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CTV News
7 hours ago
- Business
- CTV News
U.S. Fed's policy toolkit may be headed for fundamental changes
A U.S. senator's recent push to strip the U.S. Federal Reserve of a key aspect of how it controls interest rates and the battle over who will succeed Fed Chair Jerome Powell point to a future where some of the tools policymakers use to influence the economy come under greater scrutiny. There's no sense of imminent changes in the Fed's monetary policy mechanics. But that may not always be the case, especially as U.S. President Donald Trump, a persistent critic of the central bank who wants it to reduce interest rates, prepares to name a successor for Powell, whose term expires next May. The first sign of shifting ground came from Republican Senator Ted Cruz, who last month pushed to end interest payments paid by the Fed on bank reserves parked at the central bank. Ending this practice was also cited, among other back-to-basics proposals, in the influential Project 2025 effort that has helped drive some of Trump's agenda since he returned to power in January. Cruz's effort appears to have gained little traction, but success would upend how the Fed manages interest rates and have major implications for the central bank's large bond holdings. Meanwhile, how the U.S. Fed uses bond purchases and its balance sheet to stimulate or restrain the economy is also getting attention. It has been shedding bonds since 2022, but at least one possible Powell successor wants an even more aggressive drawdown motivated by a novel understanding of how the balance sheet affects the economy. Tool trouble The Fed began paying interest on bank reserves during the global financial crisis in 2008. With its benchmark interest rate near zero and the financial system flush with cash from the central bank's bond purchases, this move granted the same control over rates the Fed had when bank reserves were much less abundant. Over time the Fed built out this system and formalized it in 2019. Officials have shown no desire to go back to the pre-crisis system. 'The current regime has a number of positive attributes that people I don't think fully appreciate,' said William Dudley, a former head of the New York Fed who also managed the implementation of monetary policy when the new system was created. 'It makes monetary policy execution really easy' and saves the Fed from active intervention in markets to manage reserve levels. The system, however, has been dogged by criticism that it is an unfair financial sector subsidy. It has also pushed the Fed from a consistent profit maker to a money loser, and the profits it once handed to the Treasury to defray federal deficits are gone until the central bank can clear the red ink. Cruz argued that his push to end the power was ultimately about lowering deficits. But critics contend his goal of a de facto return to the pre-crisis policy system was full of unintended consequences and misunderstandings. Dudley said losses are not inherent to the current rate-control system but arise from the Fed having bought longer-dated bonds as a form of stimulus, creating the current mismatch between income and interest expenses that's led to losses. Powell told a U.S. Senate committee in June that 'if you were to want to go back to scarce reserves, it would be a long and bumpy and volatile road.' Losing interest rate-paying power could force the Fed to aggressively retire the excess liquidity that its current toolkit relies upon to prevent short-term rates from spiraling out of control. And that would likely mean the Fed would sell a substantial portion of the bonds it now owns. 'I understand there is a desire on the part of some to go back to the pre-(global financial crisis) framework for operating monetary policy,' said Ellen Meade, a former top Fed staffer who is now an economics professor at Duke University. But the selling of bonds needed to draw down liquidity rapidly would push up real-world interest rates, 'so any return to the pre-GFC system will involve macroeconomic pain.' Balance-sheet blues Even without toying with the Fed's rate-control tools, questions abound regarding how big its bond holdings should be. Since 2022 it has shed more than US$2 trillion of bonds, and market participants estimate the reductions will end when the balance sheet drops to about US$6.1 trillion from the current US$6.7 trillion. Fed Governor Christopher Waller, who has been mentioned as a possible successor to Powell, recently said it's possible that holdings could drop to US$5.9 trillion. Kevin Warsh, a former U.S. Fed governor who is also said to be on the short list to replace Powell, wants to go much further, and for unique reasons. In recent television interviews, he's laid out a Fed balance sheet vision that would mix rate cuts aimed at bolstering Main Street with aggressive bond holding cuts, which he believes will tamp down Wall Street speculation. 