What the Fed’s new game plan means for Indian stock markets

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Indian stock markets fell today, following a decline in Asian peers after US Federal Reserve Chairman Jerome Powell said overnight that the US central bank would raise interest rates more than expected, undermining risk appetite. The Fed raised rates by 75 basis points for the fourth consecutive time, bringing the top of its target range to 4%, the highest level since 2008.

Overnight, the US market also fell sharply after briefly rising following the Fed’s policy announcement, signaling lower rate hikes to come and noting that monetary policy acted with a lag. The markets took this as a dovish index. But Chairman Jerome Powell spoiled the mood, saying it was “very premature” to think about pausing and the spike in rates would likely be higher than expected.

“The two-sided message leaves open the possibility that the Fed could raise rates in smaller increments going forward, ending its streak of three-quarters of a percentage point hikes as early as December in favor of more moderate rate increases. maybe half a percentage point, while still giving policymakers room to keep pushing rates higher if inflation doesn’t start to come down,” said Anand Varadarajan, director of Asit C Mehta Financial Services. ltd.

As of 9:45 a.m., the Sensex was trading moderately lower at 60,858, paring initial losses while Nifty held 18,000 levels.

“The Fed’s comment after the expected 75 basis point rate hike, particularly Jay Powell’s remark that the terminal rate is likely to be higher than expected, disappointed markets, leading to a selloff in U.S. markets. But it’s important to note that when asked about moderating rate hikes, he replied, “That time has come and it could come as soon as the next meeting or that of It is therefore possible that markets could rebound again. since the economy continues to be strong and unemployment is at record highs, indicating that a recession in the United States is not imminent. said VK Vijayakumar, chief investment strategist at Geojit Financial Services.

“India’s outperformance is set to continue as leading indicators such as credit growth, capital spending and auto sales point to a robust economic recovery,” he added.

Institutional purchases could also support Indian markets. « REIT acquires 12610 crores in the last 5 trading sessions may provide support to the market at lower levels. Large-cap banks, capital goods and the high-end automotive segment can be bought down,” said Vijayakumar of Geojit Financial Services.

Girish Sodani, head of equity market at Swastika Investmart, said the RBI is also expected to raise interest rates at its December meeting, but its impact could also be limited on equities. “RBI is also considering a rate hike but we seem to have a very short term impact, the market is still in a strengthening phase and needs to focus on the specifics of stocks,” he added.

Anand James, chief market strategist at Geojit Financial Services, said a certain distribution pattern was seen in Wednesday’s trade at levels of 18070/50 for Nifty. Nifty has support in the 17960/17900 area while the next support levels are at 17760/17720.

Rupee to US dollar exchange rate today

The Rupee was down slightly today at 82.85 against the US Dollar from the previous close of 82.80.

“On the home front, the global rout overnight in financial markets is likely to haunt the rupiah. FII which fetched around 11,000 crore in just two November sessions as sentiment had improved Well, continuation of the same will depend on how RBI sticks to its policy amid Fed Today RBI will hold its unscheduled MPC meeting which is expected to be a non-event and RBI Governor Das said that a letter to be sent to the government will not be made public after the special meeting of the November 3 because the bank does not have the authority to publish it,” said Amit Pabari, Managing Director of CR Forex Advisors.

“Today, we might see that the RBI might intervene in the spot market to control volatility. Overall, we expect USDINR to trade higher within a range of 82.00 at 83.20 and a breakout on either side will determine what happens next,” he added.

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