US Federal Reserve, the country’s central bank will be holding its next policy meeting from May 3 to May 5, where it is expected to initiate another interest rate hike. This time, a 50 bps rate hike can take place, as Fed Chair Jerome Powell has indicated. However, the concern for the Indian Equity markets is, that it is showing a bearish trend since the expectation of a US rate hike has triggered the markets. The stock markets are sliding on the Fed’s aggressive tightening stance.
Pointing out a reason, Vivek Bajaj- Cofounder StockEdge & Elearnmarkets commented, “Fearing an aggressive rate hike by the US Federal Reserve, foreign investors withdrew over Rs. 4,500 crores from the Indian equity market last week, adopting a cautious approach. The prospect of a rate hike by the US Federal Reserve and the deteriorating geopolitical scenario following Russia’s invasion of Ukraine were the key reasons behind this.”
Bajaj added, “We expect FPIs to return in large numbers to India after the Ukraine situation has passed, as our values have become quite competitive. Meanwhile, the Indian stock market will remain volatile and Indian investors should remain cautious due to Fed’s aggressive tightening stance and the ongoing war between Ukraine and Russia.”
With rate hikes, US bonds are expected to fetch higher yields, so, foreign investors are interested in the US markets now. This keeps the Indian equity markets under pressure.
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Story first published: Saturday, April 23, 2022, 1:58 [IST]