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<ul class="summary-list"><li>Inflation won't stay contained for long, T. Rowe Price analyst Tomasz Wieladek said.</li><li>Central bank policy might actually miss the mark, he wrote for the Financial Times.</li></ul>Don't mistake the world's ability to rein in inflation as a permanent victory, a T. Rowe Price analyst wrote for the <a target="_blank" href="https://www.ft.com/content/696d6f5f-2691-44cb-9a77-3774e3795aa0">Financial Times</a>."Everyone seems to believe that inflation will return to its boring old normal," said Chief European economist Tomasz Wieladek. "I disagree. Changes in central bank policy, expectations, labor markets, and globalization mean that inflation will likely stay volatile going forward."Still, current inflation levels — close to the 2% target rate for the US and Europe — support market optimism.However, Wieladek noted that both monetary and fiscal policy works with a lag: down the road, it may turn out that central banks under or overshot their targets. If that happens, this would dent inflation expectations, amplifying future price shocks."The degree that policy was overtightened or remains too loose will determine how large this deviation from target will be," he wrote. "But when inflation persistently deviates from target in the future, central banks will likely act again. Depending on circumstances, this could set the scene for another large inflation target miss."Meanwhile, investors should brace for inflation shocks in the years ahead.Some of the market's <a target="_blank" href="https://www.businessinsider.com/dimon-solomon-fink-economy-inflation-recession-stocks-real-estate-outlook-2024-4">heaviest hitters</a> have made this argument before. For instance, JPMorgan chief Jamie Dimon has <a target="_blank" href="https://www.businessinsider.com/jamie-dimon-inflation-soft-landing-recession-outlook-china-interest-rates-2024-5">repeated warnings</a> of a pricey future, as global militarization and the green transition stoke inflation.Wieladek pointed to other factors as well.For instance, tighter labor supply conditions mean that workers have gained greater bargaining power, he noted. As employees demand higher wages, Wieladek expects inflation to become more entrenched.Meanwhile, although trade openness has helped keep inflation stable, it's at risk of fading. Globalization is no longer a given in the years ahead, as geopolitical risks come to supply chains, Wieladek said. A potential resurgence of tariffs, as <a target="_blank" href="https://www.businessinsider.com/trump-tariff-plan-inflation-policy-impact-trade-war-china-rates-2024-5">touted by former president Donald Trump</a>, could deepen this trend.Finally, heavy US investment in AI requires a vast energy expansion, Wieladek noted. As this happens, the US may become a net energy importer."This would have adverse inflation consequences for European countries, which rely on US LNG imports," he wrote. "While AI will likely have a disinflationary effect in the medium term, the associated energy consumption could contribute to higher short-term inflation."

Why the global fight against inflation is nowhere near over

Prime Minister Narendra Modi, on Wednesday, congratulated Reserve Bank of India's (RBI) Governor, Shaktikanta Das for bagging an A+ grade rating in the Global Finance Central Banker Report Cards 2024. Prime Minister in a post on social media "X" said, "Congratulations to RBI Governor Shri @DasShaktikanta for this feat, and that too for the second time. This is a recognition of his leadership at the RBI and his work towards ensuring <keyword id="19900794" type="General" weightage="20" keywordseo="economic-growth" source="keywords">economic growth</keyword> and stability." <keyword id="20850250" type="General" weightage="20" keywordseo="RBI-Governor-Das" source="keywords">RBI Governor Das</keyword> has been awarded the A+ grade rating for the second consecutive year. The Central Banker Report Cards, published annually by Global Finance since 1994, grade the central bank governors of nearly 100 key countries, territories, and districts, as well as the European Union, the Eastern Caribbean Central Bank, the Bank of Central African States and the Central Bank of West African States. Grades are based on an "A+" to "F" scale for success in areas such as <keyword id="21364628" type="General" weightage="20" keywordseo="inflation-control" source="keywords">inflation control</keyword>, economic growth goals, currency stability and <keyword id="22859834" type="General" weightage="20" keywordseo="interest-rate-management" source="keywords">interest rate management</keyword>. "A" represents an excellent performance, down through "F" for outright failure. "Central bankers have waged war against <keyword id="19895000" type="General" weightage="20" keywordseo="inflation" source="keywords">inflation</keyword> over the past few years, wielding their primary weapon: higher interest rates. Now, countries around the world are witnessing the tangible results of these efforts, as inflation has dropped significantly," said Global Finance founder and editorial director Joseph Giarraputo. The RBI has been successful in controlling the larger macroeconomic situations in the country. The apex bank is actively working to push economic growth through its <keyword id="20900764" type="General" weightage="20" keywordseo="monetary-policies" source="keywords">monetary policies</keyword>. The RBI recently kept the the <keyword id="20094323" type="General" weightage="20" keywordseo="repo-rate" source="keywords">repo rate</keyword> unchanged at 6.5 per cent after the deliberations of the Monetary Policy Commitee meeting earlier this month. The move reflects the central bank's cautious approach amid ongoing economic uncertainties. Announcing the monetary policy decisions, Das had said that the decision to keep the repo rate steady comes amidst persistent concerns about inflation, which remains above the RBI's target range. RBI Governor Das said that the inflation will moderate from July onwards as the monsoon has improved and global food prices have shown signs of easing in July. The Q1 <keyword id="19999655" type="General" weightage="20" keywordseo="Consumer-Price-Index" source="keywords">Consumer Price Index</keyword> (CPI) inflation for the current financial year (2024-25) is projected at 4.5 per cent. CPI inflation for the first quarter of the next financial year (Q1 2025-26) is projected at 4.4 per cent, as announced by the RBI Governor. India's retail inflation, after breaching 5 per cent in June, softened drastically in July. In line with the moderation in retail inflation, wholesale inflation in India too witnessed a sharp decline in July. The annual rate of inflation based on all India Wholesale Price Index (WPI) numbers is 2.04 per cent (provisional) for July 2024 (over July 2023).

