HDFC Life Insurance (₹634.6) closing up by 1.68%. Finally, ITC (₹428.5), a consumer staple stock, also managed to gain some ground, reflecting a rise of 1.5%. 

 Several sectors bore the brunt of the correction, with some stocks witnessing significant declines. The power sector giant, NTPC (₹326), fell the most this week, dropping a steep 10.21%. This raises concerns about the power sector’s performance. The metals sector faced significant headwinds with Tata Steel (₹143.65) closing down a worrying 9.98%. Coal India (₹427.85), another major player in the energy sector, witnessed a decline of 9.5%. Power Grid Corporation (₹271.9), a key player in the power transmission sector, also fell by 9.23%. Finally, the auto sector felt the pressure with Tata Motors (₹980) closing down by 8.96%. 

Sector Spotlight: 

Sector performances reflect the individual stock stories. The BSE IT index, which tracks IT companies, plummeted a hefty 5.54%. This was likely due to recent news from Accenture Plc lowering its growth forecast, making investors nervous about the IT industry’s future. 

However, there were some bright spots. The BSE CG index, which tracks consumer goods companies, surged 3.35%, while the BSE HC index, representing healthcare companies, also saw a decent gain of 1.71%. 

Market Breadth: 

Market sentiment leaned bullish this week as breadth skewed in favor of buyers. On the BSE, over 2,442 stocks rose in value, significantly outpacing the 1,363 that declined. With only 101 stocks remaining unchanged, this suggests a broad-based rally rather than isolated gains. This positive trend could be a sign of investor confidence returning to the market. 

Rupee Report: 

The Indian rupee had a rough week, depreciating 25 paise against the US dollar (reaching ₹83.41 from ₹83.15). This is the lowest level the rupee has seen since December 2023. The rise of the greenback globally seems to be putting pressure on the rupee. 

Gold Surges: 

Gold defied this week’s stock market gyrations, reaching an all-time high of over ₹58,000 per 10 grams (around $700 per ounce). This translates to a staggering increase of over 7% compared to last week’s closing price. The precious metal’s surge reflects investor anxiety about global economic uncertainties, including rising inflation, geopolitical tensions, and persistently low-interest rates. As a perceived safe haven, gold’s value is seen as more stable, attracting investors seeking to hedge against potential market volatility.  

Global Gossip: 

Global stock markets painted a mixed picture this week, with some regions experiencing positive momentum while others faced headwinds. European markets continued their winning streak, with the pan-European STOXX Europe 600 Index climbing 0.31%. This upswing was likely fueled by encouraging corporate earnings reports and growing optimism that the European Central Bank (ECB) might hold off on raising interest rates in the near future. France, Italy, and Germany all saw their benchmark indices rise, with the French CAC 40 leading the pack with a gain of 1.70%. 

Across the pond, the US markets took a breather after a strong run. The Federal Reserve’s decision to maintain interest rates and signal potential cuts later this year had little immediate impact, leading to a flat performance for the major indices. However, this could be a positive sign for investors hoping for lower borrowing costs in the long run. 

Meanwhile, Asian markets experienced varying fortunes. China’s recent market stabilization measures offered some relief, with the Shanghai Composite Index gaining a modest 0.28%. Hong Kong’s Hang Seng Index, however, saw a more significant rise of 2.25%, suggesting a potential rebound in investor confidence. Overall, the global markets displayed a cautious optimism this week, with regional performances influenced by local economic data and central bank policies. 

 Bottom Line
This week in the Indian market was a mixed bag. The major indices ended slightly positive, but some sectors like IT took a hit. The rupee weakened, while gold prices continued to rise. Overall, investors seem to be cautious, waiting to see what the future holds for the global economy and interest rates. Keep an eye out for further developments and stay informed to make smart investment decisions! 

Technical Stock Pick

ICICI Prudential Life Insurance Company Ltd. (ICICIPRU)

Recommendation: Buy

Target Price: ₹614 – ₹640 (Potential return of 5% – 9%)

Stop Loss: ₹545

Investment Horizon: 1-2 Weeks

Rationale:

• Breakout from Falling Wedge Pattern: ICICIPRU’s stock price has broken out of a falling wedge formation, which is a bullish technical indicator that suggests a potential reversal of the downtrend.
• Hammer Confirmation: The breakout is further confirmed by a hammer candlestick pattern formed after the stock retested the downward sloping resistance of the wedge. This hammer pattern indicates buying pressure at the support level.
• Upside Potential: The targets of ₹614 and ₹640 represent potential price levels based on the technical breakout.

🍟 Quick Bites 

• 🌡️ 2023 shattered temperature records and was the hottest year on record, according to the UN, with the decade of 2013-2023 being the hottest ever.  
• 🍦 Unilever will shed 7,500 jobs by spinning off its ice cream business, including popular brands like Magnum and Ben & Jerry’s.  
• 📉 Indian stocks opened lower but ended slightly positive (0.15%) despite volatility, with Nifty 50 crossing yesterday’s closing point at midday.  
• ⚙️ Metal and auto stocks surged while IT stocks dipped the most, with all other Asian markets closing higher except the US which was down.  
• 🛍️ Retail sales in India rose 5% in February 2024 compared to the same month last year, according to the RAI.  
• 👗 Bulgari, an Italian luxury fashion brand, achieved its best sales year ever in India in 2023.  
• 🥛 Mother Dairy plans to invest ₹650 crore to build two new factories for processing milk and fruits & vegetables.  
• 🚗 JSW Group and MG Motor partnered to manufacture electric vehicles in India, launching new ones every 3-6 months from September.  
• ⛏️ India’s mineral production increased 5.9% year-on-year in January 2024. 
•  📊 The percentage of delayed central government projects decreased slightly, from 42.8% in January to 41.2% in February.  
• 💼 SEBI will begin beta testing a new stock settlement cycle (T+0) starting March 28th.  
• ✈️ Indian airlines will operate 24,275 domestic flights per week during the summer season (starting March 31st), a 6% increase year-on-year.  
• 🍨 Kedaara Capital acquired a majority stake in Dairy Classic Ice Creams (Dairy Day).  
• 🚗 Kia India will raise car prices by up to 3% starting April 1st.  
• 💡 Schneider Electric is planning a ₹3,200 crore investment in India by 2026. 

📰 Stocks in News 

• 🚗 Tata Motors opened its fifth vehicle dismantling facility near Delhi.  
• 💰 Manappuram Finance plans to raise ₹6,000 crore through debt issuance in the coming fiscal year.  
• 🎨 Grasim secured ₹1,250 crore from the International Finance Corporation for its new paint business.  
• 🏗️ Tata Steel will raise ₹2,700 crore via unsecured Non-Convertible Debentures (NCDs).  
• 💹 REC approved an interim dividend of ₹4.5 per share.  
• 🚆 RailTel Corp secured contracts worth ₹130 crore and ₹352 crore in Bihar and Mumbai, respectively.  
• 💡 NTPC will commission a second 660 MW unit in North Karanpura, Jharkhand. 📉 Aditya Birla Capital will sell 4.99% stake in Aditya Birla Sun Life to comply with SEBI regulations.  
• 🏭 The Competition Commission of India greenlit UltraTech’s acquisition of Kesoram Industries’ cement business.  
• 🔌 Adani Group’s Adani Electricity plans to install 8,500 EV chargers in Mumbai apartment buildings.  
• 💳 HDFC Bank completed the sale of its stake in HDFC Credila for ₹ 9,553 crore. 
• 👩‍💼 L&T Tech will train 1,000 employees in partnership with Nvidia.  
• 🏠 HUDCO declared an interim dividend of ₹ 1.5 per share with a record date of March 29th and plans to raise ₹ 40,000 crore for FY 2025.  
• 🌐 TCS secured a multi-crore rupee, seven-year deal with Ramboll of Denmark. 
• 🚗 M&M is partnering with Adani Total Energies to establish EV charging infrastructure across India.  
• 📺 Reliance’s JioCinema secured 18 sponsors and over 250 advertisers for the upcoming IPL season.  
• 🚂 Jupiter Wagons acquired Bonatrans India for ₹ 271 crore, becoming the first rolling stock manufacturer with its wheel factory.  
• 🚇 RVNL received a ₹ 339 crore project from Maharashtra Metro Rail. 

