“So yes, 25 basis points is almost in the bag and if there is any doubt, there are some very small percentage talking about 50 basis points, nobody is talking about zero, so that is a given,” said Sanger. He added that the real focus will be on two critical aspects — the dot plot and commentary around quantitative tightening (QT).
“From a commentary standpoint, there are two important things that are most significant. One is does the dot plot change so that there is more confidence… and the second important thing… whether they would put a halt on quantitative tightening because that also is tightening financial conditions,” he explained. According to Sanger, any indication of easing QT or firmer conviction in multiple rate cuts this year could influence asset prices and market sentiment.
When asked about the outlook for the dollar, Sanger noted that the greenback has shown surprising strength. “The dollar has been surprisingly resilient and the part of the reason… is it is no longer just the Fed cutting rates, but also the tariff war kind of reached if there is deal with China,” he observed. He further pointed to an important meeting between U.S. President and China’s Xi Jinping, calling it “very significant in terms of the outline of trade and more predictable outcomes.”
Sanger believes the dollar will likely remain range-bound unless the Fed surprises the markets. “I still think dollar is structurally not going to have a huge rebound because the Fed is in a rate cutting cycle… but I do not see a big impact from Fed unless it comes out much more surprisingly dovish or much more surprisingly hawkish,” he said.
Turning to India, Sanger said foreign institutional investors (FIIs) may finally be turning positive after months of caution. “If you look at year-to-date, Indian market has been a huge underperformer… there is a bit of a catch up as a laggard and a bit of a relief that finally earnings are proving to be not as disappointing as they have been the last couple of quarters,” he said.He highlighted the recent GST relief measures and expectations of a potential trade deal as positive triggers but maintained that India remains expensive compared to other emerging markets. “The Indian market overall is not a screaming buy in terms of valuations relative to other markets but there are pockets of opportunity that we find quite interesting,” he added.Among sectors, Sanger pointed to steel, power, cement, and auto components as promising areas. “India has got one of the fastest growing steel sectors in the world… power is an area that remains relatively high demand… maybe some of the auto parts companies which are both dependent on exports and domestic market… those could be big winners,” he said.
While noting India’s structural challenges, Sanger concluded that opportunities still exist for selective investors. “It has been a huge laggard and at some point maybe it becomes a value trade but we still see this as a trade because the structural headwinds on it in terms of AI are not about to go away,” he said.
