Market Medley

The global economic landscape presents a mixed picture. While the U.S. economy remains relatively steady, China’s growth continues to slow, prompting the government to introduce fiscal stimulus measures aimed at stabilizing its economy and capital markets. Despite these efforts, China’s economic fragility persists, raising concerns about sustained recovery.

 In recent months, the Indian rupee has been facing substantial pressure due to a combination of external and domestic factors. The exchange rate for the rupee has averaged around ₹83.80 to the US dollar for August and September, a reflection of ongoing economic challenges. Protecting the rupee under current circumstances requires strategic interventions, especially as external pressures, such as foreign portfolio investors (FPIs) withdrawing funds, have led to net outflows since October 1st.

  The RBI directed four shadow banks, Asirvad Micro Finance Ltd, Arohan Financial Services Ltd, DMI Finance, and Navi Finserv from disbursing loans after Oct. 21 as they were charging very high interest Action based on material supervisory concerns observed in the pricing policy of these companies, RBI said:

 In the backdrop of global interest rate cuts and a positive outlook for India's fixed income market, strategic duration management presents a key opportunity for investors. With central banks across the world, including the U.S., Eurozone, and China, shifting from restrictive to neutral stances, India is expected to follow suit. As inflation recedes and fiscal consolidation continues, the Indian bond market stands in a favorable position, with the potential for further growth driven by foreign portfolio inflows (FPI) and structural shifts in interest rates.

 Global Economy and Inflation Trends Globally, inflation has started to ease across many regions, enabling central banks to cut interest rates. In September 2024 alone, 21 central banks reduced their rates, the most cuts outside of crisis periods like the COVID-19 pandemic and the subprime mortgage crisis. This reduction in rates will provide much-needed relief for both corporations and consumers, especially considering the enormous global debt, which now stands at approximately $313 trillion. As interest burdens decrease, economic activity should improve.

 The Reserve Bank of India (RBI) in its Monetary Policy Committee (MPC) meeting yesterday announced a significant shift in its policy stance from "withdrawal of accommodation" to "neutral" with unanimous support. The repo rate was kept unchanged by a 5:1 majority, marking a cautious approach toward inflation management and growth outlook. This MPC was the first to include three new external members, adding fresh perspectives to the committee's deliberations.

 In its latest monetary policy announcement on Wednesday, October 9, 2024, the Reserve Bank of India (RBI) kept the repo rate unchanged at 6.50%, as widely anticipated by the market. After raising the repo rate by 250 basis points between May 2022 and February 2023, the RBI has maintained the same policy rate for the 10th consecutive time. We are pleased to share our detailed analysis and outlook on the monetary policy.