Business
Budget 2026 | Strategic sectors get the attention; markets in range: Sanjeev Prasad
The budget has focused on sector-specific initiatives with additional funds for strategic sectors such as AI, biopharmaceuticals, component manufacturing and defence. The increase in the securities transaction tax (STT) on equity derivatives may be a negative from a sentiment perspective for the market and the large divestment target of ₹80,000 crore may act as an overhang for ‘narrative’ public sector undertaking stocks. The change in taxation on buybacks is incrementally positive.
The Indian stock market may stay range-bound over the next few months. It is stuck between positives and negatives. The positives are stabilising earnings after two years of large downgrades and a better earnings outlook; we expect 17% growth in the net profits of the Nifty-50 Index. The negatives are high valuations across most sectors and stocks, low interest among foreign portfolio investors given cheaper valuations and ‘better’ opportunities elsewhere, lack of high-tech companies in India and possible de-rating in multiples of consumption, investment and outsourcing stocks given the large disconnect between their valuations and fundamentals and their seeming lack of preparation against ongoing and oncoming disruption threats. This push-and-pull between stronger earnings visibility and valuation constraints is likely to keep index-level moves contained in the near term.
The process of de-rating may have already commenced with several large-cap companies seeing time correction for the past 3-5 years and many companies irrespective of size seeing significant price erosion in the past few weeks.
Accordingly, equity investors should moderate their returns expectations to mid-to-high single digits for the next few years, with moderate growth in earnings being likely offset by lower multiples for most parts of the market.
Also, investors should focus on steady investment returns over time and resist the allure of rapid movement in asset prices. The extreme price movements in asset classes in recent months reflect rampant greed, risk-taking and speculation at a time when economic, geopolitical, social and technological risks have increased dramatically.
Among sectors, we prefer (1) financials given improving earnings outlook and reasonable valuations, (2) domestic services sectors such as healthcare services, hospitality, retailing (selectively) and transportation due to their strong medium-term growth prospects, no threat of global competition and a large unorganised segment and (3) capital goods, specifically companies with global competencies.
Worawith Ounpeng/iStock via Getty Images
PPI) The Producer Price Index is a price index calculated to measure the average change in prices received by producers over a period of time.” data-id=”2208911029″ data-type=”getty-image” width=”1536″ height=”1024″ srcset=”https://static.seekingalpha.com/cdn/s3/uploads/getty_images/2208911029/image_2208911029.jpg?io=getty-c-w1536 1536w, https://static.seekingalpha.com/cdn/s3/uploads/getty_images/2208911029/image_2208911029.jpg?io=getty-c-w1280 1280w, https://static.seekingalpha.com/cdn/s3/uploads/getty_images/2208911029/image_2208911029.jpg?io=getty-c-w1080 1080w, https://static.seekingalpha.com/cdn/s3/uploads/getty_images/2208911029/image_2208911029.jpg?io=getty-c-w750 750w, https://static.seekingalpha.com/cdn/s3/uploads/getty_images/2208911029/image_2208911029.jpg?io=getty-c-w640 640w, https://static.seekingalpha.com/cdn/s3/uploads/getty_images/2208911029/image_2208911029.jpg?io=getty-c-w480 480w, https://static.seekingalpha.com/cdn/s3/uploads/getty_images/2208911029/image_2208911029.jpg?io=getty-c-w320 320w, https://static.seekingalpha.com/cdn/s3/uploads/getty_images/2208911029/image_2208911029.jpg?io=getty-c-w240 240w” sizes=”(max-width: 767px) calc(100vw – 36px), (max-width: 1023px) calc(100vw – 132px), (max-width: 1199px) calc(100vw – 666px), (max-width: 1307px) calc(100vw – 708px), 600px” fetchpriority=”high”>
By Jennifer Nash
The latest report on the Producer Price Index (PPI) shows that wholesale inflation for final demand increased by 0.7% in February. This uptick was higher than the expected 0.3% growth and follows a 0.5% increase in January. On
QI Research CEO and chief strategist Danielle DiMartino Booth discusses Federal Reserve chair Jerome Powell’s remarks about the federal criminal probe on ‘Making Money.’
The Federal Reserve on Wednesday left interest rates unchanged amid mounting uncertainty over how the Iran war will impact the economy and in turn the central bank’s approach to monetary policy, raising questions over whether any rate cuts will occur this year.
The Fed’s monetary policy panel, known as the Federal Open Market Committee (FOMC), voted 11-1 to leave the benchmark federal funds rate unchanged at a range of 3.5% to 3.75%. It marked the second straight meeting with rates being held steady after three successive 25-basis-point cuts in September, October and December to end last year.
Policymakers released a summary of economic projections (SEP), which showed that the median projection for interest rates sees just one 25 basis point cut the rest of this year followed by a single cut of that size in 2027.
“In our SEP, FOMC participants wrote down their individual assessments of an appropriate path for the federal funds rate under what each participant judges to be the most likely scenario for the economy,” Federal Reserve Chair Jerome Powell said. “The median participant projects that the appropriate level of the federal funds rate will be 3.4% at the end of this year and 3.1% at the end of next year, unchanged from December.”
FEDERAL RESERVE HOLDS INTEREST RATES STEADY
Federal Reserve Chair Jerome Powell said that an interest rate cut this year will depend on progress in taming inflation and other economic data. (Brendan Smialowski/AFP via Getty Images)
“As is always the case, these individual forecasts are subject to uncertainty and they are not a committee plan or decision,” Powell added.
