Business Today

All eyes on the US Fed

With corporate performance of India Inc still a couple of quarters away from firing and logjam in the Parliament, the trend in domestic equity market will be completely dictated by global cues.

twitter-logo Mahesh Nayak        Last Updated: December 14, 2015  | 09:35 IST

Mahesh Nayak, Senior Associate Editor, Business Today
Lack of positive trigger in the market coupled with weak Indian rupee are seeing investors getting frustrated, resulting in weakness in the market.

Yes, currently there are no positive developments that can push the market barometer BSE Sensex upwards. Year to date the Indian market is down 9 per cent.

With corporate performance of India Inc still a couple of quarters away from firing, logjam in the Parliament and inability of the government to drive it's reform agenda, the trend in the domestic equity market will be completely dictated by global cues and inflows.

These are testing times for investors. Yes the perfect storm in terms of market flows has not hit the market after the US Fed postponed it's rate hike in September 2015. The quantitative easing by the European Central Bank (ECB) was below market expectation.

The good part is global investors are not completely risk averse to equities but are cautiously waiting on the sidelines to get a clear trend, especially from US Federal Reserve on rate hikes.

Meanwhile the market has already discounted that the US Fed, when it meets this week, will increase the rates by 25 basis points (bps).  

Coming back to equity markets, it's developed versus emerging market. And emerging markets seem to be a clear winner when it comes to growth. Second among emerging markets, India is expected to be the biggest beneficiary. Though lower than expected, India is still growing and that's the comforting factor  for global investors.

Currently Indian market is witnessing profit booking on account of two factors. First, players are booking profit to compensate the loss incurred due to lack of performance from other emerging markets and asset classes including oil and gold. Second, Indian market is feeling the pressure because of year-end profit booking from fund managers who want to take home good bonuses. They are booking profit and are sitting on the sidelines.

Once the market gets a clear direction from the US Fed, China reforms and Euro-zone in terms of QE, the flows will come back and India is expected to the biggest beneficiary.

Until then, say a couple of quarters, it will be a testing time for investors who have to remain patient and see this as an opportunity to accumulate stocks of companies that are generating strong cash flows and also look at companies that have deleveraged by bringing down their debt.

For retail investors, buying Nifty ETFs and that too SIP should be the preferred option.

 

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