Stocks on the rise ahead of RBI’s policy

Minutes of the Federal Open Market Committee meeting indicated that the US central bank may take aggressive steps to quell red-hot inflation. Minutes showed that “many” members of the committee supported a half-cent increase in rates last month, but opted for a quarter-point move because of the war in Ukraine. The Fed also indicated that it would reduce its large bond holdings. Maximize speed of $95 billion per month, strengthen credit in the economy.

VK Vijayakumar, chief investment strategist at Geojit Financial Services, said the market expects the Fed to hike rates by 50 bps in its next meeting and by around 200 bps in 2022. This, along with expected balance sheet reduction, will be a headwind for equity markets globally, he added. Vijayakumar said whether the market can remain resilient depends on the Fed’s ability to manage the ‘soft landing’ of the US economy, preventing it from heading into recession.

Global markets also remained weak. In Asia, Japan’s Nikkei, Taiwan, Hong Kong’s Hang Seng and Shanghai Composite ended 1.23% – 1.96% lower. Among the major indices, only the Jakarta Composite rose 0.33%.

Indian markets are also showing signs of caution ahead of RBI’s Monetary Policy Committee meeting.

Shrikant Chauhan, Head of Equity Research (Retail), Kotak Securities Ltd said negative sentiment continued for the third consecutive session as US Fed’s tough stance raised concerns about interest rate hike, while investors also raised their concerns ahead of RBI’s policy. retrenchment of positions. , However, most experts are of the view that the MPC may maintain the status quo on policy rates.

HDFC Securities Ltd’s Head of Retail Research Deepak Jasani said non-institutional investors have started profit-booking aggressively ahead of the balance sheet reduction by the US Fed and RBI’s policy meeting.

The market is expected to remain volatile on Friday as participants will react on the outcome of the MPC meeting. “We expect the MPC to maintain the status quo on the rates. However, comments on inflation and growth will be actively tracked,” said Ajit Mishra, vice president of research, Religare Broking Ltd.

Meanwhile, on Thursday, Brent was trading at a level of $102.59 per barrel. Oil prices have declined from their peak, but failed to break below the $100 mark based on April’s close. While some fall in crude oil prices is also positive for the rupee, experts say that a weak equities market and a stronger dollar index will weigh on the dollar-rupee currency pair. Apart from this, the outcome of the MPC meeting will also have an impact on the movement of the rupee.

Sugandha Sachdeva, Vice President, Commodity and Currency Research, Religare Broking said, “Markets are monitoring the outcome of RBI’s policy meeting for further signals, which will propel the rupee-dollar exchange rate forward.” Sachdeva said concerns about downside risk to growth from geopolitical concerns, rising inflation, and rising prospects of major interest rate hikes by the US central bank this year are major deterrents for the domestic currency. Sachdeva said that the Indian rupee is likely to move in the range of 75.20-76.50 in the near future.

Siddharth Khemka, Head of Retail Research, Motilal Oswal Financial Services Ltd said that overall, the equity market has shown strong resilience, though it is facing an uncertain global environment and persistent inflation readings, leading to a possible rate hike.