'We're skeptical of that policy prescription,' analysts at research firm Wrightson ICAP wrote. They noted, however, that Warsh's view 'is a vivid reminder that everything in U.S. economic policy will be up for grabs over the coming year.' How much is bluster versus real strategy for change at the Fed is unclear. When it comes to recent developments, a lot is tied to 'Republicans leaving no stone unturned in their sort of ongoing campaign of pressuring the Fed for easier policy in general,' said Derek Tang, an analyst with forecasting firm LH Meyer. 'The balance sheet is a very big front for that, because it's sort of where the Fed's rate-setting and portfolio decisions intersect with the amount of fiscal space that the Trump administration has.' --- Reporting by Michael S. Derby; Editing by Dan Burns and Paul Simao
Mint
15 hours ago
- Business
- Mint
Market weakness temporary; earnings and capex cycle to drive recovery: Mansi Patel
The Indian stock market has remained range-bound with a negative bias since the start of July. The trend began to shift in late June, after benchmark indices touched a nine-month high. Following the rally that pushed the Nifty 50 and Sensex near record highs, investors have been awaiting clearer earnings signals to justify valuations. However, a muted start to the June-quarter results has dampened sentiment. The absence of fresh triggers and uncertainty surrounding a potential India–US trade deal has also kept investors cautious. The correction has been more pronounced in mid- and small-cap segments, due to their lower liquidity and greater sensitivity to risk-off sentiment. Amid this backdrop of macroeconomic headwinds and earnings uncertainties, Mansi Patel, Head – Investment Counsellor, Institution, shares her insights on the current market trajectory. She discusses what's driving the ongoing correction, whether it presents a buying opportunity, and how sectoral earnings upgrades, rural recovery, and a robust capex cycle could shape equity market trends in the coming months. Edited excerpts: While company-specific earnings remain critical in the long term, macroeconomic forces are currently shaping the ongoing correction in Indian equities. Global macro headwinds—particularly sticky U.S. inflation and elevated bond yields—are the primary culprits. These factors have triggered a broad-based risk-off sentiment and delayed hopes of U.S. Fed rate cuts, resulting in Foreign Institutional Investors (FIIs) turning net sellers after steady inflows in April–May. In contrast, Domestic Institutional Investors (DIIs) have offered strong support, reflecting their belief in India's structural earnings story. Backed by a relatively stable rupee, robust GDP growth, and healthy tax collections, DIIs have continued deploying capital. Notably, the correction has been more pronounced in the mid- and small-cap segments due to lower liquidity and higher volatility. On the earnings front, Q1 FY26 has been a mixed bag. While global-facing sectors like IT services and select NBFCs have seen some softness, large private banks, auto names, and capex-linked industrials have largely met or exceeded expectations so far. Fundamentally, India Inc. remains on solid ground, even if temporarily overshadowed by global developments. The current correction is in line with historical patterns. Over the past decade, the Nifty 50 has seen nearly one 10%+ correction each year, followed by strong rebounds. Excluding black swan events like COVID-19, these corrections have averaged around 11–12%. Institutional consensus suggests this is a healthy pause, not the beginning of a bear market. Despite external headwinds, India's macro setup remains robust—Q4 FY25 GDP growth stood at 7.4%, and rural demand and capex momentum are strengthening. This pullback offers a strategic opportunity to accumulate high-quality stocks at more attractive valuations, especially in sectors like financials, infrastructure, and consumption. A balanced approach is advisable: core exposure to large caps for stability and selective entry into mid- and small-cap ideas with strong fundamentals. Yes, several domestic-facing sectors are poised for earnings upgrades in the coming quarters. Capital goods and infrastructure remain front-runners, powered by the government's ₹ 11.11 lakh crore capex outlay in FY26. Companies like L&T, Siemens India, and ABB are benefiting from strong order inflows and improved execution efficiency. In financials, private banks and NBFCs such as ICICI Bank, Bajaj Finance, and SBI are expected to see stable NIMs and