PM Modi congratulates RBI Governor Das on A+ rating in Global Finance Report

Mumbai (Maharashtra) [India], August 8 (ANI): <keyword id="64190" type="General" weightage="100" keywordseo="RBI-Governor" source="Orion">RBI Governor</keyword> <keyword id="6359111" type="General" weightage="20" keywordseo="Shaktikanta-Das" source="Orion">Shaktikanta Das</keyword> says <keyword id="19895000" type="General" weightage="20" keywordseo="inflation" source="keywords">inflation</keyword> will moderate from July onwards as the monsoon has improved and <keyword id="489239" type="General" weightage="20" keywordseo="Global-food-prices" source="Orion">global food prices</keyword> have shown signs of easing in July. Das said, "Global food prices showed signs of easing in the month of July after registering an increase since March 2024." A degree of relief in food inflation is expected from the pickup in southwest monsoon and healthy progress in Kharif sowing. Buffer stocks of cereals continue to be above the norms, according to RBI Governor Shaktikanta Das. Das added, "Assuming a normal monsoon and taking into account the 4.9 per cent inflation print, Q1 CPI inflation for the current financial year (2024-25) is projected at 4.5 per cent, with q2 at 4.4 per cent, Q3 at 4.7 per cent and Q4 at 4.3 per cent. CPI inflation for the first quarter of next financial year (Q1 2025-26) is projected at 4.4 per cent." The inflation landscape reflects mixed signals, to which Das said, "<keyword id="21258540" type="General" weightage="20" keywordseo="headline-inflation" source="keywords">Headline inflation</keyword> eased up to 5.1 per cent in June 2024 due to higher than expected food inflation. Fuel remained in deflation for the 10th consecutive month. Core inflation moderated to a historic low in the months of May and June." RBI Governor Shaktikanta Das, outlined the <keyword id="19900794" type="General" weightage="20" keywordseo="economic-growth" source="keywords">economic growth</keyword> with real <keyword id="19972825" type="General" weightage="20" keywordseo="GDP-growth" source="keywords">GDP growth</keyword> of 7.2 per cent for the fiscal year 2024-25 and headline inflation eased to 5.1 per cent in June, on Thursday. Das said, "Real GDP growth for 2024-25 is projected at 7.2 per cent with Q1 at 7.1 per cent, Q2 at 7.2 per cent, Q3 at 7.3 per cent and Q4 at 7.2 per cent. Real GDP growth for Q1 2025-26, this is something which we are giving for the first time, is projected at 7.2 per cent. The risks are evenly balanced." He added, "We have slightly moderated the <keyword id="387719" type="General" weightage="20" keywordseo="growth-projection" source="Orion">growth projection</keyword> for the first quarter of the current financial year in relation to the projection we gave in the previous MPC in June. This is primarily due to updated information on certain high-frequency indicators which show lower than anticipated corporate profitability, general government expenditure and core industries output." This forecast marks a slight moderation from previous estimates provided in the Monetary Policy Committee (MPC) meeting in June, attributed to recent updates on high-frequency indicators such as corporate profitability, general government expenditure, and core industries output. The inflation landscape reflects mixed signals, to which Das said, "Headline inflation eased up to 5.1 per cent in June 2024 due to higher than expected food inflation. Fuel remained in deflation for the 10th consecutive month. Core inflation moderated to a historic low in the months of May and June." Balancing robust growth projections with a nuanced understanding of inflation dynamics Governor Das stated, "Food inflation which has a weight of around 46 per cent in the CPI basket, contributed to more than 75 per cent of headline inflation in May and June. Vegetable prices increased sharply and contributed about 35 per cent to inflation in June. High inflation pressures persisted across other major food items also." Governor Das mentioned softening in core inflation continues to be broad-based with core services inflation touching a new low in the current CPI series during the month of May and June 2024. Das stated, "The high food price momentum likely to have continued in the month of July also. Large favourable base effects may however push headline inflation downwards in July. The Impact of the revision in milk prices mobile tariffs also needs to be carefully monitored." A degree of relief in food inflation is expected from the pickup in south west monsoon and healthy progress in Kharif sowing. Buffer stocks of cereals continue to be above the norms, according to RBI Governor Shaktikanta das. Das anticipates some relief in food inflation due to the expected pickup in the southwest monsoon and healthy progress in Kharif sowing. Buffer stocks of cereals remain above the normative levels, contributing to a more stable food price environment. Global food prices, which have been on an upward trajectory since March 2024, showed signs of easing in July.

