Fed Chair Powell’s Speech: A Market-Shaking Pivot? | Weekly Update August 23rd
Hello Readers!
The markets are continue their northward march, and this week with US Fed’s Powell’s signal of rate cut gave a positive boost to the US equities too. The market euphoria continues yet some are worried or awaiting a correction. Which side of the market are you on?
Let’s get into the juicy bits, right after we look at the week that was.
🧾In this Article
Cover story: Fed Chair Powell’s Speech: A Market-Shaking Pivot?
📈 Weekly Market Wrap-up
The Indian stock market closed marginally higher for the week ending August 23, 2024. The Nifty 50 index gained 11.65 points to settle at 24,823.15, while the Sensex ended the week up by 33.02 points, closing at 81,086.21. Overall, the market exhibited a positive sentiment,
Additionally, the broader Nifty 500 index also registered a strong gain, closing at 23,418.65, up 746.00 points or 3.3% for the week. This indicates a broad-based rally across various sectors of the Indian market. Furthermore, the Nifty Midcap Select index surged by 441.45 points or 3.5%, highlighting the strong performance of mid-cap stocks during the week. Finally, the Nifty Smallcap 100 index also recorded a significant gain of 5.5%, closing at 19,079.25. This indicates that small-cap stocks also outperformed the broader market during the week, attracting investor interest.
Sector Spotlight
The IT sector continued its strong performance, with the BSE IT index gaining 0.77%. The FMCG sector saw a significant rally, with the BSE FMCG index up by 2.16%. The BSE CG index rose by 0.7%, indicating a positive outlook for the capital goods sector. The BSE CD index surged by 3.99%, reflecting strong demand for consumer durables. Finally, the BSE HC index gained 2.29%, suggesting a positive outlook for the healthcare sector. Overall, the Indian market exhibited a broad-based rally, with gains across various sectors. This indicates a positive sentiment among investors and suggests that the market may be poised for further growth.
Nifty 100 Top gainers
- Interglobe Aviation Ltd. = ₹4,710.45 (↑11.9%)
- Hindalco Industries Ltd. = ₹685.10 (↑10.2%)
- Grasim Industries Ltd. = ₹2,748.55 (↑9.4%)
- Bharat Petroleum Corporation Ltd. = ₹352.20 (↑8.4%)
- Varun Beverages Ltd. = ₹1,582.10 (↑8.2%)
Nifty 100 Top losers
- Adani Energy Solutions Ltd. = ₹1,065.65 (-4.3%)
- Oil & Natural Gas Corporation Ltd. = ₹318.90 (-2.8%)
- Avenue Supermarts Ltd. = ₹4,901.50 (-1.2%)
- Siemens Ltd. = ₹7,022.15 (-0.3%)
- SRF Ltd. = ₹2,490.65 (0.0%)
FII and DII Activity:
Foreign Institutional Investors (FIIs) were net sellers of Indian equities, selling a net of 1,608.89 crores. To make up for it, the domestic Institutional Investors (DIIs) went on a buying spree. They were net buyers of Indian equities to the tune of ₹13,020.29 crores showing their positive outlook.
| Date | FII Net Activity | DII Net Activity |
| 19-AUG-24 | -₹2,667.46 cr | ₹1,802.92 cr |
| 20-AUG-24 | -₹1,457.96 cr | ₹2,252.10 cr |
| 21-AUG-24 | -₹799.74 cr | ₹3,097.45 cr |
| 22-AUG-24 | ₹1,371.79 cr | ₹2,971.80 cr |
| 23-AUG-24 | ₹1944.48 cr | ₹2,896.02 cr |
| Total | ₹1,608.89 cr | ₹13,020.29 cr |
Global Gossip
Over the week, Asian stock markets displayed a mixed performance. The SET Composite from Thailand surged by 3.98%, while the Taiwan Weighted and Shanghai Composite declined by 0.86% and 0.87% respectively. The KOSPI and Jakarta Composite experienced more modest gains of 0.17% and 1.51%. These fluctuations can be attributed to a combination of global economic trends, domestic developments, and investor sentiment.
