Daily Voice: Markets factoring in 250 bps easing from Fed by end of 2025, says Aamar Deo Singh of Angel One

Aamar Deo Singh is the Senior Vice President – Research at Angel One

With US borrowing costs at their highest in nearly two decades, markets are roughly factoring in 250 basis points easing from the US Federal Reserve by the end of 2025, Aamar Deo Singh, Senior Vice President – Research at Angel One said in an interview to Moneycontrol.

According to him, a lot would depend on 2 factors, US CPI data, month-on-month & US jobs data, as these data points will determine the pace and tenure of the proposed rate cut cycle.

Among sectors, jewellery space holds promise in the coming years but at the same time, investors need to bear in mind that this sector is relatively more prone to volatility as compared to many other sectors, said Aamar, the Chartered Financial Analyst, who holds more than 18 years of industry experience.

Considering the current economic data, do you see a series of interest rate cuts from the US Federal Reserve?

Expectations run high amongst domestic as well as global investors that the US Federal Reserve shall now initiate the rate cut cycle, with market participants anticipating a rate cut anywhere between 25 basis points to as high as 50 basis points, given that US inflation is below the subpar 3 percent level. With US borrowing costs at their highest in nearly two decades, markets are roughly factoring in 250 basis points easing by the end of 2025. However, a lot would depend on 2 factors, US CPI data, month-on-month & US jobs data, as these 2 sets of data will determine the pace and tenure of the proposed rate cut cycle, starting from the ongoing US FOMC meeting, scheduled for September 17-18.

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Aamar Deo Singh

Senior Vice President – Research|Angel One

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Do you advise investment in the EMS growth story?

The Indian EMS market is expected to continue to grow in double digits, given the fact that the government’s initiatives support domestic manufacturing, while at the same time, a vibrant and growing local market with domestic production exceeding the $100 billion mark, in FY 2023. Amongst various sectors, mobile phones, telecom, and consumer electronics played a major role in the growth of this sector, and given India’s growth story, presents substantial opportunities in coming years. However, investors need to be selective in their investments as many of the stocks of such companies’ trade at expensive valuations.

Have you started taking big exposure to technology stocks considering the attractive opportunity in the AI space?

Technology has always played a key role in the growth of any industry, and given the emergence of AI & Big Data, the game has completely changed for all industries, which can no longer ignore the dramatically changing business landscape as competition heats up. Only those who will survive and thrive in this decade can leverage the power of AI & Big Data, to understand their businesses, their competition, and their customers, to stay ahead of the competition.

Hence, technology companies that can create the knowledgebase and skillsets to service various sectors shall emerge as the victorious lot, but it would not be easy for them as well, as technology continues to evolve with every passing day. But the ones able to adapt, learn, and unlearn, are the ones who shall command a premium in the market. So, it's time that investors start going after companies in this space, but a slow and steady approach will be more desirable at the current stage of the market.

Will you be worried about the market if the benchmark indices break the August low?

Markets often give a reason to worry to the market participants, and the current market scenario is definitely an apt situation for the same. Concerns about recession in the US economy, rising geo-political tensions, possibility of US Fed rate cut, all are heavily weighing on the markets currently. Despite all this, markets continue to trade at record highs on the back of strong inflows, both domestic and FPIs.

Technically speaking, the broad-based benchmark index, Nifty 50 has very strong support around the 24,800-25,000 zone whereas immediate resistance is seen around the 25,500-25,600 zone, with the uptrend remaining intact and bulls having the upper hand. However, how the markets react post the US FOMC meeting, is what is causing concern amongst investors. Hence, investors are advised to stay light in their positions and adopt a wait-and-watch approach.

Do you have a bullish bias in the jewellery space?

Most of the stocks in the jewellery space have witnessed a spectacular rally, with the likes of Titan, turning out to be multi-baggers over the past couple of years. Given that gold prices are trading at record highs, and with the upcoming festival season in the near future, demand is expected to pick up, but it will be interesting to see, how the higher prices impact demand. Overall, this sector holds promise in the coming years but at the same time, investors need to bear in mind that this sector is relatively more prone to volatility as compared to many other sectors.

Do you see more upward journey in the paint sector?

The India paint industry is likely to grow sub 10 percent CAGR over the next 5-6 years, to a market size of ~$15 billion by 2029 and with the entrant of the Birlas in this sector, competition has definitely heated up. Going forward, there are growth opportunities for most of the well-entrenched players, who can capitalize on their economies of scale, manage their costs, and remain competitive, while at the same time, can connect well with the end consumer. As paints are derived from petrochemicals, a drop in crude prices leads to a reduction in input and raw materials costs, which helps in shoring up the margins of paint companies. Those who can capitalise on this better, stand to gain more. Investors can view this sector with a positive bias, and stick with the quality leadership names, from a long-term perspective.

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