RBI Governor Shaktikanta Das projects 7.2% GDP growth for 2024-25, reports eased inflation to 5.1% in June

<ul class="summary-list"><li>BlackRock CEO Larry Fink says the Fed will cut rates just once more this year. </li><li>The market sees two more 25 basis point cuts before the end of the year.</li></ul>The Federal Reserve will disappoint markets by cutting interest rates just one more time in 2024, BlackRock CEO Larry Fink said.Fink said the Fed will likely cut interest rates by 25 basis points before the end of the year amid a rise in global inflation. "I think it's fair to say we're going to have at least a 25, but, that being said, I do believe we have greater embedded inflation in the world than we've ever seen," Fink said during a Tuesday panel in Riyadh, Saudi Arabia.The market sees two more cuts this year, pricing in a 25 basis point cut at the November and December meetings, according to <a target="_blank" href="https://www.cmegroup.com/markets/interest-rates/cme-fedwatch-tool.html">CME's FedWatch tool</a>. Investors see slimmer odds of about 30% that the Fed will leave rates unchanged in December. Fink pointed to inflationary policies in the US, which he said are changing the economy's consumer-driven nature."We have a government and policy that is much more inflationary. Immigration — our policies of onshoring, all of this — no one is asking the question 'at what cost,'" he said. "Historically we were, I would say, a more consumer-driven economy, the cheapest products were the best and the most progressive way of politicking."His comments point to the policies aimed at bringing supply chains closer to the US and "re-shoring" domestic manufacturing jobs via spending bills like the Inflation Reduction Act and the Infrastructure Investment and Jobs Act.Those measures will likely mean inflation sticks around and prompts the Fed to pause its easing cycle, Fink suggested."Today, I think we have governmental policies that are embedded inflationary, and, with that being said, we're not gonna see interest rates as low as people are forecasting."The latest inflation reading for September showed the consumer price index grew 2.4% year over year, down slightly from 2.5% in August, according to data from the U.S. Bureau of Labor Statistics.After Fink's comments, another panel at the conference reaffirmed his forecast. When asked to raise their hand if they expected the Fed to cut interest rates twice more before the end of the year, the CEOs of Goldman Sachs, Morgan Stanley, State Street, and other Wall Street giants kept their hands down, according to <a target="_blank" href="https://www.cnbc.com/2024/10/29/larry-fink-says-the-fed-wont-cut-interest-rates-as-much-as-markets-expect-this-year.html">CNBC</a>.The central bank kicked off its easing cycle with a <a target="_blank" href="https://markets.businessinsider.com/news/stocks/interest-rates-today-fed-meeting-cut-stock-market-powell-economy-2024-9?_gl=1*1pio24j*_ga*MTY3OTgyNjg0MS4xNzIxMDE2MDM2*_ga_E21CV80ZCZ*MTcyNjc0OTAzMi4xNTguMS4xNzI2NzQ5MTE3LjYwLjAuMA..">jumbo 50 basis point cut</a> last month. This week <a target="_blank" href="https://markets.businessinsider.com/news/stocks/stock-market-outlook-tech-earnings-gdp-inflation-jobs-report-economy-2024-10?_gl=1*mog14z*_ga*MTY3OTgyNjg0MS4xNzIxMDE2MDM2*_ga_E21CV80ZCZ*MTczMDIxMTU3OC4zMzAuMS4xNzMwMjE0ODY0LjUzLjAuMA..">will be important</a> for the Fed's decision-making process, with a slew of data releases scheduled, including personal consumption expenditures, third-quarter GDP, and the October jobs report.

The Fed is likely to disappoint markets with just one more rate cut this year amid global inflation, BlackRock CEO says

