CLSA India expects first US Fed rate cut in November

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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CLSA anticipates the first rate cut from the US Federal Reserve to happen in November.

Indranil Sengupta, Economist & Head of Research of CLSA India said that the Fed has once again adopted a hawkish stance, prompting CLSA to revise their projection for the initial Fed cut to November.

For India, Sengupta shifted his forecast for the first rate cut to October.

“Here we are having to keep rates high, because of the Fed. Our inflation numbers clearly don’t warrant 6.50% inflation rate. So I think all over the world if the present situation continues, especially for emerging markets (EMs), this cannot but affect growth beyond a point, because you are going to sit with very high real rates,” he noted.

CLSA India believes the market has largely priced in a third term for Prime Minister Narendra Modi. Their base case for the upcoming election is for political continuity.

The voting for the first phase of Lok Sabha elections began at 7 am on April 19, Friday with polling beginning at 102 parliamentary constituencies across 21 states and Union Territories.

Sengupta said, “The opinion polls clearly make a case for political continuity. I think as far as a BJP re-election is concerned, that is now broadly in the price.”

He identified two key aspects of the BJP’s policies outlined in their manifesto.

Firstly, there’s an emphasis on macro-financial stability, including continuing to build our FX reserves for external security, continue to have a preference for strong balance sheets, bank balance sheets, and finally fiscal discipline.

Secondly, he highlighted the party’s focus on infrastructure development aimed at establishing global manufacturing hubs.

Additionally, he noted that markets will also assess various other factors such as global events, the actions of the Federal Reserve, ongoing conflicts, and more.

CLSA recommends investing in largecap liquid stocks as a precautionary measure against global volatility. They highlight that their defensive largecap basket has outperformed the Nifty benchmark by 16% over the past year.

Also Read | Lok Sabha Election 2024: These stocks may benefit if PM Modi wins a third term, as per PhillipCapital

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow