Indian Stocks Near Record Highs, Await Global Economic Data

This week, Indian stock indices registered gains of 0.7% to 1.0% cumulatively, marking their longest rally of 2024 as they rose for a seventh straight session on Friday.

However, the indices treaded cautiously on the last trading day of the week, closing largely flat. Market participants remained on edge ahead of US Federal Reserve Chair Jerome Powell's highly anticipated Jackson Hole Symposium speech, which is expected to have global ramifications.

The stock market indices have been slowly closing the gap with their previous highs as investors await crucial economic updates. Looking ahead to the coming week, attention will turn to GDP reports from India, scheduled for August 30, and the US, as noted in S&P Global Market Intelligence’s weekly report, Week Ahead Economic Preview. Inflation data from the US and the eurozone will also be closely watched for indications of future rate adjustments.

Powell’s Jackson Hole address on Friday strongly hinted at a potential reduction in US interest rates, as inflation rates are aligning with the Fed’s target. Powell stated, "The time has come for policy to adjust," though he did not specify the extent of the rate cut.

For the past three years, inflation has consistently exceeded the Fed’s 2% target, and the labor market has remained exceptionally tight. Market expectations now include a possible 25 basis point rate cut in September, which is anticipated to have a positive short-term impact. Vinod Nair, Head of Research at Geojit Financial Services, noted that further market trends will depend on the central banks’ commitment to an accommodative policy and potential future rate cuts.

On the economic front, India’s GDP grew impressively by 8.2% during the financial year 2023-24, continuing its status as the fastest-growing major economy. In comparison, India’s economy grew by 7.2% in 2022-23 and 8.7% in 2021-22. The Reserve Bank of India has projected a GDP growth of 7.2% for the financial year 2024-25, with quarterly growth estimates of 7.1% for Q1, 7.2% for Q2, 7.3% for Q3, and 7.2% for Q4.

Additionally, global rating agencies and multilateral organizations have revised their India growth forecasts upward. The International Monetary Fund (IMF) recently increased its 2024 growth projection for India from 6.8% to 7%, reinforcing its position as the fastest-growing economy among emerging markets. The Economic Survey presented in Parliament conservatively projects a real GDP growth of 6.5-7% for 2024-25, acknowledging the higher market expectations.

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