As the results season kicks in, the <keyword id="20097634" type="General" weightage="20" keywordseo="quarterly-earnings" source="keywords">quarterly earnings</keyword> numbers of several <keyword id="22405488" type="General" weightage="20" keywordseo="blue-chip-firms" source="keywords">blue-chip firms</keyword> — such as <keyword id="19906778" type="General" weightage="20" keywordseo="Infosys" source="keywords" meta.keywordsubtype="org" meta.entityname="Infosys" meta.hostid="261" meta.entityid="Infosys">Infosys</keyword> and Reliance Industries — along with <keyword id="20837523" type="General" weightage="20" keywordseo="global-trends" source="keywords">global trends</keyword> and <keyword id="20223116" type="General" weightage="100" keywordseo="trading-activity" source="keywords">trading activity</keyword> of foreign investors, will determine <keyword id="22405487" type="General" weightage="20" keywordseo="equity-market-movement" source="keywords">equity market movement</keyword> in the holiday-shortened week ahead, according to analysts. The domestic <keyword id="22405489" type="General" weightage="20" keywordseo="WPI-inflation-data" source="keywords">WPI inflation data</keyword> for June — scheduled to be announced on Monday — will also influence trading sentiments, traders said. Markets will remain closed on Wednesday for Muharram. Among major quarterly earnings to be tracked this week are from HDFC Life Insurance Company, Bajaj Auto, BPCL, JSW Steel, Asian Paints, Infosys, and Reliance Industries. "Q1 earnings will be a key focus this week as numerous companies, including heavyweights Infosys, and Reliance, are set to release their results. Additionally, <keyword id="22194639" type="General" weightage="20" keywordseo="pre-Budget-discussions" source="keywords">pre-Budget discussions</keyword> are expected to contribute to market volatility," Santosh Meena, Head of Research, Swastika Investmart Ltd, said. On the global front, a significant focus will be on China. The country is scheduled to announce its GDP and Industrial Production (IIP) numbers, Meena said. "Other global factors to watch include the speech by the US Federal Reserve Chairman, US retail sales figures, and macroeconomic data from Japan," he added. Meanwhile, IT services company HCL Tech on Friday posted a 20.4 per cent rise in consolidated net profit to Rs 4,257 crore for the June-ended quarter and gave a revenue growth guidance of 3-5 per cent for FY25 on GenAI diversification and strong operational execution. "On Monday, markets will react to India's inflation data. Key results this week include Jio Financial Services, HDFC Life, Asian Paints, LTIMindtree, Infosys, Wipro, JSW Steel, Paytm, etc. Also globally, investors will take cues from China's GDP numbers, US core retail sales data, and ECB (European Central Bank) interest rate decision," Siddhartha Khemka, Head, Retail Research, Motilal Oswal Financial Services Ltd, said. Retail inflation increased to four-month high of 5.08 per cent in June as food items, including vegetables, became dearer, according to government data released on Friday. Vinod Nair, Head of Research, Geojit Financial Services, said, "We expect stock-specific moves to gain traction due to the ongoing earnings season; indeed, IT will be in the limelight due to the good start to the earnings and outlook." In the week ahead, economic data like China GDP, EuroZone CPI inflation, ECB policy, and the US Fed chair speech will be watched by investors to get cues on market momentum, Nair added. On a weekly basis, the BSE benchmark jumped 522.74 points, or 0.65 per cent, while the Nifty climbed 178.3 points, or 0.73 per cent. The 30-share BSE Sensex jumped 622 points, or 0.78 per cent, to settle at a record closing level of 80,519.34 on Friday. During the day, it zoomed 996.17 points, or 1.24 per cent, to hit an all-time high of 80,893.51. The NSE Nifty surged 186.20 points, or 0.77 per cent, to settle at a record closing high of 24,502.15. Intra-day, it jumped 276.25 points, or 1.13 per cent, to hit a new lifetime peak of 24,592.20.

Trading activity to hinge on Q1 results, global trends in holiday-shortened week: analysts

