How the US Federal Reserve's upcoming rate decision may impact Indian markets


by 5paisa Research Team Last Updated: Dec 09, 2022 - 12:30 pm 15.4k Views
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The US Federal Reserve is set to begin its two day bi-monthly deliberations on a rate hike, and the Indian stock market is watching nervously. While the Nifty and the Sensex have managed to hold on to their elevated levels thus far, the two benchmark indices could take a tumble if the US Fed chooses to go in for another significant rate hike. 

How much of a potential rate hike has the Indian market priced in?

A report by The Economic Times newspaper has said that according to analysts, the Indian market has already priced in a 75 basis points hike by the US Fed. 

What is the US Fed’s stance likely to be?

The Fed is likely to reiterate its hawkish stance, most analysts feel. 

Why are analysts expecting a 100 basis points hike by the US Fed?

“August inflation data has opened the door to the possibility of a 100 bps rate hike after two consecutive hikes of 75 bps. No matter which way the Fed goes with, the takeaway is clear — there is more work to be done and expectations should be adjusted accordingly,” Vikram Kasat, Head Advisory, Prabhudas Lilladher, told ETMarkets.

What is the US Fed’s key benchmark lending rate likely to be at by March?

Markets now expect the US central bank to boost its main interest rate to 4.4 per cent by March. That is up from forecasts of about 4 per cent earlier.

But could there be a situation where the Indian markets rise further?

Yes. Analysts say that if the news from the US Fed is better than expected, there could be a relief rally on the Indian bourses. 

What chances do Wall Street analysts see of a 100 basis points rake hike by the Fed?

According to the ET report, on Wall Street, analysts see a 20 per cent chance of a 100 bps rate hike as the labor market remains strong and as the economy slowly softens.

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