Federal Reserve may end rate hikes in May By Ramkumar, Reliance General CIO

Published By: Money Control

Published Date: 19-04-2023

According to K Ramkumar, Chief Investment Officer at Reliance General Insurance Company, the Federal Reserve will likely end its interest rate hike cycle in May 2023, provided downward trends in job and inflation indicators continue.

Ramkumar expresses caution regarding the IT sector due to uncertainties in the US, UK and Eurozone markets, where substantial headwinds to growth exist. He notes that Europe and the UK will likely face higher inflation and interest rates, potentially hampering growth. He's also moderately cautious about pharmaceutical exports.

Regarding the US banking sector, Ramkumar believes the worst may be behind us, considering the extent and swiftness of past interest rate increases. However, he warns that weaker banks remain vulnerable and more negative news may emerge from the US. As he puts it, ""The medicine for bank stress has been found, but the diagnosis shall continue.""

On the pharmaceutical sector, Ramkumar advises against taking a broad sector view, explaining that business models vary significantly between companies, creating substantial performance differences even within the same industry.

For Indian inflation, he believes it's possible to bring rates below 5 percent and maintain them there in the current financial year, unless commodity price spikes occur due to supply disruptions.

Regarding market performance, Ramkumar observes that equity markets typically don't perform well at the beginning of rate-cut cycles due to economic concerns. Rallies tend to occur toward the end of rate-cut cycles when valuations become reasonable and benefits flow into earnings.​