Will the US Fed’s hawkish tone, rate hike threat stop Sensex, Nifty rally; experts weigh bonds-stocks tradeoff

The US Fed’s hawkish tone precipitated a fall in the worldwide and domestic percentage markets today. Indian equities still continue to be attractive for long time traders, albeit with a bit difficulty over valuations amid growing interest costs, say experts. The markets had priced in a 50 bps price hike from the FOMC (Federal Open Market Committee), but Fed chair Jerome Powell reiterated that the combat towards rising inflation changed into set to preserve, and signalled that the quotes ought to upward push greater than previously expected. That regarded to have dampened the market spirits nowadays.

Will the US Fed’s hawkish tone, rate hike threat stops Sensex, Nifty rally; experts weigh bonds-stocks tradeoff

What America Fed rate hike and remark on inflation mean for Sensex, Nifty
“Indian markets have additionally opened poor following US markets, following the expectancies of recession/slowdown and more hawkish feedback from Fed. However, this is after an inexpensive rally put up US and India inflation records. For India and the RBI, there is the cushion of home economic system holding with the outside headwinds. RBI coverage raised 35 bps this time, however if inflation comes underneath 6% all over again, there is a larger scope for pause,” stated Anitha Rangan, Economist, Enquires.

“For long-term investors, the December-cease tax-loss harvesting would be a extremely good time to set up capital into the equities markets. Some might recall making an investment in long-length treasuries to “lock-in” the increased yields and also a big capital benefit whilst the hobby rates start reversing. However, in our opinion, the equities provide a better go back capacity from interest reversals from top in comparison to lengthy-period bonds,” stated Vikas Gupta, CEO and Chief Investment Strategist, OmniScience Capital.

“The Indian marketplace, though no longer completely decoupled from the mother market US, has been charting a slightly exclusive path showing unexpected resilience even within the face of worldwide weak point. This is due to India’s superior increase and profits possibilities, going ahead. However, excessive valuations and growing hobby rates are possibly to restrain the ongoing rally. Fixed earnings belongings are getting attractive,” stated K Vijayakumar, Chief Investment Strategist, Geojit Financial Services.

Outlook on US Fed’s further fee hikes
“The ultra-modern coverage movement is pointing that slowing inflation has been encouraging and that the Fed believes similarly hikes, though at a slower pace, are had to ensure that charge pressures in the end drop to its 2% goal,” Anand Varadarajan, Director, Asit C. Mehta Financial Services stated. While US CPI inflation statistics suggests that inflation is cooling down, it’s miles still higher than the Fed’s target. “Hence, this time it is able to be the case that Fed errs at the higher facet of projected terminal fee in preference to decrease end,” delivered Vivek Goel, Joint Managing Director, Tailwind Financial Services.

“Powell also stated that the pace of policy hikes may be decrease however emphasized that the tempo does now not depend anymore, and it is the terminal price that subjects,” stated Anitha Rangan, Economist, Equirus.
Will inflation in the US fall?
“The new dot plot suggests that the height hobby price now is predicted to be round 5.1% with a small risk of going as much as 5.6%,” Vikas Gupta, CEO and Chief Investment Strategist, OmniScience Capital anticipated. “The Fed confirms that the economy, in 2023, is probable to continue developing, albeit at a slower tempo, the unemployment rate to peak at 4.6% and the PCE inflation to reach three.1% and maintain falling. All of these are very high-quality indicators,” he delivered.

“Notwithstanding some preliminary signs of a weakening economic system, the Fed continued to worry approximately a strong hard work marketplace. Interestingly, although growth projection turned into revised down (to zero.5% from 1.2%) for CY23, the unemployment price revisions had been only marginal (four.6% to 4. Four%),” said Hemang Jani, Head of Equity Strategy, Motilal Oswal Financial Services.

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