Final US Federal Reserve tapering to be a non-event for Indian markets: Axis Mutual Fund

Sep 24 2013, 09:14 IST
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SummaryPossibility of complete withdrawal of bond-buying programme by next year: Axis MF

The final tapering of the US Federal Reserve's bond buyback, which was postponed indefinitely last week but may happen anytime next year, will not have much impact on domestic markets as most of the news has already been factored in, says a top Axis Mutual Fund official.

Tackling the eventual taper

"We don't see much impact of the actual announcement of tapering by US Fed on the domestic market as much of the news has already been factored in by our market," Managing Director and Chief Executive of Axis Mutual Fund Chandresh Nigam said in an interaction here.

He further said the possibility of complete withdrawal of bond-buying programme by the mid of next year is little less as expected earlier.

Late May, the US Fed had hinted at reducing its USD 85 billion bond buyback programme per month as the economy showed signs of recovery.

This had hit the Indian economy hard with the rupee, bonds and equity markets witnessing sharp volatility as FIIs pulled out money to the tune of over USD 13 billion till early September, mostly from the debt segment.

While benchmark index BSE Sensex fell to around 17,500 levels, the rupee has plunged to 68.80 on the back of FII outflows.

However, US Fed's decision to continue with the bond buying programme last week, brought cheer to markets though it created apprehension about the timing of its withdrawal and consequent impact.

Nigam said as domestic economy recovers, companies in the infrastructure, capital goods and other interest-rate sensitive sectors will do good, which will pull the market up.

"The market is likely to see significant upside in the next 18-24 months as performance of companies in infra and capital goods among others start improving," Nigam said.

On the impact of the RBI decision to reduce the marginal standing facility (MSF) rate by 75 basis points to 9.5 per cent over the weekend, he said debt funds would do better, especially in the short-tenure space, in the next three-six months.

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