How Narendra Modi led-BJP's poll win, US Federal Reserve policy will dictate Indian market movement

Aseem Thapliyal        Last Updated: March 16, 2017  | 15:11 IST
How BJP's poll win, US Fed policy's certainty will dictate Indian market movement

A market which fell merely on prospects of US Federal Reserve rate hike last year has found solace in PM Narendra Modi-led BJP's strong show in the recently concluded Assembly Elections.

The 25 basis points rate hike last night was an event which would have made us believe that the Indian market would be adversely affected owing to the hike in cost of capital and the prospects of higher returns on the foreign fund inflows from emerging markets into the US economy.

More than numbers, it's the sentiment arising out of an event which influences markets around the world. And the sentiment resulting from the latest Fed Rate hike was certainty that the US economy was on a positive track, and the economy would see additional two rate hikes this year and three more in 2018.

: Yellen cools down anxiety; announces interest rate hike by 25 basis points

"We have seen the economy progress over the last several months in exactly the way we anticipated," Federal Reserve Chair Janet Yellen said in a press conference following the end of a two-day policy meeting. "We have some confidence in the path the economy is on," she added.

The Fed also stuck to its outlook for two additional rate increases this year and three more in 2018. The central bank lifted rates once in 2016. That cooled speculation among some investors that the Fed could move more aggressively.

But, the two Federal Reserve rate hikes this year are not likely to affect the future course of the Indian market, taking into account positive domestic cues arising out of Narendra Modi government's reforms process.

ALSO READ: Markets well placed to absorb Fed rate hike: Shaktikanta Das

After Fed interest rate hike, Sensex and Nifty today moved in green territory with gains of almost 150 points and 60 points respectively. The Nifty50 hit its new all time high of 9152 in intra-day trade. The market has been on a roll ever since Prime Minister Narendra Modi's BJP victory in the Assembly elections assured political stability.

Investors saw Modi-led BJP's landslide victory in Uttar Pradesh and remarkable gains in other states in the recent Assembly elections as an endorsement of his economic reform agenda.

The Nifty hit a new all-time high, crossing 9,000 level for the first time in two years and Sensex too rose over 600 points in early trade on March 14, 2017. The Nifty50 hit its highest point of 9,122, surpassing its March 2015 record of 9,119 level.

Going ahead, domestic not global cues, especially from the US, will dictate movement of Indian market unless some significant political or economic event makes it to the global stage.

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