Equity Markets and Government Bonds Expected to Open Positively on Monday
August 25, 2024 | 7:41 PM IST
The equity market and government bonds are poised for a positive opening on Monday, buoyed by a decline in US Treasury yields following remarks from Federal Reserve (Fed) Chair Jerome Powell signaling an upcoming interest rate cut.
Dealers are optimistic that the rupee will also strengthen against the dollar on Monday. This follows a drop in the yield on the benchmark 10-year US Treasury bond by 7 basis points (bps) to 3.79%, down from 3.86% as of the previous Friday.
While Powell did not specify the magnitude of the anticipated rate cut, most analysts forecast a 25-bp reduction in September. "The time has come for policy to adjust," Powell stated at the Fed’s annual Jackson Hole retreat. He emphasized that the pace of rate cuts will be determined by ongoing economic data and risk assessments.
Experts believe equity markets, already factoring in a 25-bp rate cut, could see gains between 0.5% and 1% due to Powell’s clear indication of a rate cut cycle starting. US markets closed more than 1% higher on Friday in response to his comments.
The yield on the benchmark 10-year government bond in India is expected to open approximately 4 bps lower on Monday, having settled at 6.86% on Friday. "We might see the yield fall by 3-4 bps," said Venkatakrishnan Srinivasan, founder of Rockfort Fincap LLP, while stressing the need for clarity on rate cuts from the Reserve Bank of India (RBI).
Throughout the financial year 2024-25, the benchmark yield has decreased by 19 bps, albeit rising by 31 bps this calendar year. In August alone, the yield softened by 6 bps. The benchmark indices—Nifty and Sensex—have rallied over 3.5% from this month’s lows amid rebounding global markets, alleviating fears of a US recession.
On Friday, the Sensex and Nifty closed at 81,086 and 24,823, respectively, though both are still below their record highs. Ajit Mishra of Religare Broking highlighted that market participants would react positively to Fed’s dovish stance along with a weakening dollar and falling crude oil prices.
Foreign exchange traders anticipate the rupee to open around 83.85 against the dollar, down slightly from 83.9 on Friday. Amit Pabari of CR Forex noted the potential impact of RBI intervention on the rupee’s performance.
As of this financial year, the rupee has depreciated by 0.6% and by 0.8% this calendar year, with August seeing a 0.2% depreciation.
First Published: Aug 25, 2024 | 7:17 PM IST
Original Story https://www.business-standard.com/markets/news/stocks-bonds-seen-opening-stronger-post-powell-s-indication-of-rate-cut-124082500484_1.html
Category :
Tags:
