Fed Rate Hike Scare Shakes The Market

Market This Week

Market is looking much stronger than last week as FIIs have initiated buying in the market and DIIs are continuing to pump in capital as well. Quarter results of few of the giants have dragged the market some how in the last week but the major correction has been witnessed due to U.S. Fed President Yellen Janet commentary regarding the rate hike in the coming policies. Investors remained under some threat of rate hike. Looking at the past record of the rate hike news, this knife is hanging since last one year or even more than that. Any correction arising due to such policy news should be considered as fresh buying opportunity.

Movers & Shakers

The earning season ended yesterday, some companies brought cheer to the market and few results were not up to the mark. Some earnings were disappointing but global investors maintain a decent macro outlook for India. There could be a benefit of goods and services tax (GST) coming through and to add to it India has a good domestic growth story. Due to these developments, India is going to remain a favourable destination for institutional investors.

Key Market Drivers

Market pundits are of the opinion that is whether Fed will increase interest rates in March. Though what will be the pace for the rate hikes is still a matter of uncertainty. The US economy has begun to pick up and due to this, on the inflation front, there is no reason for the Fed to bring rates forward. US market has been scaling new highs in the last few days and the S&P 500 did not see even one percent correction in the last 85 trading days. On higher levels, it doesn't seem like good time to invest in US market which add attraction back to Indian equities.

Event Watch

Economic growth is largely dependent on the Financial inclusion hence it is a useful guide in the times of slowdown. As more people in India open bank accounts, it is only natural that Indias investment and savings rate will rise. Higher investment complements growth. For instance, after banks' nationalisation in 1969, banks were forced to open up branches in remote areas. In that period Indias investment and savings rate rose steeply from 13% in the early 1970s to around 25% of GDP in about 15 years. After demonetisation, India is on the verge of repeating the history. It could even get the economy back on the track with more stability and some better growth prospects.

Stocks to Watch

Gujarat Alkalies and Chemicals is on up side while Infratel is on down side.