Street Signs: Fed rate cut foreshadow, fair value compass, and more

Foreign portfolio investors made an unexpected move into Indian equities last week, injecting over $2 billion

Fed rate cut foreshadow: Foreign flows shift India’s market tectonic plates

Foreign portfolio investors (FPIs) made an unexpected move into Indian equities last week, injecting over $2 billion (around Rs 17,300 crore) and driving the National Stock Exchange Nifty 50 up by 2 per cent. This sudden influx of FPI capital surprised market observers, as many overseas funds had been underweight in Indian equities within their emerging market and Asia (excluding Japan) allocations. A combination of global factors fuelled the rally: declining US bond yields, a weakening US dollar, dropping oil prices, and rising metal prices created a favourable environment for equities ahead of the anticipated US Federal Reserve (Fed) rate cut. The S&P 500 in the US also saw its strongest weekly gain of 2024, climbing by 3.5 per cent. Analysts link the resurgence in risk appetite to promising US economic data, suggesting that the Fed might cut rates without hinting at an economic slowdown.

Fair value compass: Sebi’s new rules point to true north

The Securities and Exchange Board of India (Sebi) has rolled out new rules to stabilise the opening prices of companies listing after an initial public offering (IPO) or demerger. Effective Tuesday, these changes curb first-day trading volatility and ensure fair price discovery. Previously, the pre-open call auction session — a one-hour price discovery process — was prone to manipulative practices. Market participants often cancelled orders just before the session closed, creating false demand and skewing price discovery. To address this, Sebi has revamped the pre-open session. It will now conclude randomly within the last 10 minutes of order entry, preventing last-minute order cancellations. The new rules will be implemented starting with PN Gadgil Jewellers’ listing on Tuesday. Time will tell whether these changes effectively address price manipulation or if market players find new ways around them.

Market liftoff: Arkade Developers, Western Carriers ignite IPO skies

The grey market premium (GMP) for real estate developer Arkade and logistics company Western Carriers (India) is around 50 per cent and 33 per cent, respectively. Meanwhile, shares of mortgage lender Bajaj Housing Finance are expected to more than double on their trading debut on Monday, with a current GMP of 112 per cent. Shares of jewellery retailer PN Gadgil, listing a day later, are projected to rise by over 70 per cent. This month has seen a boost in IPO activity, with 10 issues launched so far, raising a total of Rs 10,407 crore. Although this is less than August’s Rs 17,110 crore — the highest since May 2022 — the ongoing momentum indicates a continued positive sentiment in the primary market.