- The Indian equity indices, Sensex and Nifty 50, are projected to open higher on Tuesday, buoyed by positive global market cues.
- Asian markets are trading higher, while US stocks ended positively overnight, fueling hopes of a US Federal Reserve interest rate cut this year.
- Traders are currently pricing in rate cuts worth 46 basis points from the Fed by the end of 2024, according to LSEG’s rate probability app.
Indian stock market shows positive signs following global market trends, with expectations of an interest rate cut by the US Federal Reserve.
Indian Stock Market Performance
On Monday, the Indian stock market benchmark indices ended mixed amid high volatility. The Sensex gained 17.39 points, or 0.02%, to close at 73,895.54, while the Nifty 50 settled 33.15 points, or 0.15%, lower at 22,442.70. Siddhartha Khemka, Head – Retail Research, Motilal Oswal Financial Services Ltd, noted a surge in India VIX by over 70% in the last eight trading sessions, indicating increasing investor nervousness due to ongoing global uncertainties and the upcoming Lok Sabha election outcome.
Global Market Cues
Asian markets traded higher on Tuesday, tracking overnight gains on Wall Street. Japan’s Nikkei 225 rose 0.96%, while the Topix gained 0.61%. South Korea’s Kospi rallied 1.6% and the Kosdaq surged 1.08%. Hong Kong’s Hang Seng index futures indicated a slightly weaker open. The US stock market ended higher on Monday, extending gains for the third straight session. The Dow Jones Industrial Average gained 176.59 points, or 0.46%, to 38,852.27, while the S&P 500 rose 52.95 points, or 1.03%, to 5,180.74. The Nasdaq Composite ended 192.92 points, or 1.19%, higher at 16,349.25.
US Federal Reserve and Interest Rates
Richmond Fed President Thomas Barkin stated that the current interest rate level should cool the economy enough to return inflation to the central bank’s 2% target. Barkin, a voter this year on interest rate policy, added that inflation “data whiplash” supported the Fed’s deliberative policy towards interest rates. Federal Reserve Bank of New York President John Williams said while rate cuts would happen, monetary policy was currently in a very good place.
Japan Services PMI
Japanese service sector activity grew at the fastest pace in eight months in April, with the final au Jibun Bank Service purchasing managers’ index (PMI) rising to 54.3 last month, the highest level since August 2023, and up slightly from 54.1 in March.
Oil Prices and US Dollar
Crude oil prices rose after Israel struck Rafah in Gaza while negotiations for a ceasefire with Hamas continued without resolution. Brent crude futures rose 0.46% to $83.71 per barrel, while US West Texas Intermediate (WTI) crude futures gained 0.59% to $78.94 a barrel. The US dollar index, which measures the currency against six major peers, was little changed at 105.13, after dipping as low as 104.52 on Friday.
Conclusion
With the Indian stock market showing positive signs and global markets trading higher, investors are keeping a close eye on the US Federal Reserve’s potential interest rate cut. The performance of the Japanese service sector and fluctuations in oil prices and the US dollar also remain key factors influencing market trends.