<div type="image" title="In case RBI is in the mood to hike the interest, your home loan EMIs might end up taking more from your pockets. Or, if it leaves the rates unchanged, your EMIs wont budge one bit" msid="114284206" hostid="261" caption="&amp;lt;p&amp;gt;In case RBI is in the mood to hike the interest, your home loan EMIs might end up taking more from your pockets. Or, if it leaves the rates unchanged, your EMIs wont budge one bit&amp;lt;/p&amp;gt;"></div> On September 18, 2024, the <keyword id="19951097" type="General" weightage="20" keywordseo="us-fed" source="keywords">US Fed</keyword> delivered a jumbo-sized surprise to the global economy. Not only did they trim their interest rates by a massive 50 basis points to bring their yields down to 5%, but also hinted at further rate cuts in the upcoming months. This move from the fed and several other central banks globally had pushed expectations high for a similar rate slash closer home, from the <keyword id="19899808" type="General" weightage="100" keywordseo="rbi" source="keywords">RBI</keyword> this month. But governor <keyword id="19913110" type="General" weightage="20" keywordseo="shaktikanta-das" source="keywords">Shaktikanta Das</keyword>, in a “picture abhi baaki hai” moment, decided to hold the repo rates here steady, leaving them unchanged at 6.5% for the record 10th straight time. Although, he did tinker with the policy stand, changing it from “rate cuts are absolutely off the table” to a more accommodating “we’re okay with bringing down the rates, if needed”. This, rather neutral, stance from India’s financial custodian sparked hopes for a rate cut in December this year. However, the stubborn <keyword id="22195" type="General" weightage="20" keywordseo="inflation" source="Orion">inflation</keyword> levels in September have again dented such hopes. As consumers, you may be wondering what all the hullabaloo this is about, since it hardly makes a difference to your regular financial routine. Well, the majority of both economic growth and inflation is closely connected to this policy stance from the central bank and it does have a rather indirect effect on both our earnings and spending. But more directly, it would have clear implications for those looking to own a house. Even the slightest modification of interest rates, or the lack of it, influences the <keyword id="19916018" type="General" weightage="20" keywordseo="emi" source="keywords">EMI</keyword> you pay significantly. So, all aspiring homebuyers, is this the right time to take out a loan and buy a house? Can you expect a rate cut anytime soon, and what will that mean for your home-owning dreams? We lay it out. <h2>What’s the connection?</h2>You see, buying a house is no small feat, at least financially. The task becomes even more herculean if you are scouting for your own roof in cities like Delhi, Noida, Bangalore or Mumbai where, as Circuit from Munnabhai says, “room shuru hote hi khatam ho jata hai”. Naturally, you’ll have to take a <keyword id="6354730" type="General" weightage="20" keywordseo="Home-loan" source="Orion">home loan</keyword> from the bank. Don’t be mistaken, the bank won't give you a loan that covers 100% of the value of the property you want to own. Rather, your loan amount will be equivalent to a certain percentage of the property’s total value. RBI’s guidelines on this are pretty clear: <ul><li>If your loan amount is up to Rs 30 lakh, you can get a loan worth 90% of the property’s value.</li></ul><ul><li>If the loan amount is between Rs 30 lakh and Rs 75 lakh, you are eligible for a loan worth 80% of the property’s value. </li><li>If you are taking a loan of more than Rs 75 lakh, your loan amount will be equivalent to 70% of the property’s value. </li></ul>Now assuming that you have the money, it's all about paying back the principal amount, but not without a little (read hefty) interest added on top. See, when you’re taking a home loan, you are actually signing up for a long-term, even multi-decadal financial commitment, which will unfailingly present itself to your bank accounts and finances every single month, in the form of EMIs, or equated monthly instalments). When you take a home loan, you can choose to pay the interest in two ways (talk about choices!). One is that you decide to keep a fixed rate of interest throughout the tenure of your home loan. So, if you opt for a 25-year fixed-rate home loan at the rate of 8.8% p.a., you’ll have to pay interest at this rate for the next 25 years, till your entire loan is paid off. Yes, you can go backsies and switch to a floating-rate home loan by paying a fee. Floating, as the name suggests, means that your interest rate is not set in stone. But starting October 2019, when it comes to a floating interest rate home loan, your payable interest and EMIs are directly impacted by any changes in <keyword id="20094323" type="General" weightage="20" keywordseo="repo-rate" source="keywords">repo rate</keyword>, which were left unchanged by RBI this time around. Why are these two so chummy, you might ask. Well, <keyword id="173069" type="General" weightage="20" keywordseo="Home-loan-interest" source="Orion">home loan interest</keyword> rates are a sum of two things: <ol><li>Repo Rate (the rate at which RBI lends money to banks)</li><li>Operational cost + margins</li></ol>Any plus or minus in this equation would send your home loan interests tanking, or skyrocketing. Vivek Iyer, Partner, Grant Thornton Bharat explains that any change in the repo rates impacts the cost of funds and thereby the home loan interest rates. “When the interest rates are expected to reduce, the corresponding impact will be in the form of a reduced EMI. Home loan borrowers should always try to borrow at a floating rate when interest rates are expected to reduce and at a fixed rate when the interest rates are expected to increase. This minimizes the outflow in the form of EMIs that the home loan borrowers will experience”, he continues. So, no change in repo rates means no change in your home loan interest payout and no financial relief whatsoever. A rate cut, which most experts are anticipating will start this December, would mean your EMI payments come down, and your wallet might save a little more. But there’s also a chance of an UNO reverse happening. In case RBI is in the mood to hike the interest, your home loan EMIs might end up taking more from your pockets. Consider this. You took a floating interest rate home loan worth Rs 50 lakh in January 2022 at 8% p.a., for a period of 20 years. This brings your total monthly EMI to Rs Rs 41,822. But, as luck would (or won't) have it, RBI raised the interest rate by 250 basis points between May 2022 and February 2023, bringing it to its current status of 6.5%. Some back-of-the-envelope calculations suggest that now, your home loan interest payout will also rise by a hefty 2.5%, taking the total to 10.5%. In other words, you’ll have to dish out Rs 49,919 per month as EMI. Now, won't you heave a sigh of relief if the RBI were to bring down the interest rate by say, even 50 basis points, or 0.5%? Agreed, your EMI will come down just marginally, to Rs 48,251. But look at this over a 20-year period, and you’ll see how big the difference is. <h2>Are rates set to change anytime soon?</h2>Generally, RBI hikes the repo rates if it sees inflation spiralling out of control. Then, in a bid to reduce consumer spending, it raises interest rates to make borrowing expensive. But when the apex bank sees sluggish consumption in the economy, inflation in control and wants to boost spending, it slashes down on interest rates, making it more lucrative for people to borrow. As of now, most experts are not anticipating any changes in the interest rates anytime soon. This means home loans are not getting cheaper anytime soon. The CPI data, which came out yesterday, saw inflation rise to 5.49% in September, compared to 3.65% last month. Food and beverage prices jumped to a four-month high of 8.36% in September, as opposed to a 5.3% rise in August. So a rate cut seems a no-go at the moment! Apurva Sheth, Head of Market Perspectives and Research, SAMCO Securities explains that the RBI had probably expected a hardening of inflation and that's why it chose to hold on to the rates in the monetary policy announcement last week. “Now, it seems that RBI will take a cautious stance going ahead and will not be in a hurry into rate cuts like its global peers”, he added. In all this, one thing is clear, in the grand movie of the Indian economy, the RBI has chosen stability over drama. And just like in every good Bollywood film, we're left wondering what twist the sequel will bring. Until then, it might be “The End" for rate cuts, but the show must go on for the Indian economy!