strong credit growth. Manufacturing and industrials are gaining from PLI schemes and the China+1 strategy, benefiting players like Bharat Forge and Cummins India. Auto and auto ancillaries are seeing rural-led demand revival and softer raw material costs, boosting earnings visibility for names like M&M and Bajaj Auto. Healthcare and diagnostics too are on a recovery path, with improving volumes and margin support—players like Apollo Hospitals and Dr. Reddy's stand to benefit. However, global-facing sectors like IT services and chemicals may remain under pressure due to sluggish overseas demand. Corporate commentary on rural markets has turned distinctly positive. NielsenIQ data shows rural FMCG sales grew 11% in Q4 FY25, far outpacing urban growth of 2.6%. FMCG majors like HUL and Colgate report stronger traction in rural areas, especially in smaller SKUs and hygiene products. This recovery is underpinned by better monsoons, rising farm incomes, and lower inflation. Simultaneously, the capex outlook is strengthening. Large banks like SBI and ICICI Bank are witnessing increasing demand for project financing across manufacturing, agriculture, and infrastructure. Energy majors like NTPC and Adani Energy are ramping up investments, while infra players like L&T and KNR Construction report robust pipelines. This dual tailwind of rural consumption and industrial investment bodes well for sustained economic growth. Yes, we continue to accumulate select sectors that align with India's structural and policy-led growth trajectory. Infrastructure, capital goods, and power remain top picks due to the strong capex cycle and government spending. Financials—particularly private banks and high-quality NBFCs—offer stability and earnings momentum. Consumer staples are showing rural-led demand revival, while healthcare is benefiting from volume growth and normalizing input costs. Sectors aligned with digital transformation, such as automation and fintech infrastructure, also present long-term potential. These areas remain core to our buy-on-dips strategy. In the near term, large caps are better positioned due to their stable earnings, stronger balance sheets, and ability to weather macro volatility. Blue-chip names like HDFC Bank, Infosys, and L&T continue to attract institutional flows, especially during FII pullouts. However, recent corrections have improved valuations in mid- and small-cap spaces, reviving interest among long-term investors. With Q1 earnings showing resilience and improved corporate guidance, selective accumulation in quality mid-cap financials, capital goods, and consumption names is underway. A barbell strategy—anchoring portfolios with large-caps while selectively adding high-conviction mid- and small-caps—is the most prudent approach in the current cycle. Disclaimer: This story is for educational purposes only. The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.
Business Recorder
a day ago
- Business
- Business Recorder
India bonds inch up before state debt supply, US rate decision
MUMBAI: Indian government bonds edged higher in early deals on Tuesday after a two-day selloff, while volumes remained muted ahead of the state debt supply and the U.S. rate decision due a day later. The yield on the benchmark 10-year bond was at 6.3631% at 10:25 a.m. IST, compared with the previous close of 6.3700%. Bond yields move inversely to prices. Traders said the benchmark bond yield was unable to break past a key technical upside level, so there is some reversal in trend. Investors took a break from selling, which was triggered by falling bets of an immediate rate cut following hawkish commentary from the Reserve Bank of India Governor Sanjay Malhotra. On Friday, Malhotra said that the monetary policy will place greater emphasis on the outlook for growth and inflation, rather than their current levels. India bonds extend fall as August rate-cut bets fade 'Traders are mostly on the sidelines till the RBI policy decision as there is no incentive for taking positions,' a trader at a state-run bank said. 'Focus is on U.S. Fed Chair Jerome Powell's commentary, which could give more cues on domestic policy easing cycle for FY25.' The Federal Reserve is widely expected to keep interest rates unchanged on Wednesday. Meanwhile, Indian states are aiming to raise 300 billion rupees ($3.46 billion) via bond auctions later in the day, slightly exceeding the scheduled amount. Rates India's overnight index swap (OIS) rates saw receiving pressure in early trades, as the 10-year bond yield failed to breach key technical level, spurring some buying. The one-year rate dropped 2 basis points to 5.52%, while the two-year OIS rate fell 2 basis points to 5.50%. The liquid five-year OIS rate was down 1 basis point at 5.73%.
