Last week, it seemed that the steps of the US central bank Federal Reserve are not going to have much impact on the Indian stock market. The Federal Reserve raised the interest rate after four years. He hinted at raising interest rates six more times this year. This did not affect the Indian stock market. The market was bright at the end of the week. But, on Monday, the Federal Reserve cleared the air of the Indian stock market.
Federal Reserve Chairman Jerome Powell said that the central bank may increase interest rates by 50-50 basis points at times to control inflation in the US. He also indicated to start the process of reduction in balance sheet by May. It was believed that the Federal Reserve had increased liquidity to control the corona epidemic, due to which a lot of money also came into the Indian stock market.
Economists of Nomura It is believed that the Federal Reserve’s stance may remain aggressive. It has become clear from Powell’s statement that this year the interest rate in America can be increased by up to 2 percent. The central bank may increase the interest rate by 50-50 basis points in May and June. He is also ready to reduce the balance sheet.
Now the question is, if the Federal Reserve takes a more aggressive stance, then what will be its effect on the Indian market? Experts believe that it is bound to have an impact on the Indian stock market. The reason for this is that the Indian market had predicted that the interest rate in the US could increase by 150 basis points this year. Now if there is an increase in the interest rate more than this, then it will be negative for the Indian market.
This month, most of the sell-off foreign funds in the Indian market changed their stance. On Friday, he had net purchases of around Rs 3,000 crore. On the other hand, the environment has changed at the global level as well. Commodities prices have skyrocketed. In such a situation, if the Federal Reserve’s stance remains more aggressive than expected, then foreign funds will want to withdraw money from emerging markets like India. They will invest in the US market for higher returns.
In this calendar year, foreign funds have reduced their investment in the Indian market by up to Rs 1.08 lakh crore. So far, domestic investors have played a big role in handling the market by buying. But, if the selling of foreign funds increases, it will be difficult for them to handle the market. In such a situation, the pressure on the Indian market may increase.
In the last 12 months, foreign funds have sold stocks in IT, banks, NBFCs and industrial stocks. Due to this, BSE IT and Bankex have fallen 7 per cent and 5 per cent respectively so far this year. The industrial index has also lost 6 per cent.
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