Hike In US Fed Rate May Not Affect Indian Markets That Much As Earlier

Indian markets seemed unfazed by the US Federal Reserve interest rate hike as the broad markets are trading mostly higher or flat today. In the past, the effect of a Fed rate hike was a sharp fall in Indian equity indices, but this time, mirroring the trend in last one year, the market holding its own is a testimony to India’s growing economic strength in the emerging markets and absence of better investment destinations.

Data from the past one year shows that BSE Sensex did not move more than 1 percent on either side after the US Federal Reserve announced its interest rate policy. When the US central bank hiked rates in December 2016, Sensex tripped only 0.3 percent, while after the rate hike in March it actually rose by 0.7 percent.

In the short-term, the third interest rate hike by the US Federal Reserve in the last seven months may cause a limited amount of foreign fund to outflow from India as the yields on US bond will improve. Another scenario of the increase in US bond yields could be that foreign portfolio investors may not pull out their money from Indian Debt and equity markets, but may limit their investments to some degree. For More Information Please Visit : www.paceresearchindia.com and Call : 8817774774