Simply Put: Boom or bust — how RBI’s decision to leave rates unchanged affects homebuyers

The Indian mutual fund industry continued to register strong growth in fund inflows during May 2024, as monthly data released by the Association of Mutual Funds in India (AMFI) today showed. This was a record month for equity mutual funds, with the category’s inflows jumping up by a whopping 83% since April. The mutual fund industry’s AUM (net assets under management) stood at Rs 58.91 lakh crore, rising marginally from Rs 57.25 lakh crore in April 2024. With total inflows worth Rs 42,294.99 crore, debt mutual funds continued to receive more investor attention than their equity counterparts during the month, which saw inflows of around Rs 34,697 crore. Notably, this is the 39th consecutive month where <keyword id="19925781" type="General" weightage="100" keywordseo="equities" source="keywords">equities</keyword> have seen positive inflows. Hybrid funds also ended their month in green, garnering Rs 17,990 crore in May. <cmsannotation type="cmsannotation" annotationid="Expectations around election results behind the surge, say experts" comment="subhead" text="Expectations around election results behind the surge, say experts">Expectations around election results behind the surge, say experts</cmsannotation> Expectations around the continuation of a stable regime led by the ruling party BJP during the election month of May could have been the major driver behind the record inflows into the MFs. Venkat Chalasani, Chief Executive, AMFI, said "Political stability creates an environment conducive to sustainable economic growth, attracting investments and fostering long-term investments. Global growth is sustaining its momentum in 2024 and is likely to remain resilient, supported by a rebound in global trade. The overall outlook for Indian capital markets remains positive, supported by strong fundamentals, and favourable demographics. However, it remains to be seen how the lesser-than-expected seats for the Narendra Modi-led BJP have impacted the MF sector in the month of June. However, a continuation of the NDA regime is likely to have contributed to the improved market sentiments as evident with surging markets post the counting day, and could reflect into the MF activity as well. "Although coalition governments face challenges in consensus-building and decision-making, infrastructure and nation-first initiatives introduced earlier are likely to receive support from allies across the political spectrum. The forthcoming 100-day action plan and a comprehensive Union Budget will provide a clearer picture of the government's priorities for the Indian economy," says Gopal Kavalireddi, Vice President of Research at FYERS. <cmsannotation type="cmsannotation" annotationid="Equity inflows mark a record high" comment="subhead" text="Equity inflows mark a record high"><keyword id="421833" type="General" weightage="20" keywordseo="Equity-inflows" source="Orion">Equity inflows</keyword> mark a record high</cmsannotation> Equity inflows remained positive for the 39th consecutive month, starting from March 2021. Growth Equity fund inflows for the month of May was ₹ 34,697, pushing the total inflows into mutual funds to Rs.1.1 lakh crore for the month. A total of 9 schemes were launched last month in the category of open-ended schemes, raising a total of ₹ 10,140 crores, said AMFI. Kavalireddi says, “Despite potential high volatility from FII selling, general elections, GDP data, and other minor events in May, investors remained steadfast in their pursuit of returns on the back of the Indian growth narrative." In a clear indication of investors looking to diversify their investments, multi-cap funds garnered Rs 2,644.88 crore. Large-cap funds amassed Rs 663 crore, while mid-cap funds made Rs 2,605.70 crore. On the other hand, small-cap funds have seemingly begun gaining their lost sheen, managing to take in Rs 2,724.67 crores during the month. Flexi-cap funds led the troupe, with inflows worth Rs 3,155 crore. "Equity flows have been largely driven by expectations of the election outcome, coupled with some NFO (new fund offer) launches, which perhaps led to a much higher than expected quantum in the equity category. On the equity side, investors possibly wanted to position their portfolios in advance to avoid any kind of gap risk as election exit polls were coming out over the weekend, which could have led to a spike in equity allocations towards the end of the month," Anand Vardarajan, Head Business Head – Banking, Institutional Clients, Alternate Products and Product Strategy, Tata Asset Management. Amidst hybrid funds, the majority came from arbitrage funds, which saw inflows worth Rs 12,758.12 crores in May. Notably, index funds and other ETFs collectively raked in Rs. 15,180 crore. <cmsannotation type="cmsannotation" annotationid="SIPs going strong" comment="subhead" text="SIPs going strong"><keyword id="159805" type="General" weightage="20" keywordseo="SIPs" source="Orion">SIPs</keyword> going strong</cmsannotation> Systematic investment plan (SIP) contributions continued to breach their record highs on a month-on-month basis. SIP contributions rose marginally to an all-time high of Rs 20.90 crore last month, as opposed to Rs 20.37 crore in April. SIP accounts also jumped to their highest figure in May, standing at 8,75,89,485. During the month, around 49,74,400 new SIPs were registered. As per <keyword id="1029773" type="General" weightage="20" keywordseo="AMFI-data" source="Orion">AMFI data</keyword>, SIP plans accounted for 19% of the net flows during the month. In the debt category, liquid funds saw the most influx, worth Rs 25,873.38 crore. Sectoral or thematic funds amassed Rs 19,213.43 crore during the month, trumping inflows by small-cap funds, which stood at Rs 2,724.67 crore, by a significant margin. Inflows into thematic funds were largely bolstered by the NFO of HDFC Manufacturing Fund, which drew Rs. 9,563 crores. Although Himanshu Srivastava, Associate Director, Manager Research, Morningstar Investment Research India, has a word of caution for all those flocking to sectoral funds, “investors must be cautious while investing in such funds. They are cyclical, and hence investors should have the necessary skills or the right set of advice in place to track sector dynamics and time their entry and exit from these funds. These are high-risk return propositions, and hence investors must take a judicious call while investing in them.” <cmsannotation type="cmsannotation" annotationid="Gold continues to shine" comment="subhead" text="Gold continues to shine">Gold continues to shine</cmsannotation> The quantum of net flows in <keyword id="20050894" type="General" weightage="20" keywordseo="gold-ETFs" source="keywords">gold ETFs</keyword> saw a sharp uptick to Rs 827 crore in May 2024, from a net outflow of Rs 396 crore in April. Srivastava further notes that the enduring <keyword id="19950651" type="General" weightage="20" keywordseo="global-inflation" source="keywords">global inflation</keyword>, which remains above central banks' comfort levels, and the persistent uncertainty surrounding <keyword id="19962135" type="General" weightage="20" keywordseo="interest-rate-cuts" source="keywords">interest rate cuts</keyword> have bolstered gold's appeal as a haven and as a hedge against inflation, thereby attracting more investors. “Also, over the years, gold has gained prominence as an effective diversifier, prompting many investors to include gold ETFs in their portfolios. <keyword id="19910265" type="General" weightage="20" keywordseo="gold-prices" source="keywords">Gold prices</keyword> also saw some corrections in May, which spurred buying from investors. In INR terms, gold has done fairly well over the last year but dwarfs in comparison to how equities have fared. Given this backdrop, flows in the gold ETF category have been somewhat patchy relative to the equity asset class," he continued. Disclaimer: The content on this website is for informational purposes only and should not be construed as investment advice. We recommend readers consult certified, qualified and registered advisors for professional and personalised financial advice.

