Hello. The Federal Reserve just cut its target rate by 50 basis points. Immediately, Indian markets reacted to the news. We’ll tell you how and then close with Gupshup, a round-up of the most important headlines.

Also, Samosa Capital is hosting its first live expert panel and networking event on Thursday, November 7 in New York City. Hear from world-class experts on Indian markets, and then meet other professionals. Doors open at 6:30 PM. See more and buy tickets here.

BTW: India is home to the oldest spoken language in the world. Do you know what it is? (Answer at bottom)

Markets

Read here for an appendix on the above.

Fed Cuts by 50

The Fed Meeting earlier today was the most contentious in recent history with market pricing showing a 60% chance of a 50 bps cut and 40% leaning towards 25. Generally, hours before a meeting, markets can fully price in the expected action which also made this meeting important for asset prices, particularly in countries like India.

Saying “risks to achieving its unemployment and inflation goals are roughly in balance,” the Fed cut its target federal funds rate by 50 bps an hour ago. Additionally, Fed Minutes post the meeting cited that the committee was looking to do 2 more 25 bps cuts for 2024 to bring the target rate down to 4.25 - 4.50%. Additionally, based on the Fed member projections for the next 3 years, the US is expected to avoid a recession while reducing inflation to the target 2% by the beginning of 2026 using a slower reduction of rates going forward to properly gauge the ramifications of rate cuts on inflation and the economy.

How does this impact India? A risk-on sentiment is initially positive for emerging market assets. Indian stocks (FLIN and INDA since domestic Indian markets were closed) rose about 0.54% directly after the decision before flattening out more. EEM (the MSCI EM ETF) rose nearly a percent, dampened by the inclusion of riskier countries’ assets. Further fluctuations will be determined by rhetoric from U.S. central bankers: more recessionary talk will lower asset prices, while talk of growth could continue a bullish streak.

Indian bonds continued to appreciate with yields falling to 6.78%. India VIX, a measure of market volatility, also rose by 6% going into the day before tapering after the decision.

One thing we missed on was oil prices: we expected a rise in prices following the cut but it seems that the risk and more recessionary outlook placed on a 50 bps cut led to global prices falling around 0.70%. Gold, however, did rise 1.21% in the hour after the Fed Meeting.

Macro

India debates easing rice export limits (BBG)

• While normally the largest producer and exporter in the world, India has curbed exports for a year

• To avoid oversupply and falling prices for farmers, the Indian government is debating changing this

Fed 50 bp cut is starting gun for RBI (BBG)

• RBI has increased flexibility to cut rates in coming months, though analysts are not sure when the first cut will come

Equities

Nepalese noodle company Wai Wai plans for Indian IPO in 2025 (BBG)

• Wai Wai has 28% market share rivaling Maggi with annual revenue of $96M

• The conglomerate is looking to expand in central and eastern Europe

Disney India is seeking $940M in damages from Zee (BBG)

• This stretches out a legal battle starting from when Zee defaulted on payment for covering cricket matches 

Alts

India’s aging electric grids can’t handle the growing need of renewables (BBG)

• Investment in renewables has doubled since 2010 but the CapEx on improving grids has stayed stagnant

Indian lender REC has backed Gujarati proposals for clean energy developers (BBG) 

• Gujarat has been working to dispel the perception that energy distributors are not profitable, and has started receiving bids from domestic firms; they are looking for international support as well

Policy

Trump plans to meet with Modi next week (BBG)

• Modi will likely meet Trump while in the US for the Quad and a United Nations address

Modi polls worse in Kashmir and Jammu going into 3-phase election (BBG)

• 9M registered voters are picking 90 seats in the local assembly

• The growing separatist sentiment and lament for lack of autonomy is driving Modi down

Indian government taking steps to make local and national polls simultaneous (BBG)

• The recommendation comes 6 months after a committee approval; needs a ⅔ majority in the Parliament

• This would significantly cut down on election expenditure and efficiency improvements

Oh, and Tamil is the world’s oldest continuously spoken language, with evidence dating the language’s back 5000 years. Today, it has around 70 million fluent speakers who live mostly in the southern Indian states of Tamil Nadu, Kerala, Karnataka, and Andhra Pradesh.

See you next week. Remember to get your tickets to our November 7th live event here.

Disclaimer: This is not financial advice or recommendation for any investment. The Content is for informational purposes only, you should not construe any such information or other material as legal, tax, investment, financial, or other advice.

1 USD = 83.71 Indian Rupee