RBI will cut rates only after the Fed; IT good for long-term investors, says Siddhartha Khemka of Motilal Oswal

livemint.com:

Motilal Oswal Financial Services believes the RBI will keep interest rates unchanged in 2023. In an interview with Mint, he said the RBI will cut rates only after the US Federal Reserve. Talking about the IT sector, he said valuations are attractive after sharp underperformance hence long-term investors can gradually accumulate in a staggered manner.

The market has built in the possibility of one more 25bps rate hike by the US Fed this year and expects it to take a pause from thereon with the likelihood of a rate cut somewhere in the middle of CY24 (calendar year 2024). However, any larger quantum of rate hike or prolonged hawkishness could impact the market. From the domestic point of view, it is very likely that the RBI will keep interest rates unchanged in CY23.

The next rate action could be a cut, initiated by the US growth slowdown in Q4FY24. However, a rate cut could occur only in 2024 if the global economy weakens. Further, it is very likely that the RBI will cut rates only after the US Federal Reserve, since the domestic economic growth may weaken but not substantially to warrant rate cuts before.

We have three important states going into an election in November-December 2023 viz MP, Rajasthan and Telangana – the outcome of which would have a strong bearing on the sentiments going into the general elections next year. Further, the quantum of freebies announced by the government in the run-up to the election like the recent one of the ₹200 cut in the LPG cylinder, would also impact the market sentiments. However, purely on a historical data basis, since the last five elections, it has been observed that the market has rallied at least 10 per cent during the six months prior to the election.