Foreign Inflows after Fed Rate Cut Did Not Wait Long

• The much-awaited Fed Rate Cut of 0.5% took place yesterday, attracting foreign investment into India
• Technology companies expect earnings to fall in the September quarter
• However, the renewable energy sector and NTPC Green IPO are attracting investor interest

The Indian stock market was one of the first to react to the Federal Reserve's much-awaited decision to cut the rate by 0.5%, experiencing an influx of foreign investment in shares of several Indian companies.

While technology companies are expecting lower earnings for the September quarter, the energy sector has a more optimistic outlook. In particular, the renewable energy market is experiencing growing investor interest, with NTPC Green at 100 billion rupees.

Details of India's Response to the Interest Rate Cut

The Indian economy has been well impacted by the interest rate cut, experiencing inflows into several of its sectors at once. Foreign investors are focusing most on sectors such as healthcare and consumer goods after the rate cut, so stocks related to these sectors should benefit the most in the coming months.

Meanwhile, technology companies are expecting lower earnings in the September quarter, which could have a corresponding impact on foreign investor interest and share prices. They are likely to take a wait-and-see attitude until such investments promise greater benefits and stability.

In general, analysts' forecast regarding the effect of lower rates says that companies are rushing into the local currency bond market to capitalize on lower borrowing costs.

Corporations have already sold an unprecedented 2.4 trillion rupees ($28.7 billion) of bonds this quarter, setting the stage for the highest sales ever between July and September.

NTPC Green IPO and the Renewable Energy Sector

But the Rs. 100 billion IPO of NTPC Green, a unit of India's largest power producer, shows the extreme interest of investors in the renewable energy sector.

Overall, Indian companies are extremely important in this sector for the world, and in the Bloomberg World Energy Index ranking, where four of the top five stocks came from India.

Conclusion

Let's see how Indian markets react further, especially if the November and December rate cuts pay off too.

However, this should be a big boost to Indian markets, which are generally very promising, analysts' forecasts are also very optimistic, and lower borrowing costs should support bond issuance in the corporate sector.