Rupee Report
Over the week, Asian stock markets displayed a mixed performance. The SET Composite from Thailand surged by 3.98%, while the Taiwan Weighted and Shanghai Composite declined by 0.86% and 0.87% respectively. The KOSPI and Jakarta Composite experienced more modest gains of 0.17% and 1.51%. These fluctuations can be attributed to a combination of global economic trends, domestic developments, and investor sentiment.
Gold Surges
Last week, the commodities market experienced a volatile period. Brent Crude, a key benchmark for oil prices, declined by 4.55%. Gold, a traditional safe-haven asset, saw a modest increase of 2.36%. Crude Oil, another important commodity, also faced a downturn, falling by 3.91%. These fluctuations could be attributed to a combination of factors, including geopolitical tensions, supply and demand imbalances, and economic uncertainty. Investors should closely monitor these trends and consider their implications for their investment strategies.
🍟 Quick Bites
📉 India’s PMI fell in August, with manufacturing PMI declining and services PMI rising.
⚛️ India’s second 700 MW nuclear power reactor in Gujarat has reached full capacity.
📊 Reliance Jio, Airtel, and Vodafone-Idea saw subscriber changes in June, with Jio gaining and Vi losing subscribers.
✈️ Domestic air passenger numbers increased by 7.3% in July.
🛢️ India overtook China as the largest importer of Russian oil in July.
💎 India’s exports of gems and jewelry decreased by 21.93% in July, while imports fell by 15.13%.
🔎 Stocks in news
🏗️ L&T secured a large order for road and bridge construction in Maharashtra, worth ₹2,500 crore to ₹5,000 crore.
🧾 Hindustan Zinc received a GST notice worth ₹26.12 crore.
🌏 RVNL signed an MoU with a Malaysian company for railway infrastructure projects in ASEAN.
💵 Hindustan Zinc announced a second interim dividend of ₹19 per share.
🏦 IndusInd Bank received RBI approval to set up a subsidiary AMC.
💳 Tata Chemicals raised ₹1,700 crore through debt instruments.
🌐 Petronet LNG signed an MoU with LTL Holdings to supply LNG to Sri Lanka.
✈️ InterGlobe (IndiGo) reported the highest number of passengers affected by flight delays in July.
💊 Glenmark Pharma launched a new drug for eye allergy in the US.
🚀 DCM Shriram commissioned a Hydrogen Peroxide plant in Gujarat with a capacity of 52,500 tonnes per annum.
🏭 Dabur plans to set up its first manufacturing plant in South India, investing ₹400 crore over the next five years.
🎫 One97 (Paytm) will sell its entertainment ticketing business to Zomato for ₹2,048 crore.
📈 IREDA will consider raising ₹4,500 crore in its board meeting.
🛡️ BEL received orders worth ₹695 crore for various defense equipment.
🏭 Wipro Hydraulics inaugurated its sixth manufacturing plant in Jaipur, Rajasthan with an investment of ₹250 crore
📈 1QFY25 key results this week
📈 FSN E-Commerce (Nykaa) reported a 150% increase in net profit for the April-June quarter.
⛏️ Hindustan Copper’s net profit rose by 139.82% year-on-year in the April-June quarter.
♻️ Sustainability Corner
🏭 GAIL signed an MoU with Petron Scientech to establish a bio-ethylene plant.
⚡ Tata Motors partnered with Delta Electronics and Thunderplus to set up EV charging stations.
🛵 Ola Electric received a PLI certificate for two more EV scooter models.
