US Fed Rate Cut Impact on India: Experts Divided - News
Sep 19, 2024 15:37
Experts debate the impact of the US Fed's rate cut on India, with some predicting increased investment and others foreseeing a decline in equity returns and gold price surges. The Reserve Bank of India's next monetary policy meeting will be crucial in deciding on interest rates.
Illustration: Dominic Xavier/Rediff.com
New Delhi, Sep 19 (PTI) Experts shared mixed views on the impact of the half-point benchmark rate cut by the US Federal Reserve, as some believe cheaper financing could boost investment flows, others said it could lead to a decline in returns on equity and a rise in gold prices.
The US Federal Open Market Committee voted to cut the federal funds rate target range by 50 bps to 4.75-5 per cent, from 5.25-5.50 per cent, against expectations of a cut half that size.
The US central bank had kept interest rates at an over two-decade high for 14 months.
According to PHDCCI President Sanjeev Agrawal "We expect that the cut in the Federal Reserve rate could lead to a decline in returns on equity and a rise in gold prices".
Echoing similar sentiments, Colin Shah, MD at Kama Jewellery, said this scenario must be taken positively, as the rate cut has opened doors for gold to scale new highs shortly, reinstating the might of the yellow metal as an investment haven.
Some experts believe the Fed rate cut could lead to rate cuts in emerging markets.
"The impact on the Indian economy is going to be an increased inflow of foreign money into Indian stock markets as well as higher inflow of FDI. This wil lead to stronger rupee as well as lower interest rates in India giving room to RBI to lower the interest rate also," said Rohit Arora, Co-founder and CEO, Biz2Credit and Biz2X.
The Reserve Bank of India (RBI) has left the repo rate unchanged at 6.50 per cent since February 2023 as it tackled to bring down inflation. The next RBI Monetary Policy Committee meeting is scheduled to be held on October 7-9, where it would take a call on interest rate.
"India has remained well insulated from the rest of the world rate movements for now and the tremendous rally in risk assets plus projected economic growth keep an inflationary underlying force in the economy. RBI MPC meets next month and a rate cut may remain elusive for now, and perhaps not required yet, in India," Vishal Goenka, Co-Founder of IndiaBonds.com said.
Reiterating similar sentiment Trideep Bhattacharya, President & CIO-Equities, Edelweiss MF said, "Fed rate cut was cut deeper than expected, change in US economic forecasts indicate a soft patch than recession, paves way for rate-cuts in emerging markets, positive for capital flows into emerging markets".
According to Vikas V Gupta, CEO & Chief Investment Strategist, OmniScience Capital "For global investors, especially in emerging markets like India, cheaper financing could boost investment flows, particularly from Foreign Institutional Investors (FIIs)".
Deepak Ramaraju, Senior Fund Manager, Shriram AMC, stated, "We can expect the broader Emerging economies to undertake rate-cut decisions. On the domestic front, RBI will focus on the data and might likely undertake a rate cut in December or 4Q FY 25. The FII flows can be outbound in the short term and as the US dollar starts easing, the flows can come back into India.
Home »
Market News » US Fed Rate Cut Impact on India: Experts Divided - News
DISCLAIMER - This article is from a syndicated feed. The original source is responsible for accuracy, views & content ownership. Views expressed may not reflect those of rediff.com India Limited.
You May Like To Read
MORE NEWS
CCI to Boost Enforcement, Leverage Tech for...
CCI Chairperson Ravneet Kaur outlines plans to strengthen enforcement, enhance...
TRAI to Pilot Digital Consent System for Spam...
TRAI is launching a pilot program to digitize past user consents for commercial...
Caliber Mining IPO: Rs 600 Crore Coal Mining &...
Caliber Mining and Logistics, a Nagpur-based coal mining and logistics provider, files...
Neelkanth Realtors IPO: Sebi Filing, Details...
Neelkanth Realtors, a Mumbai-based real estate developer, files draft papers with Sebi...
India Launches New PLI Scheme for Steel Sector
India's government will launch a new round of the PLI scheme for the steel sector,...
Lower GST on Cement to Boost Demand: JK Lakshmi
JK Lakshmi Cement urges government to reduce GST on cement to 18% and implement...
ICAR Member Urges Modi to Appoint New Director...
An ICAR member calls for a new director general with global expertise to revitalize the...
NHAI Prepays Rs 56,000 Cr Loan, Saves Rs 1,200...
NHAI prepays Rs 56,000 crore in loans during FY25, reducing its debt liability and...
Crystal Crop Acquires Bayer's Ethoxysulfuron...
Crystal Crop Protection has acquired the herbicide active ingredient Ethoxysulfuron...
Punjab & Sind Bank Launches Instant Loan Scheme...
Punjab & Sind Bank is introducing an instant loan scheme for MSMEs up to Rs 25 lakh,...
Read More »