Election fever? Equities and SIP inflows mark record highs in May, per AMFI data

<ul class="summary-list"><li>Global inflation could see a resurgence as the Olympics and Taylor Swift concerts drive demand.</li><li>Mega-events tend to spike hotel and transportation costs, UBS said.</li></ul>Global inflation could see a fresh resurgence thanks to a spending spree fueled by Taylor Swift concerts and the Olympics, UBS said.The European bank warned that the two "mega-events" could create a sudden demand shock among consumers due to crowds rushing to Europe to see the sporting events and Swift's hugely popular shows.Mega-events often lead to a spike in hotel and transportation costs, which could cause headline inflation to tick higher, even when the overall cost of living in those cities isn't increasing, the bank noted.That may have been the case in the UK, it added, where hotel prices rose in June, possibly due to Swifties heading into the city to catch Taylor Swift's Eras Tour."The Olympic Games or a Taylor Swift concert create a sudden demand shock. Tickets for mega events will often sell for high prices—but that may not be recorded in consumer price data. The survey method used often overlooks specific event like this," Paul Donovan, the chief economist of UBS Global Wealth Management said."The measurement method for [hotel and transportation] prices is more likely to capture the unusual and transitory pattern of demand, and it is here that the increase in consumer price inflation takes place," he added. Taylor Swift concerts, in particular, are known to be a <a target="_blank" class="" href="https://markets.businessinsider.com/news/stocks/taylor-swifts-economic-impact-catches-attention-federal-reserve-hotel-revenue-2023-7">super force in the economy</a>. Swift's US tour caught the eye of the Federal Reserve in 2023, which noted in its beige book that the pop star's concerts were boosting local economies throughout the US.In <a target="_blank" class="" href="https://www.ecb.europa.eu/stats/macroeconomic_and_sectoral/hicp/html/index.en.html">Europe</a> and the <a target="_blank" class="" href="https://www.businessinsider.com/inflation-cpi-june-prices-food-energy-fed-interest-rate-cuts-2024-7">US</a>, prices have cooled from their highs in 2022, with inflation in both regions clocking in at 2%-3% in June. But central bankers are still keeping an eye on the pace of inflation, with US central bankers expressing caution about loosening monetary policy before inflation gets closer to their 2% target.While markets have priced in ambitious Fed rate cuts in the US since the fresh rise in the unemployment rate that showed up in the July jobs report, hotter-than-expected inflation numbers could still cause push policymakers to delay easing policy. That could be bearish for stocks, and <a target="_blank" class="" href="https://markets.businessinsider.com/news/stocks/recession-outlook-stock-market-economy-fed-rate-cuts-forecast-siegel-2024-7">raise the risk of a potential recession</a>, market commentators warn.

