Ahead of the crucial US Fed Reserve meet on Tuesday, market players seem to have adopted a cautious approach towards equities.
The decision by Fed will not only set the future flow of capital from large global players to emerging markets, including India, but Fed’s FOMC statement will also decide the direction of sentiments that will prevail in the US markets.
Moreover, after the outcome of Tuesday’s meeting is known, domestic players will be keenly watching what stance the Reserve Bank of India (RBI) takes at its policy review meet scheduled at the end of next month.
Anita Gandhi, head of institutional business at Arihant Capital Markets, said, “Though the global equity markets have already factored in a 25bps cut in the rate by Fed, the market is still looking forward for the FOMC statement on September 18 for a specific direction. The statement is more important from the sentimental point of view rather than its fundamental aspects. In the immediate term, the Indian markets may react to developments in the US, but over a period of time, we believe that the domestic markets would delink from global sentiments and start reflecting the strong domestic fundamentals.”
Adrian Mowat, MD and chief Asian and emerging markets equity strategist, of JP Morgan, said, ?With the Fed now outlining the balance of risks as skewed towards growth, we believe financial markets have fully priced in a 25bps cut in the Fed funds rate in its September 18 meeting and a total 50bps cut by the end of the year. The risk to the expectations are to the downside. No cut in the Fed funds rate or a hawkish statement would significantly disappoint the market.?
