Markets to fall less as key overhang of US Fed move is gone

Focus will shift to domestic issues like GST timeline, corporate performance and RBI policy

Indian equity markets are expected to fall less going ahead even if there is pull-out by foreign institutional investors in the short-term as a knee jerk reaction to rate hike by the US Federal Reserve.

Many market participants said if US Fed had not hiked the rates, it would have been taken a wrong signal and markets would have fallen more.

“India is not immune to potential general emerging market jitters related to the Fed lift-off, but it is better placed than many of its peers,” said Thomas Rookmaaker (Director, Sovereign Ratings, Fitch Ratings.

This is the reason why S&P BSE Sensex fell just 46 points intraday today.

“If we see history also, the long-term trend of the Indian market remained intact when US fed had increased the rate during 2004 and 2006, thus history may repeat itself again,” said Rohit Gadia, Founder & CEO, CapitalVia Global Research Ltd.

Vikas Gupta, Executive Vice-President and Chief Investment Officer at ArthVeda Capital, pointed out that US securities will be favoured and emerging market as an asset class will be less favoured. But within the emerging markets basket, India will become overweight on the back of higher growth rates and lower debt and export dependency.

In other words, India will continue to be and become the most favoured nation within the emerging markets basket, he added.

In case of a market fall, there is support from domestic institutional investors who are witnessing unprecedented inflows from investors mainly through systematic investment plans and are buying whenever there is a fall led by FII selling.

(This article was published on December 17, 2015)