Time of India
a day ago
- Business
- Time of India
India bonds inch up before state debt supply, US rate decision
Indian government bonds edged higher in early deals on Tuesday after a two-day selloff, while volumes remained muted ahead of the state debt supply and the U.S. rate decision due a day later. The yield on the benchmark 10-year bond was at 6.3631% at 10:25 a.m. IST, compared with the previous close of 6.3700%. Explore courses from Top Institutes in Please select course: Select a Course Category Bond yields move inversely to prices. Bonds Corner Powered By India bonds inch up before state debt supply, US rate decision Indian government bonds saw a slight increase in early trading on Tuesday, recovering from a two-day selloff, though trading volume remained low. Investors are awaiting state debt supply details and the U.S. Federal Reserve's rate decision. The focus is also on RBI policy decisions and U.S. Fed Chair Jerome Powell's commentary for cues on the domestic policy easing cycle. Retail investors are waking up to bonds—here's why it matters, says Vineet Agarwal Fixed income isn't just for retirees, it belongs in every portfolio: Jiraaf's Vineet Agarwal How Bond duration impacts return in a falling rate regime, Gautam Kaul explains Corporate bonds meet arbitrage: a smarter, tax-efficient play for fixed income investors Browse all Bonds News with Traders said the benchmark bond yield was unable to break past a key technical upside level, so there is some reversal in trend. Investors took a break from selling, which was triggered by falling bets of an immediate rate cut following hawkish commentary from the Reserve Bank of India Governor Sanjay Malhotra. Live Events On Friday, Malhotra said that the monetary policy will place greater emphasis on the outlook for growth and inflation, rather than their current levels. "Traders are mostly on the sidelines till the RBI policy decision as there is no incentive for taking positions," a trader at a state-run bank said. "Focus is on U.S. Fed Chair Jerome Powell's commentary, which could give more cues on domestic policy easing cycle for FY25." The Federal Reserve is widely expected to keep interest rates unchanged on Wednesday. Meanwhile, Indian states are aiming to raise 300 billion rupees ($3.46 billion) via bond auctions later in the day, slightly exceeding the scheduled amount. RATES India's overnight index swap (OIS) rates saw receiving pressure in early trades, as the 10-year bond yield failed to breach key technical level, spurring some buying. The one-year rate dropped 2 basis points to 5.52%, while the two-year OIS rate fell 2 basis points to 5.50%. The liquid five-year OIS rate was down 1 basis point at 5.73%.
Mint
17-07-2025
- Business
- Mint
Best stocks to buy today, 17 July, recommended by NeoTrader's Raja Venkatraman
India's macroeconomic backdrop remains robust, driven by easing inflation, lower interest rates, a healthy monsoon, and softer crude prices. Eight straight months of easing inflation have fuelled investor confidence and ignited a relief rally. Investor caution persists, however, as the market awaits Q1FY26 corporate earnings. An upgrade in earnings estimates is key to validating current premium valuations. On the global front, mixed sentiment stems from fading hopes of a near-term U.S. Fed rate cut due to sticky inflation and fresh tariff concerns, notably a proposed 50 percent duty on copper. Though the Jane Street episode is now behind us, it has left a residue of uncertainty that could prove an impediment to the market's progress. SWANENERGY: Buy above ₹ 522 and on dips to ₹ 485, stop ₹ 475, target ₹ 574-595 SOBHA: Buy above ₹ 1,651 and on dips to ₹ 1,620, stop ₹ ,1599, target ₹ 1,775-1,800 EMUDHRA: Buy above ₹ 822 and on dips to ₹ 795, stop ₹ 785, target ₹ 865-885 Market indices traded in a narrow corridor on 16 July. The Sensex closed at 82,634.48, up 0.08%, and the Nifty at 25,212.05, up 0.06 %. Market breadth favored advancers, with 2,234 gainers against 1,658 losers. The Nifty is rebounding again is now testing supports around 25,000. The ongoing rise will face challenges at immediate value area resistances on the daily chart around 25,300 then 25,500. While 25,300 is acting as a stiff resistance, a move above this would force the bears to rethink. The pullback is being currently being bought into as investors are expecting a revival. While there has been some buying, we could be entering a critical phase as the week is coming to a close. We can now revise the next set of supports to around 22,300, where buying the dip could