How will Indian markets react if US Fed goes for a 100 bps hike?
Global equities are rattled amid fear of the US Fed raising the interest rate to tame inflation. But domestic equities settled with marginal cuts of 0.4%. What does this say about Sensex and Nifty?
Rex CanoAvdhut Bagkar New Delhi
 "US Federal Reserve")
Photo: Bloomberg
Inflation in the US eased to 8.3% in August, as against a reading of 8.5% in July 2022. The print was also lower than the peak of 9.1% touched in June this year.
Yet global equities witnessed mayhem on Wednesday as the annual pace of price rise was more than economists’ median estimate of 8.1%.
The US registered its biggest single-day loss in over two years, with the Nasdaq plunging 5% and Dow Jones 4% in Tuesday’s overnight trade.
In Asia, Nikkei and Hang Seng shed over 2.5% each; while Kospi and Taiwan were down 1.5% each.
On the contrary, aggressive buying in banking and metal stocks helped the markets recoup initial losses.
The frontline S&P BSE Sensex recouped 920 points from the day’s low to end just 0.37% down near 60,350 levels.
The Nifty50, too, shut shop 0.37% down at 18,000 levels.
Investors fear that the higher-than-expected inflation data will likely make the US Fed even more aggressive in its rate hiking spree, leading to a hard landing for the economy.
For now, the US markets are more or less factoring-in a 75-basis point rake by the US Federal Reserve when it meets on September 20-21.
Mark Matthews, Head of Research for Asia, Julius Baer says Fed may hike rates by 50 bps or 75 bps. Markets may not be disturbed or pleased by either. US futures market is pricing in 75 bps hike, he says.
However, Wednesday’s data has also increased the probability of a steeper 100-basis point rate hike.
Against these expectations, should investors be worried if the Fed goes for a 100-bps hike?
According Avdhut Bagkar of Business Standard, underlying trend remains robust. Key benchmark indices on course to hit fresh peaks. Sensex may touch 63,000; and Nifty 19,000. Nifty Bank eyeing 42,000-mark, he says.
Going into today’s trade, global mood will be the key determinant of the session’s trajectory.
Commodity prices, FII fund flow, weekly F&O expiry and stock-specific triggers shall dictate the market action.
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First Published: Sep 15 2022 | 7:00 AM IST
