Fed warns 50 bps hike possible in May. Is this a big worry for Indian markets?
Premium- Stock market update: Sensex had losses in noon trade after falling over 1% in early trade
Indian stock markets fell sharply today as global sentiment soured after the US Fed chief hinted at an increasingly aggressive rate hike amid concerns about high inflation. The Sensex and Nifty fell more than 1% though the broader markets werflat. Overnight, Fed Chair Jerome Powell said that a half-point rate hike will be "on the table" when the central bank meets in May, and it would be appropriate to "be moving a little more quickly."
Other Asian markets were under pressure today also.
V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, said yesterday's comment by the Fed chief that a 50 bps rate hike is possible in May' and that ' control of inflation has become absolutely essential' has pushed the 10-year bond yield above 2.9% and consequently impacted equity markets.
“But this impact, too, is likely to be temporary since the market has already discounted this known hawkishness of the Fed," he added.
He attributed the excessive volatility in Indian markets without any clear direction to two factors: one, external and two, internal.
“The external factor is the erratic movement in the mother market US where the S&P 500 and Nasdaq go up by around 2 % one day and go down by around 2 % the next day. The internal factor influencing the market is the see-saw tussle between FIIs and DIIs. Both these external and internal factors are erratic now and that's why the market is volatile without any direction," Mr Vijayakumar said.
"What investors should do in this time of high uncertainty is to buy high quality stocks on steep market corrections and wait with patience"
Among the stocks today, HCL Technologies rose 3.3% after it posted a rise in March-quarter net profit.
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Santosh Meena, Head of Research, Swastika Investmart, said that the market is very volatile for the last 7 months and witnessing large swings on both sides amid lots of headwinds like geopolitical tension, high commodity prices, record inflation, rising US bond yields and relentless selling by foreign investors “but the good part of this market is that it is not breaking down because the outlook of the Indian economy is still promising and the market is continuously getting support of domestic money."
“The long term outlook is bullish for the market with short term volatility therefore long term investors should remain invested while short term investors can maintain stop loss of 16,500. Investors should focus on Indian economy facing sectors like capital goods, infrastructure, real estate, financials, consumer durable etc," he added.
At 11:20 am, Indian markets had pared some losses and Nifty was trading 0.6% lower.