🚀 IPO corner
Upcoming SME IPOs:
- Indian Phosphate Limited IPO (26 to 29 Aug 2024)
- Jay Bee Laminations Limited IPO (27 to 29 Aug 2024)
- Premier Energies Limited IPO (27 to 29 Aug 2024)
- Vdeal System Limited IPO (27 to 29 Aug 2024)
- Paramatrix Technologies Limited IPO (27 to 30 Aug 2024)
- ECOS (India) Mobility & Hospitality Limited IPO (28 to 30 Aug 2024)
- Aeron Composite Limited IPO (28 to 30 Aug 2024)
Subscription status:
- Orient Technologies IPO was 86 times subscribed on Day 3, with the HNI portion being oversubscribed by over 211 times.
- Interarch Building IPO was subscribed 93.53 times, with retail subscription at 19.11 times.
- Interarch Building Products IPO has been oversubscribed by 93.53 times.
News:
- Ola Electric Mobility shares declined by 6% on August 22.
- Blackstone-owned IGI India filed a draft red herring prospectus to raise ₹4000 crore.
- Joyalukkas has decided to postpone its initial public offering while announcing plans to expand its retail network by opening 60 new stores in three years
Fed Chair Powell’s Speech: A Market-Shaking Pivot?
The Federal Reserve’s recent decision on interest rates has sent shockwaves through financial markets, with investors scrambling to assess the implications for their portfolios. While Fed Chair Jerome Powell’s speech offered some clarity on the central bank’s intentions, the market’s reaction has been mixed, reflecting the complex interplay between economic fundamentals and investor sentiment.
Key Points from Powell’s Speech
- Inflation progress: Powell acknowledged the progress made in curbing inflation, noting that the rate has declined significantly from its peak.
- Labor market stability: Despite a slight rise in unemployment, Powell emphasized the resilience of the labor market, attributing the increase to more people entering the workforce and a slower pace of hiring.
- Dual mandate focus: The Fed is now balancing its focus on price stability with ensuring a strong labor market.
- Market expectations: Investors are anticipating interest rate cuts in the near future, with a high probability of a quarter-point reduction in September.
Market Reactions
Following Powell’s speech, stock prices experienced a volatile reaction. Initially, stocks rose sharply, as investors cheered the prospect of lower interest rates. However, gains were short-lived, as concerns about the potential economic impact of rate cuts and lingering inflation pressures weighed on sentiment.
Impact on Specific Sectors
- Interest-rate sensitive sectors: The financial sector, which is particularly sensitive to interest rate changes, initially saw a decline as the prospect of lower rates reduced the profitability of banks and other financial institutions. However, as investors digested the implications of Powell’s speech, the sector recovered some of its losses.
- Growth stocks: Growth stocks, which are often more sensitive to changes in interest rates, experienced a mixed reaction. While lower rates can boost the valuations of growth companies, concerns about the potential for a slowdown in economic growth weighed on sentiment.
- Value stocks: Value stocks, which are typically less sensitive to interest rate changes, outperformed growth stocks, as investors sought to position themselves for a potential economic downturn.
Economic Implications
The Fed’s decision to maintain interest rates at their current level has significant economic implications. Lower interest rates can stimulate economic growth by making it cheaper for businesses to borrow money and invest in new projects. However, there is also a risk that lower rates could lead to higher inflation, as increased borrowing could fuel demand for goods and services.
The market’s reaction to Powell’s speech highlights the uncertainty surrounding the economic outlook. While the Fed’s decision to maintain rates at their current level suggests a cautious approach, investors remain concerned about the potential for a recession and the impact of geopolitical tensions.
Wrapping up
The Fed’s rate decision and Powell’s speech have created a complex environment for investors. While the short-term impact on the market may be mixed, the long-term implications for the economy and financial markets remain uncertain. As investors continue to navigate this volatile landscape, it is essential to stay informed about economic developments and monitor the Fed’s future actions.
Upcoming key financial events for the week:
| Date | Event |
| 27-Aug-24 | USD CB Consumer Confidence |
| 29-Aug-24 | EUR German Prelim CPI m/m |
| USD Unemployment Claims | |
| USD Prelim GDP q/q | |
| USD Pending Home Sales m/m | |
| 30-Aug-24 | EUR Core CPI Flash Estimate y/y |
| USD Core PCE Price Index m/m |
