There is one key event on September 18th, it may change the direction of the market. US Federal Reserve is about to cut interest rates after long waiting game. Let’s try to decode how markets might react.
- If US Federal Reserve takes 25 basis point cut, it is already priced in the market, so decent amount of profit booking will occur.
- If the US Federal Reserve takes 50 basis point cut, market might give some initial run up, it might continue for couple of days or sometimes market will top out on the same day with Euphoria.
The top which is made after the rate cut decision can be considered as short term climax top. Market participants might book their profit once and wait for fresh downside triggers.
Overall there are some sectors which will get benefitted due to the rate cut decision, when rate cuts happen slowly money will start moving back to the hands of people. People might spend in different ways rather than keeping it in age old fixed deposits.
- Consumer spending might increase, travel & luxury related sectors will get benefited.
- Real-Estate sector will pick up, so automatically sectors like paints, home décor will get benefitted.
- IT sector will definitely do better because cost of the money will come down, so overall client renewals and new projects will increase for them in the company.
Companies which are leveraging the debt and going ahead in the growth paddle, those companies will have good advantage because overall interest rate burden will come down, they will use that additional cashflow to either invest in different ideas or for the debt repayment. This will be positive trigger for the companies.
Markets are always unpredictable, take this analysis with pinch of salt & invest your money with due diligence.
