Will RBI follow Fed’s lead and cut rates in October? Andrew Holland answers

“Given that sizeable move by the Federal Reserve, I think the market will wonder if the Reserve Bank of India will actually pivot to a smaller rate cut in October because the economy is slowing down, but for sure they’re going to do something. In December,” says Andrew Holland, CEO of Avendus Capital.

Is it that you are building the Indian market specifically because, rate cuts in the US will mean more money flowing into emerging markets?
Andrew Holland: No, that’s absolutely true and I think our markets are now kind of realizing that there are two points to this in terms of emerging markets.

One is that we still expect more, likely a 75 basis point cut in the US with 50 basis points again in November, then 25 in December.

It will probably weaken the dollar in the short term and it is always best for emerging markets and commodities, so it is your first type of move in terms of emerging markets and commodities.

The other point is that given that sizeable move by the Federal Reserve, I think the market will wonder if the Reserve Bank of India will actually play a major role in October with a smaller tapering as the economy is slowing down, but sure enough they are. Something to do in December.

So, as we’ve seen in the US, you’re going to start to see markets move towards interest rate sensitivity as it’s going to happen this year. So, banking and NBFC stocks will be the ones that drive the market, which is what we are seeing today. But I hope it will continue even in the RBI meeting in October.

But what to take when it comes to PSU basket? Should you buy again or stay away? What is the overall opinion on PSUs?
Andrew Holland: So, I can look at PSUs, but I think the play at the moment is largecap private banks, NBFCs and commodity stocks and once you move past that, you will find PSU stocks in those sectors also doing well. But I think the first call will be non-PSU stocks, largecap stocks, which I think will power this market.

What about autos because there were reports coming in that maybe registrations are on the weak side, there’s heavy discounting, there’s a lot of inventory in the system, but today it’s picking up again. What is the view on auto then?
Andrew Holland: No, I think we have a positive view on Auto. But I think this last type of incremental move has more to do with the festive season and the prospect of interest rate cuts, which will help demand later in the year.

I think it will struggle a bit more for auto stocks now. So, if anything, I would shift some of those short-term gains to the sectors I just mentioned, which are banking, NBFCs and commodities.

Because when this really worked from that covid low, when everyone was aiming to buy a bigger house, but do you think that kind of move, if there’s some sort of discount, reduction in stamp duty, would that work for realty again? Once the big kicker because this sector is already booming?
Andrew Holland: I think that helps keep the boom going because with these kinds of incentives, plus we talked about before the interest rates come down and India alone is likely to go down at least 50 to 70 basis points, so that’s the extra philippines you need for housing. . market

So, I would have thought that most housing stocks would rise on the back of this, on a combination of those factors because they are all very positive. That will keep pace for home sales, so that’s good news.

Want your opinion on some other places, especially the whole of exchanges and financial related matters. There is a lot of buzz around the upcoming IPO in the NSE, the kind of valuation it is getting in the unlisted and private markets. BSE has seen a huge surge this week itself. Would you bet on a theme like this?
Andrew Holland: Exchanges are something we love and have many of them listed. So, obviously, all of them will benefit from NSE’s IPO listing or put some extra cost to get it in a very short period of time. And again, we go back to the kind of volumes that you’re seeing across the board.

So, with asset management companies, again, this is a trend that we will continue to see over the next three to five years. So, I would say that whenever NSE gets listed we will probably see a slight jump in valuations. But until then, you can enjoy a strong upward move even from these levels.