Fed rate hike out of the way, stocks continue to rise

Benchmark indices Sensex and Nifty rose 1.84 per cent on Thursday. The indices have gained around 9% in several trading sessions.

Markets rose as the Fed hiked rates amid hopes of progress on plans to end the Russia-Ukraine war, said Amnish Agarwal, director of Institutional Equities at brokerage Prabhudas Lilladher.

Joseph Thomas, head of research at Emkay Wealth Management, said the rate hike and certainty about Fed policy provided markets a clear path map on the likely trajectory of overseas markets.

Other Asian markets also responded positively on Thursday. Asian indices, including the Nikkei, Taiwan, Hang Seng and Shanghai Composite, rose 1.4% -7.04%, with gains in Chinese indices.

Chinese stocks saw their biggest two-day gains in more than two decades as the government pulled investors back after a brutal sell-off to stabilize financial markets and spur the economy.

While the Fed rate hike was no surprise after more than three years, the US central bank’s decision to raise six more rate hikes this year appeared aggressive.

Mitul Shah, head of research at Reliance Securities, said: “The Fed surprised the market with the signal for rate hikes in all the remaining six meetings, although global equities jumped following the Federal Reserve’s view that the US economy was strong and monetary Can handle the tightness.”

However, over the rate hike trajectory indicated by the Fed, it is important to keep an eye on the proposed reduction of its balance sheet, which is expected to begin from the next meeting, said Nishit Master, portfolio manager at Axis Securities. Master said this tightness of liquidity could add to volatility in the markets and low PE multiples. He expects the market to remain volatile in the near future amid liquidity conditions at the global level.

However, some analysts said equities could also benefit from global fund rebalancing.

In a recent report, analysts at JPMorgan said: “We anticipate potential rebalancing flows for the end of March to be approximately $230 billion in equities from bonds and from multi-asset investors.” Although most of the funds will go to the US. , some may come to emerging markets like India.

Brent is now trading from a high of $130 a barrel to a level of $100 a barrel with softening crude oil prices, providing relief, and further fall in prices will help the Indian economy.

Selling by Foreign Portfolio Investors (FPIs) is also easing and this may support the Indian markets. Shah expects a gradual resumption of FII flows into emerging markets, including the Indian stock markets, in the coming days. Further, Shah said that India is better than many countries in handling the pandemic and post-Covid economic revival.