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Economy & Markets:

*Federal reserve cuts Fed funds rate by 50bps to 4.75-5.00% in September 2024. Fed has acted before reaching its inflation target of 2%, indicating a willingness to ease as long as disinflation towards this target remains plausible, potentially by 2026.

*Summary of economic projections by the US Fed, they project to deliver an additional 50bps cut over next two policy in 2024, followed by 100bps in 2025 and 50bps in 2026 taking the terminal Fed Funds rate to 2.9%.

*A weakening dollar usually leads to stronger global equity performance, the Fed's support for US equities may counter this trend.

*The US economy is likely to slow over the next six months. However, the base

*case picture is that growth will remain modestly positive.

Equity Markets:

*Overall volume growth is holding up in India, while low price hikes and flat commodity prices lead nominal growth to fall to 10%.

*On a YTD basis, Nifty and Sensex increased by 19% and 17%, respectively.

*FIIs remain net buyers in September; Primary market supply inched up. Improvement in SIP and non SIP equity inflows; Debt inflow rises sharply this quarter.

Economic Activity Moderation in Q2 FY25:

*Economic Slowdown: Overall economic activity is moderating, with declines in key indicators such as bank credit growth, GST collections, and consumption of petroleum products and electricity.

*Urban vs. Rural Dynamics: Urban consumer sentiment is declining, affecting domestic air traffic and car sales, while rural wages show slight improvement, with two-wheeler sales remaining positive despite weaker tractor sales.

*Capital Expenditure Trends: Central government capital expenditure has weakened due to pre-election spending, and state capex is constrained by welfare commitments; however, private corporate investment intentions remain positive.

*Consumer Confidence and Exports: Consumer confidence is slowly recovering, supported by moderating inflation. Merchandise exports are flat, but specific sectors like electronics and services exports show resilience, indicating potential for gradual economic recovery.

Fixed Income Market:

*Bond yields moderate over the month across all tenors in September 2024.

*Rupee appreciated at the margin by ~0.1% to INR 83.80/$ in Sep’24 (vs. 83.87 a month ago).

*Oil prices moderated by ~6% in Sep’24 vs. Aug’24, now at ~US$73.7/bbl level.

*The bond market is experiencing curve steepening, with long-term bonds selling off and equities rising, reviving the negative correlation between the two, If Trump comes it is bond negative as he would cut corporate taxes at a time when fiscal deficit is high.

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