'Average' was the operative word in the US Fed's strategy shift on inflation. Easy liquidity is fuel for inflation, which is why the glut of money that is inflating asset prices has also been causing a niggling worry in financial markets that once it starts raising prices of goods and services, central banks will have to begin unwinding. The Fed move to shift its inflation goal to "2% averages over time" creates room for low interest rates to stay for a long, long time. Even the worry of high employment causing excess inflation is buried for now! Powell says inflation didn't rise in recent years as anticipated when unemployment fell to historic lows.
MARKET CUES: Where do we stand >>>  | Nifty futures on the Singapore Exchange traded 32 points higher at 7 am (IST) this morning, signaling a positive start ahead for Dalal Street. |
| On Thursday, Nifty could not add on to opening gains and ended almost flat. It formed a small bearish candle on the daily chart, but continued to form higher highs and lows for the fifth straight session. |
| Asian stocks were mixed this morning after their US counterparts eked out modest gains. Stocks rose in Japan, led by banks. South Korean shares climbed, Hong Kong fluctuated and both Australia and China slipped. Hang Seng added 0.1%, Shanghai Composite fell 0.2% and Kospi rose 0.6%. |
| Markets swirled after Fed Chairman Jerome Powell laid out a policy that aims for 2% inflation on average as investors tried to digest its ramifications. Dow rose 160.35 points, or 0.57%, to 28,492, the S&P500 gained 5.82 points, or 0.17%, both setting new intraday highs. Nasdaq dropped 39.72 points, or 0.34%, to 11,625. |
| Oil prices fell in early trade on Friday as a massive hurricane raced inland past the heart of the U.S. oil industry in Louisiana and Texas, with a storm surge weaker than predicted. WTI crude futures fell 16 cents, or 0.4%, to $42.85 a barrel while Brent futures for October set to expire on Friday, fell 9 cents, or 0.2%, to $45.00 |
| The rupee sharply appreciated 48 paise to settle at 73.82 against the US dollar on Thursday after Governor Shaktikanta Das said RBI has not exhausted its ammunition to deal with the current situation |
| The dollar rose against six global currencies on Friday, after the US Fed's aggressive new strategy to lift employment and increased tolerance for higher inflation pushed US bond yields up. The euro hit last week's low of $1.17545 overnight. The British pound was little changed |
| Domestic gold prices rose to Rs 55,200 per 10 gm, while silver fell to Rs 65,500 a kg. On MCX, October gold futures fell 1.69 per cent on Thursday to Rs 50,902, while silver September futures stood at Rs 65,190. In international markets, the yellow metal fell 0.1% to $1,926.86. |
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Future board to bet RIL deal tomorrow… The board of Future Enterprises will meet on Saturday to finalise the sale of the group's retail business to Reliance Retail. The all-cash deal will see the Mukesh Ambani company take on Future Group's debt and liabilities, and pick up a minority stake in the latter's FMCG arm. According to the terms of the deal, valued at about Rs 29,000-30,000 crore, Future Group will merge five listed units across grocery, apparel, supply chain and the consumer business into Future Enterprises (FEL), which currently houses the group's retail back-end infrastructure. FEL will then hive off all retail assets and sell them to RIL as a single unit.
Read More Traders carry bullish bets into Sept series… Traders carried forward bullish derivative bets into the September series as the August contracts expired on Thursday on optimism that the recent upward momentum driven by easy money policies of global central banks could push indices higher. Derivative analysts expect the Nifty to surpass 11,750 in the September series but cautioned that as per historical trends, indices tend to weaken after rising for three straight series.
Read More Fed unveils new money policy approach… Fed Chair Jerome Powell unveiled a new approach to setting US monetary policy, letting inflation and employment run higher in a shift that will likely keep interest rates low for years to come. Following a more-than-yearlong review, Powell said the Fed will seek inflation that averages 2% over time, a step that implies allowing for price pressures to overshoot after periods of weakness. It also adjusted its view of full employment to allow labor-market gains to reach more workers.
Read More Centre gives states 2 borrowing options… The Centre has offered two borrowing options to states to make up for the shortfall in GST compensation cess fund, including a special window to directly raise finances from RBI. The proposals were made at Thursday's GST Council meeting and will be discussed at the next one in September. States can either borrow the full compensation deficit of Rs 2.35 lakh crore, or the shortfall purely due to GST implementation of Rs 97,000 crore via the special window.
Read More Das asks banks to shed risk aversion… RBI governor Shaktikanta Das has called upon banks to shed their extreme risk aversion in lending and to focus on risk management and quality of decision making. Pointing out that banks will not be able to earn income if they do not lend, Das said that extreme risk aversion is not desirable. Lenders, however, contested this, stating that there is an absence of demand from existing borrowers and they are careful in lending with those who are worst affected as a prudent measure.
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Investors can skip HAL OFS… Investors could give the offer for sale of Hindustan Aeronautics on Friday a miss. Though retail investors will be allotted shares at 5% discount to the cut-off price of the issue, analysts say a tepid earnings outlook and the recent run-up in the share price could put a lid on gains in the near future.
Read More Primary market bond sales dry up… Rising yields have taken a toll on companies raising money from the local debt markets. Primary market sales dried up significantly in the past two weeks, with top-rated Power Finance Corp, too, cancelling a bond sale. Meanwhile, LIC Housing Finance and Rural Electrification Corp. paid 15-20 basis points more than the usual for three-year bonds. To be sure, LIC is buying bonds, preventing the yields from stiffening further.
Read More FTSE Russel drops top Indian lenders…. Global index provider FTSE Russell unexpectedly removed three lenders — HDFC Bank, Kotak Mahindra Bank and IndusInd Bank — from its indices. They were kept out for failing to comply with the 'minimum foreign headroom requirements'. Their inclusion could have led to inflows of over $600 million into these stocks, according to analyst estimates.
Read More Mistry firms oppose high debt at Tata Steel, TaMo… Cyrus Investments and Sterling Investment Corp, the Mistry family firms that hold an 18% stake in Tata Sons, raised the issue of high debt levels at Tata Steel and Tata Motors and criticised the capital-allocation strategy of the holding company at its first virtual annual general meeting on Thursday. The two firms also criticised the role of independent directors on the board of Tata Sons in the capital-allocation plans. Tata Sons chairman N Chandrasekaran defended the group's strategy, saying that it was taking "corrective measures" against missteps between 2013 and 2016, when Cyrus Mistry was chairman.
Read More Meanwhile... Negative returns worry banks…. Banks have raised an alarm over real returns on deposit accounts turning negative with the rise in inflation numbers. The concern is that with deposit rates continued to be subdued, investors may not find bank deposits attractive enough. "It is a tricky situation, interest rates cannot be the only factor driving the economy. As an emerging economy, we need higher contribution from savers," PNB MD S Mallikarjuna Rao said.
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