Indian markets gained in Sep from US Fed interest rate cut: ICRA

The Indian equity and debt markets saw an upsurge in the month of September, mainly propelled by the US Federal Reserve’s rate cut by 50 basis points (BPs) and also because of reports that China may cut rates on mortgages, according to ICRA Analytics. Growing demand for government bonds and the drop in prices of crude oil were contributing factors, too.

While reports that China may cut interest rates by 50 BPs on mortgages worth $5 trillion to give a push to its real estate sector has been seen as a factor for the boom in markets last month, ICRA (or, Investment Information and Credit Rating Agency), however, noted that the Centre’s decision to stick to its budgeted borrowing plan was a reason that advantages on bond yields remained restricted.

Bond yields in India went on a downward spiral after the US Fed initiated its first interest rate cut in four years this September. Global interest rate changes also affected bond yields, the report by ICRA Analytics said.

The ICRA report also noted that every category of debt mutual funds fetched positive returns across all time investment horizons in the month of September 2024. Credit risk funds gave maximum returns over a 3-year period while long duration funds scored across one-month, 3-month, 6-months, one-year and 5-year investment horizons. Gilt funds that have a 10-year constant duration saw maximum returns over the 10-year period.

Equity mutual funds, on the other hand, largely saw negative returns as of September 30 except the dividend yield fund, which managed positive returns at 0.42 per cent. Maximum returns for small cap funds happened over investment horizons of 6 months, 3 years, 5 years and 10 years. Mid cap funds saw maximum returns over an investment horizon of one year, at over 50.11 per cent. Large cap funds gave the least returns across all investment horizons.

In case of hybrid mutual funds, aggressive funds saw maximum returns over 6 months, one year, 3 years, and 10 years while these funds lost a maximum of 0.56 per cent in a span of a week. Arbitrage funds gave the lowest returns across all investment horizons. Multi asset allocation funds saw the highest returns in 3-year, 5-year and 10 year investment horizons.