First fall of 2022 in Indian markets due to Fed’s tough stance

The BSE Sensex was down 621.31 points or 1.03% at 59,601.84. Nifty slipped 179.35 points or 1% to end at 17,745.90.

Markets in both Asia and Europe after Wall Street’s tech-heavy Nasdaq fell more than 3% on Wednesday, and 2- and 5-year Treasury yields, key drivers of global borrowing costs, rose to post-COVID pandemic highs. There was a huge drop in Japan’s Nikkei fell 2.88% while South Korea’s Kospi fell 1.13%.

Minutes of the Fed’s December meeting showed that a tight jobs market and unreliable inflation could prompt the US central bank to start raising rates and reducing its overall asset holdings sooner than expected – a process known as quantitative tightening. (Qt) is known as. Minutes showed Fed officials were equally concerned about the pace of inflation, which, even with global supply constraints, promised to continue “well through” 2022.

“Global markets were hurt by heavy selling as Fed meeting minutes pointed to a faster-than-expected policy rate hike given higher US inflation levels. said Vishal Wagh, head of research at Bonanza Portfolio Ltd., Investor of COVID The rapid spread of cases and strict restrictions are in place as it will keep the market highly volatile in the days to come.

As India gears up for the third wave of COVID-19, Radhika Rao, Senior Economist, DBS Group, feels that an unfavorable global environment has led to heavy financial borrowing pipelines, liquidity withdrawals, rising oil prices and lack of direct support from the central bank. Caution is taken. The 10-year rupee has touched a near 20-month high of 6.5 per cent.

“The Reserve Bank of India (RBI) policy commentary in December pointed to a preference for a gradual road towards policy normalisation. The guidance emphasized that the priority of the MPC is to secure growth impulses and preserve the policy room to meet this objective, which is at odds with global policy changes, particularly the US Fed. Even as inflation risks on imported pressure and food volatility were highlighted, ‘flexibility’ in the price stability mandate would guide the policy towards the recovery path,” Rao said.

Analysts at Reliance Securities are optimistic that an all-round calibrated economic recovery is on the cards, though the timing is highly uncertain. “Our 2022 target for Nifty is 20,000 at 22 times FY24 earnings. We expect Nifty to be at a premium on the back of higher earnings CAGR (before reaching steady earnings pace of growth) for the next 1-2 years Will enjoy valuations, as India becomes a preferred destination for global manufacturing, going forward.This trend will continue over the next 4-5 years, supported by China+1 policy and government support for various industries. Our 2022 year-end target of 20,000 for Nifty means 13% return from current levels,” the brokerage firm said.