FOMC meeting: Experts decode US Fed’s rate hike impact on Indian stock market
FOMC meeting today: Indian stock market is trading in a tight range as investors are awaiting final outcome of the Federal Open Market Committee (FOMC) meeting, which is ending today. The market buzz suggests that US Fed chief may choose to announce a maximum of 25 bps interest rate hike. According to stock market experts, Dalal Street has already discounted US Fed’s interest rate hike and hence it won’t have much impact on the Indian indices. However, they expected highly volatile session post-FOMC meeting and advised short term investors to loom at high quality pharma and FMCG stocks that are available at discounted and attractive valuations. For long term investors, experts suggested buy on dips strategy in Auto, IT and banking stocks.
US Fed rate hike in focus
Expecting US Fed to raise interest rate after conclusion of FOMC meeting today, Ritika Chhabra, Quant Macro Strategist at Prabhudas Lilladher said, “Despite concerns regarding the ongoing banking crisis, the Fed will raise the FFR by 25bps in the upcoming FOMC meeting. The central bank will reiterate its commitment to restore price stability. It will try to allay financial stability concerns by tapping liquidity facilities, without changing its monetary stance.”
On why US Fed official can’t afford hawkish stance on interest rate hike, Arvinder Singh Nanda, Senior Vice President at Master Capital Services said, “Easing US inflation provided confidence that the Fed would not opt for a harsh rate hike of 50 bps and might even consider taking a break during the March meeting. The market is buzz with the hawkish stance from the US Fed officials in this meeting and expecting a maximum of 25 bps rate hike.”
Global brokerage Nomura has also predicted 25 bps rate hike by the US Federal Reserve post-FOMC meeting.
Strategy for Indian investors
On what Indian stock market investors should look at in US Fed’s statement post-FOMC meeting, Ravi Singhal, CEO at GCL Broking said, “Indian and other emerging market investors are advised to look at the US Fed’s statement on bank crisis in US because it is going to hit business of IT companies of India and other developing countries. So, instead of US Fed interest rate, my suggestion to Indian and other Asian stock market investors to look at the US Fed’s commentary on current bank crisis and their road map to overcome this series of bank collapses.”
Ravi Singhal of GCL Broking said that if the US Fed decides to raise interest rate by 25 bps, then it won’t have much impact on the Indian markets as it has already discounted itself in recent sell off. But, Ravi Singhal maintained that for short term return from IT and banking sector stocks will be outperformed by quality stocks of pharma and FMCG sector.
Stocks to buy ahead of FOMC meeting
Ravi Singhal went on to add that short term positional investors can buy quality pharma stocks like Aurobindo Pharma and Zydus Life as these pharma stocks are available at attractive valuation after the recent bloodbath on Dalal Street. He went on to add that FMCG stocks like Marico, Dabur and ITC can be a value pick for up to three months, if someone is interested in FMCG sector stocks.
Stocks to buy for long term
For long term investors, Avinash Gorakshkar, Head of Research at Profitmart Securities said, “If the US Fed decides to raise interest rate by 25 bps or around 25 bps, then fall in IT, auto and banking stocks should be considered as good buying opportunity by positional investors. One should look at Mahindra & Mahindra (M&M) in auto segment while State Bank of India (SBI), Canara Bank, Axis Bank and ICICI Bank in banking space.”
On IT stock to buy in the wake of expected 25 bps US Fed rate hike, Ravi Singhal of GCL Broking said, “If TCS becomes available at around ₹2900 to ₹3,000 apiece levels in near term, then it would be a big buying opportunity for long term IT stock investors.”
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.
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