emerge. The Put Call Ratio (PCR) has moved to 0.87 and is just below 1 in Nifty and 0.87 in Bank Nifty, highligting a sedate approach by the bulls. A look at Bank Nifty shows constant support from the ascending trendline, highlighting the possibility of a rebound. An encouraging trigger could carry prices higher. Source: TradingView At the moment the bears have not been able to drag the index much lower. Until we see Nifty move below 25,000 decisively, Open Interest data suggests immediate supports is at 25,200. Buy above ₹ 522 and dips to ₹ 485, stop ₹ 475, target ₹ 574-595 Why it's recommended: After spending lot of time in consolidation the prices corrected sharply and broke the recent supports to test the cloud support suggesting that the trends could now revive. As the prices have now neared the cloud support region around 68, we can look to trade the rebound. Consider going long. After spending lot of time in consolidation the prices corrected sharply and broke the recent supports to test the cloud support suggesting that the trends could now revive. As the prices have now neared the cloud support region around 68, we can look to trade the rebound. Consider going long. Key metrics: P/E: 1797.16 52-week high: ₹ 809.80 Volume: 31.22M Technical analysis: Support at ₹ 450, resistance at ₹ 650 Support at 450, resistance at 650 Risk factors: Market volatility and sector-wide fluctuations in geopolitical news could impact returns. Market volatility and sector-wide fluctuations in geopolitical news could impact returns. Buy at: above ₹ 522 and dips to ₹ 485 above 522 and dips to 485 Target price: ₹ 574-595 in one month 574-595 in one month Stop loss: ₹ 475 Buy above ₹ 1,651 and dips to ₹ 1,620, stop ₹ 1,599 target ₹ 1,775-1,800 Why it's recommended: SOBHA is experiencing a tailwind due to its strong performance last quarter. Profit booking in June dragged the stock down to the cloud support. The subsequent recovery over the past two days has now formed a rounding pattern at higher levels. This can be seen as an opportunity to initiate a long. SOBHA is experiencing a tailwind due to its strong performance last quarter. Profit booking in June dragged the stock down to the cloud support. The subsequent recovery over the past two days has now formed a rounding pattern at higher levels. This can be seen as an opportunity to initiate a long. Key metrics: P/E: 157.11 52-week high: ₹ 2,066.20 Volume: 490.46K Technical analysis: Support at ₹ 1,497, resistance at ₹ 1,800 Support at 1,497, resistance at 1,800 Risk factors: Rising input costs, increased operational expenses, and potentially foreign exchange impacts. Rising input costs, increased operational expenses, and potentially foreign exchange impacts. Buy at: above ₹ 1,651 and dips to ₹ 1,620. above 1,651 and dips to 1,620. Target price: ₹ 1,775-1,800 in one month. 1,775-1,800 in one month. Stop loss: ₹ 1599 EMUDHRA: Buy above ₹ 822 and dips to ₹ 795, stop ₹ 785, target ₹ 865-885 Why it's recommended: The stock has been forming a rounding pattern for the past few days and a with strong volume-led breakout in the last few sessions has managed to cross the KS line, resulting in a strong breakout. The formation of a long body candle with positive news on acquisition augurs well for the stock. Momentum is also seen heading higher. The stock has been forming a rounding pattern for the past few days and a with strong volume-led breakout in the last few sessions has managed to cross the KS line, resulting in a strong breakout. The formation of a long body candle with positive news on acquisition augurs well for the stock. Momentum is also seen heading higher. Key metrics: P/E: 361.62 52-week high: ₹ 1,023.55 Volume: 490.46K Technical analysis: Support at ₹ 750, resistance at ₹ 1,000 Support at 750, resistance at 1,000 Risk factors: Global economic challenges, and challenging macroeconomic environment. Global economic challenges, and challenging macroeconomic environment. Buy at: above ₹ 822 and dips to 795 above 822 and dips to 795 Target price: ₹ 865-885 in one month 865-885 in one month Stop loss: ₹ 785 Raja Venkatraman is the co-founder of NeoTrader. His Sebi-registered research analyst registration no. is INH000016223. Investments in securities are subject to market risks. Read all the related documents carefully before investing. Registration granted by Sebi and certification from NISM in no way guarantees performance of the intermediary or provide any assurance of returns to investors. Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before making any investment decisions.
