Fed and BOJ Both Hike: Crude Reverses, NSE IPO Opens Strong

The Federal Reserve raised its benchmark rate by 25 basis points to a target range of 3.75 to 4%, its first increase since 2023. The vote was unanimous, 12-0, which was itself notable, there had been widespread speculation ahead of the meeting that at least one member, likely Governor Christopher Waller, might dissent. The Fed's updated dot plot showed 16 of 18 officials expect at least one more hike before year end, with four expecting two. Officials' year-end rate projections now sit between 4.1 and 4.4%.

Fed Chair Kevin Warsh's press conference was notably terse. He acknowledged the Fed "cannot affect any individual price" like oil or groceries, but said the central bank's job is ensuring such price shocks "don't broaden out" into the wider economy. He deflected questions about political pressure from the White House, saying plainly, "part of the independence of the Federal Reserve is we stay in our lane."

The Bank of Japan raised its policy rate by 25 basis points to 1.25%, the highest level since 1995, and its fastest hiking pace since normalisation began in 2024, just three months since its last move. All 52 economists surveyed by Bloomberg had expected this hike, but the BOJ's own board was genuinely split, voting 7-2, with two members dissenting in favour of a hold, arguing core inflation at 1.7% was still below the 2% target.

Here's the counterintuitive part, and it's worth understanding rather than skipping past. A rate hike normally strengthens a currency. This time, the yen weakened after the decision, because the split vote itself raised doubts about how much further the BOJ is actually willing to tighten, and markets ended up pricing in less future tightening, not more, despite the hike that just happened. Japan's 10-year bond yield fell nearly 5 basis points on the same news.

After six straight weeks of an escalating spike toward $110 a barrel, crude fell for three consecutive sessions this week to around $101, its sharpest reversal of the entire run. Saudi Arabia said it could restore about half the capacity of its damaged East-West pipeline within days, and full operations within six weeks, while also rerouting some crude exports through ship-to-ship transfers near Oman to reduce exposure to the contested Strait of Hormuz. Separate reports suggested China had urged Iran to help rein in Houthi militants, and US President Trump said he hoped an end to the war with Iran was near.

NSE's IPO opened for subscription on September 17, priced at Rs 1,700 to 1,785 per share, an entirely offer-for-sale issue of Rs 22,562 crore, making it India's second-largest public offering on record, behind Hyundai Motor India's Rs 27,870 crore listing. By the end of Day 2, the issue was fully subscribed overall, non-institutional investors covered 1.35 to 1.46 times, qualified institutional buyers 1.32 times, and the employee portion 1.36 to 1.42 times. Retail investors, however, had covered only 0.69 times their portion, the one category still lagging even as the issue overall crossed full subscription. The issue closes September 21, with allotment expected September 22 and listing on BSE targeted for September 24. Jio Platforms' own IPO, estimated at around Rs 37,700 crore, remains without a confirmed date, expected by year end.

After five straight weeks of decline, Nifty and Sensex closed firmer on September 18, Nifty up 0.33% to 23,346.40 and Nifty Bank up 0.54% to 56,358.70, helped by lower crude prices, firmer US and Asian equities following the Fed decision, and capital demand tied to the NSE IPO. Sensex itself closed nearly flat, down a marginal 0.03% to 74,294.96, but market breadth told a healthier story underneath, 2,151 advancing stocks against 1,094 declining on the NSE, and Nifty Midcap 100 jumped 1.24% to 62,191.25, outpacing the headline indices. India's VIX fell over 1.5% to 12.09, a meaningful cooling in expected volatility from the elevated levels of recent weeks.

Zooming out to the month as a whole adds useful context. FIIs have turned net sellers for September overall, around Rs 8,636 crore so far, reversing two consecutive months of net buying. DIIs, meanwhile, have bought roughly Rs 24,987 crore over the same period, nearly three times the FII outflow, continuing to comfortably absorb the foreign selling pressure. Separately, India's own 10-year bond yield touched 7.02% mid-week, its highest level since May, before easing alongside the broader global cooling in yields.

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