Taylor Swift concerts and the Olympics could lead to a fresh surge in global inflation, UBS says

<ul class="summary-list"><li><keyword id="20335345" type="General" weightage="20" keywordseo="McDonalds" source="keywords" meta.keywordsubtype="org" meta.entityname="McDonald's" meta.hostid="261" meta.entityid="McDonald's">McDonald's</keyword> global sales fell for the second consecutive quarter, down 1.5%.</li><li>Fast-food chains have faced challenges from <keyword id="19999654" type="General" weightage="20" keywordseo="food-inflation" source="keywords">food inflation</keyword>, affecting <keyword id="20139791" type="General" weightage="20" keywordseo="consumer-spending" source="keywords">consumer spending</keyword> habits.</li></ul>Global sales at McDonald's have fallen for a second consecutive quarter as the fast-food chain struggled in international markets, especially France, the UK, China, and the Middle East. Sales were down 1.5% in its third quarter, following from a 1% slide in the previous quarter, ending June 30. Comparable sales in the US were virtually flat, up 0.3% from the same period in 2023, while sales in international markets dropped 2.1%. Sales in licensed international markets fell 3.5%. "We will stay laser-focused on providing an unparalleled experience with simple, everyday value and affordability that our consumers can count on as they continue to be mindful about their spending," McDonald's CEO Chris Kempczinski said in the earnings release. While sales dropped, <a target="_blank" class="" href="https://www.businessinsider.com/trying-most-expensive-mcdonalds-switzerland-disappointing-fries-best-burger-2023-12">the Golden Arches</a>' revenue increased 3% to $6.9 billion, beating the $6.82 billion figure that was the consensus of analysts. Net income declined 3%, down to $2.26 billion, down from $2.32 billion in the last quarter. Shares in McDonald's fell 2.7% in premarket trade after the results were announced. Fast-food restaurants have struggled with food inflation since the COVID-19 pandemic. The most recent <a target="_blank" class="" href="https://www.bls.gov/news.release/cpi.nr0.htm">US consumer price index</a>, released in early October, showed that the cost of food away from home rose 4% in the prior 12 months, significantly higher than gains in both grocery store prices and the overall CPI. Chains, including McDonald's, have responded to the soaring cost of ingredients and labor by raising menu prices. Consumers have felt the strain of rising costs. Analysts have said that some consumers are <a target="_blank" class="" href="https://www.businessinsider.com/why-fast-food-is-so-much-more-expensive-value-affordable-2024-4">comparing the rising cost of fast food to the slowing rate of grocery inflation</a> and choosing to cook more often at home instead of eating out. Lower-income customers have particularly felt the pinch. "The decline in comparable sales signals that consumers continue to retrench from eating out," Neil Saunders, managing director of GlobalData's US retail and consumer division, told Business Insider. "Negative comparable sales and higher costs have also put some pressure on the bottom line where both operating and net income are down," he said. It's uncertain how the <a href="https://www.businessinsider.com/mcdonalds-e-coli-outbreak-cases-rise-75-people-2024-10" target="_blank">recent E. </a><a href="https://www.businessinsider.com/mcdonalds-e-coli-outbreak-cases-rise-75-people-2024-10" target="_blank">coli outbreak</a> in several states might affect McDonald's fourth-quarter results. One person died, and at least 75 were sickened. The Food and Drug Administration has said that the slivered onions on affected <a href="https://www.businessinsider.com/mcdonalds-quarter-pounder-ecoli-outbreak-why-important-sales-2024-10" target="_blank">Quarter Pounder burgers</a> were "a likely source of contamination," and the supplier of the topping <a href="https://www.businessinsider.com/mcdonalds-supplier-taylor-farms-recalls-onions-amid-e-coli-outbreak-2024-10" target="_blank">has issued a recall</a>. Correction: October 29, 2024 — An earlier version of this story overstated what has been confirmed about the recent <keyword id="22099782" type="General" weightage="20" keywordseo="E-coli-outbreak" source="keywords">E. coli outbreak</keyword> linked to McDonald's. The FDA is still investigating the outbreak and has not conclusively settled on a cause, though it has said slivered onions from one of the chain's suppliers were "a likely source of contamination."

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