September Seasonality Is Not Positive, But Indian Markets May Show Some September Surprise

Huge FPI outflows, underwhelming corporate earnings, fragile sentiment on the back of punitive Trump Tariffs of 50% all contributed to a second successive negative month for Indian markets. Starting September, which is seasonally one of the weakest months for global markets, India has a small booster in the form of April-June quarterly GDP numbers coming in very robust at 7.8% YoY growth.

Globally, Friday saw a mild fall in US stocks, especially the loft valuation AI related stocks in the US Big Tech cohort. Asian markets are taking the lead from US today and Australian, Japanese and Korean stocks are down this morning. Four other developments are challenging market sentiment. US PCE inflation showed an upward trajectory, which makes the Fed rate cut decision slightly fraught with difficulty on Sep 17th.
 

Second, the US Federal Appeals Court ruled Trump Tariffs as unconstitutional, ruling that the tariff levying powers rest with the US Congress and not the Executive. The Appeals Court kept the tariffs in place till October 14th, to allow the Trump administration time to challenge the decision in the US Supreme Court.
 
Also Read: Ajay Bagga Explains Why AI Stock Selloff Could Be More Than A Blip

Third, US Q2 GDP was revised upwards to 3.3% while the US Q3 GDP forecast is at 3.5% as per the Atlanta Fed. With strong consumer spending, elevated and rising inflation, tariffs not yet having flown into goods prices due to various reasons and the robust US GDP outlook, the monetary reasoning for a Fed rate cut is weak. A rate cut based on political pressure will be negatively viewed by global investors.
 

Finally, the move by Trump to fire a Fed Governor, Lisa Cook for cause, is under challenge in the courts. A decision on this is expected by mid week and it could impact the independence of the US Fed.
 

The US markets are closed today on account of the Labor Day holiday, so cues are limited to guide the markets during the Asian and European trading day. Indian futures are slightly up, with some optimism around stronger China-India economic ties following a successful SCO meeting between PM Modi and President Xi over the weekend. September Seasonality makes us pessimistic, but markets rarely perform as per predictions. 

Also Read: Trump - Putin Alaska Meet: Key Takeaways For Each Player And Investors