During the post-announcement press conference, Powell was asked what officials are seeing that led them to project a cut despite higher forecasts for both inflation and unchanged projections for the unemployment rate and economic growth.
The SEP showed policymakers projected that the personal consumption expenditures (PCE) index – the Fed’s preferred inflation gauge – will be 2.7% at the end of this year, well above the central bank’s 2% target. That’s up from 2.4% in the Fed’s prior projection in December.
Core PCE, which excludes volatile measurements of food and energy, was also revised up to 2.7% at the end of this year. The previous projection had it at 2.5%.
“There are 19 people, and so 19 reasons, 19 individual submissions,” Powell said. “If you notice, the median didn’t change, but there was actually a meaningful amount of movement toward fewer cuts by people, so four or five people went from two cuts to one cut.”
“Essentially, the forecast is that we will be making some progress on inflation, not as much as we had hoped, but some progress on inflation,” Powell said. “It should come as we start to see in the middle of the year progress on tariffs going through once and then tariff inflation coming down. We should be seeing that.”
“And you know, the rate forecast is conditional on the performance of the economy, so if we don’t see that progress, then you won’t see the rate cut,” he explained.
FED OFFICIALS CLOSELY MONITOR IRAN CONFLICT FOR POTENTIAL INFLATION IMPACT
The market responded to the Fed’s projection by pulling back expectations surrounding interest rate cuts this year, which were previously expected to begin as early as June.
The CME FedWatch tool showed an 89.2% probability that rates will remain at their current level following the Fed’s June meeting in the wake of today’s announcement. That’s up from 79.5% yesterday, 62.8% a week ago and 37.8% last month – while the tool also now shows a 3.8% chance of a 25 basis point hike in June, up from zero a month ago.
The market now sees it being more likely than not that the Fed will leave rates unchanged through the end of this year.
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The CME FedWatch tool shows a 51.3% chance of rates being at their current range after the Fed’s December meeting – up from 23.5% a week ago and 4.9% last month.
Probabilities for December show a 35.7% chance of one 25 basis point reduction by then, while the odds of a second cut between now and then have fallen to 9.5% from 32.5% a month ago.
The West Leederville property fund has purchased an industrial property for $16.5 million.
Micron Just Smashed Estimates – Buy The Dip
Slootman Frank sells Snowflake (SNOW) shares worth $1.38 million
Europe’s largest airlines extended their suspensions of flights to Dubai and other major Middle Eastern travel hubs amid the conflict in the region.
On-and-off airspace and airport restrictions are forcing carriers worldwide to reroute planes, on sometimes lengthy detours at a time when energy prices are rising due to oil supply constraints.
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Snowflake’s EVP Kleinerman sells $523k in shares
Wall Street ends sharply lower after Fed keeps rates unchanged
The company is still weighing an IPO, but is unlikely to move ahead until market conditions improve, according to the report.
The company confidentially filed for a U.S. IPO in November 2025. Kraken was set to go public in the first quarter of 2026.
Initially focused on crypto, the company has expanded across asset classes in recent months, including equities with the rollout of commission-free trading.
Iran certainly is not a forever war as President Trump has said many times. Indeed, Mr. Trump is “ending” Iran’s forever war against the United States. Yet now it looks like the Fed chairman, Jay Powell, wants to be the Fed’s first forever board member. Telling a press conference that he will remain on the Federal Reserve’s board of governors until the investigation is “well and truly over.” Whatever that means.
This is unwelcome news to stock markets, as the Dow fell by more than 700 points, to a new 2026 low. It fell about 300 points after Mr. Powell made his forever board member comment. All the indexes were down today. Bond rates went up. As did oil prices.
Actually, the Fed’s dot plot of economic projections suggested only one projected rate cut this year instead of three before the war began. They also suggested higher inflation and a slight rise in growth.
What you really want is for the Fed to just keep its powder dry, as the Iran war winds down and oil prices move back to pre-war normalcy. Yet it seems like the Fed is already signaling a higher interest rate policy, which would do some damage to the American economy.
That’s one reason why it’s crucial that Mr. Trump’s nominee for Fed chairman, Kevin Warsh, be liberated as rapidly as possible to take over the central bank’s helm and get rid of the Fed models that say stronger growth leads to higher inflation. I’m calling it #FreeKevin.
And have someone who understands the economic growth benefits of lower tax rates, deregulation, and drill baby drill, which is a prosperity prescription that would raise growth and reduce inflation. And protect King Dollar.
Yet in order to liberate Mr. Warsh, it seems like the Justice Department has got to settle its disagreement with the Federal Reserve. Otherwise, Mr. Warsh will never get through the Senate Banking Committee, even though they love him, and Mr. Powell will stay at the Fed forever.
He might even be somehow voted to stay on as chairman by the Fed’s policy-setting body, the Open Market Committee, which really always leans against Mr. Trump. Or Steven Miran would have to give up his board seat to make room for Mr. Warsh’s board appointment, but not necessarily as the chairman. If you think this is a confusing and bizarre scenario, you would be right.
I believe that post-war American growth potential is around 5 percent. And as energy prices normalize, the inflation rate will drop below 2 percent. By the way, on inflation, a measure of the money supply, M2, is growing at 3.5 percent, not President Biden’s 30 percent.
Government spending has slowed down. And the dollar’s been rising. Those are all counter-inflationary moves. The Jay Powell Fed only sees a measly 2 percent economic growth. That’s what their models tell, but it’s garbage in, garbage out. Please will someone liberate Mr. Kevin Warsh? #FreeKevin.
Steel strategy announced to preserve production in the UK
Producer Price Index: Wholesale Inflation Up 0.7% In February
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