🌱 Sustainability Corner 

• ⚡ Torrent Power secured a 300 MW wind-solar project from the Maharashtra government for ₹ 3,650 crore.  
• 🏭 BHEL landed a contract to build a 1,600 MW thermal power plant for NTPC. 

🚀 IPO Corner

• Krystal Integrated Services IPO got listed at a premium of 9.8%. 

Hold on to Your Hats: Fed Stays Put, Cuts Coming, and Gold Shines Bright! 

The US Federal Reserve, often nicknamed “the Fed,” made a big decision this week. They decided to keep interest rates on hold, which means borrowing money won’t get any cheaper or more expensive right now. But that’s not the whole story! Here’s why this news might actually be good for the economy, and why you might want to keep an eye on gold prices. 

Hold on the Horses: Why Rates Didn’t Change 

Think of interest rates as the price you pay to borrow money. A higher rate means it costs more to borrow, and a lower rate makes it cheaper. The Fed uses interest rates to control inflation, which is the fancy term for how much prices go up over time. 

Lately, inflation has been a bit higher than the Fed likes. So, some folks thought they might raise rates to cool things down. But, the Fed surprised everyone by keeping rates steady. Why? Well, they’re still confident that inflation will eventually come down on its own. They’re also keeping an eye on the economy as a whole – raising rates can slow things down, and the Fed might want to avoid that for now. 

Cuts on the Horizon: A Brighter Future (Maybe!) 

Here’s the interesting part: even though the Fed didn’t cut rates this time, they signaled they might do it later this year! They’re thinking about making three cuts throughout 2024. This could be good news for borrowers, as lower rates would make it cheaper to buy a house, car, or anything else you might need a loan for. It could also boost the stock market, since lower rates are generally seen as positive for businesses. 

Gold Rush! Why the Shiny Metal is Soaring 

Now, let’s talk about gold. While the Fed was making headlines, gold prices were making history! They reached their highest level ever, which might seem strange considering interest rates stayed the same. Here’s the deal: gold is often seen as a safe investment during times of uncertainty. If people are worried about inflation or the economy slowing down, they might put their money into gold as a way to hedge their bets. So, the fact that gold prices are rising could be a sign that some investors are a little nervous about the future. 

What Does This Mean for You? 

This whole Fed decision and gold price hike might sound like complex financial jargon, but it can actually impact your everyday life. Here are a few things to keep in mind: 

• Interest rates: If the Fed does cut rates later this year, it could mean cheaper loans and a potentially stronger stock market. However, it could also lead to higher inflation down the road. 
• Gold: If you’re an investor, keeping an eye on gold prices can be a good way to gauge investor sentiment. A rising gold price could indicate some economic jitters. 
• The Economy: The Fed’s decision to hold off on a rate hike suggests they’re confident in the economy’s overall health. However, continued high inflation could still pose a challenge. 

The Bottom Line 

The Fed’s decision to keep interest rates unchanged is a sign they’re taking a cautious approach. While it might not be the most exciting news, it suggests they believe the economy is on the right track. As for gold, its record-breaking price could be a sign of investor anxiety. 

No matter what the Fed does or gold prices do, staying informed about these issues can help you make smart financial decisions for yourself and your future. So, keep an eye on the news, ask questions, and don’t be afraid to invest in your own financial literacy! 

Upcoming key financial events for the week: