Indian Stock Markets vs. US Fed: How to Play the Faceoff


Indian stocks today reacted to the Fed’s hawkish stance after the US central bank hiked interest rates and signaled it would raise rates more often than markets had expected. The Nifty was flat in afternoon trading after falling more than 1% earlier in the session. Overnight, the Fed raised rates by 75 basis points on Wednesday — the third straight such hike, triggering a selloff in other markets.

The big question from the Indian market’s perspective is whether India’s outperformance will continue in the current global risk-averse environment, says VK Vijayakumar, chief investment strategist at Geojit Financial Services. “Investors can remain optimistic but be cautious as India’s valuations are on the rise. Financials, capital goods, some stocks related to autos, telecoms and construction can be bought down “, did he declare.

“While the Fed’s 75 basis point rate hike and reiteration of the hawkish message were in line with expectations, the indication that the terminal rate should be 4.6% was above market expectations. The bond yield US 10-year bond above 3.5% and the dollar index above 111 are worrying the stock markets.Today, the market estimates that the probability of a recession in the United States has increased to 75%. Against the backdrop of a sharp slowdown in the eurozone and China, this is bad news for global growth,” he added.

The Indian rupee hit a record low of 80.56 as the dollar surged on the Federal Reserve, raising rates sharply and maintaining a more hawkish stance than expected.

“The market is seeing more of a movement tied to specific stocks rather than following the benchmark,” said Ajit Mishra, VP – Research, Religare Broking Ltd, adding that consumer goods and automotive stocks were moving based on expectations of good holiday season sales.

The FMCG index rose 1.5% as ITC hit a 5-year high. Foreign investors bought $1.4 billion net of Indian stocks so far this month at the last close, compared to $6.44 billion net of shares in August.

“While the rebound in foreign investor buying acts as a cushion for markets, the upside remains capped due to weak global signals,” Mishra said.

Trideep Bhattacharya, CIO Equities, Edelweiss MF, said rising interest rates represent a headwind for Indian equities, but “our buoyant domestic demand scenario presents a ray of hope for global investors looking to diversify globally.

“We remain constructive on Indian equities over the medium term and continue to steer our portfolios around domestic cyclicals which continue to look attractive to us over the medium term.”

US stock index futures were flat today after a strong sell-off on Wall Street in the previous session.

“After the Fed policy announcement, markets remained volatile. Since markets were pricing in most of the announcements, the immediate impact of the announcements was limited. However, going forward, it will be important to see how the aggressive pace of tightening is helping to rein in inflation and its impact on growth, job growth and global currencies,” said Vivek Goel, co-founder and co-CEO of Tailwind. Financial Service. , a wealth management platform.

(With contributions from the agency)

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