Benchmarks Sensex and Nifty are all set to see solid gains on Monday morning, in line with rallies seen on Asian peers, after the US Federal Reserve Jerome Powell’s speech at Jackson Hole raised bets of September interest rate cut. US indices such as Dow Jones and S&P500 settled up to 1.89 per cent higher on Friday and Asian markets trading up to 1 per cent higher. Gift Nifty last quoted at 24,948.
“Powell’s dovish speech at Jackson Hole supports risk appetite in the near term. We think Chair Powell’s dovish leaning speech at the Jackson Hole (JH) signalling a resumption of Fed rate cut cycle should continue to support risk appetite, at least in the near term,” Nomura said.
Powell signalled the start of rate-cut cycle back in 2024 as well and that episode led to a rally in some Asian laggards.
On Friday, US stocks reacted positively, and barring no negative surprises from NVDA results and US Core PCE coming week, Nomura thinks this should continue at least until the market focus moves to the US August CPI release on September 5, followed by the US Core CPI release on September 11.
Jerome Powell signalled that the Fed remains data-dependent and open to adjusting rates if economic conditions allowed for it. This increased the chance of a rate cut in September and a further cut later in the year.
This will ease concerns over FPI outflows. Data showed FPIs have sold domestic equities to the tune of Rs 22,040 crore in August so far.
SBI Securities in a note said despite a slight improvement in the FII long-short ratio—from 7.95 per cent on August 13 to 10.70 per cent on August 22, primarily due to some short covering, FIIs continue to hold significant short positions in index futures.
“Interestingly, the last time the long-short ratio fell below 10 per cent was in March 2023, where it remained at these levels for three consecutive sessions. That period coincided with a market bottom, after which Nifty moved higher,” SBI Securities.
“Over the past six weeks, FII activity has consistently reflected bearishness. Yet, despite this heavy selling, Nifty has corrected just 3.11 per cent from its June 30 high of 25,669. The resilience is largely due to strong domestic institutional investor (DII) support,” SBI Securities said.
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