US Fed’s aggressive rate hike plans make markets jittery – The Hindu BusinessLine

Clipped from: https://www.thehindubusinessline.com/todays-paper/us-feds-aggressive-rate-hike-plans-make-markets-jittery/article65346455.ece

FILE PHOTO: People stand outside the Bombay Stock Exchange (BSE), after Sensex surpassed the 60,000 level for the first time, in Mumbai, India, September 24, 2021. REUTERS/Francis Mascarenhas/File Photo

FILE PHOTO: People stand outside the Bombay Stock Exchange (BSE), after Sensex surpassed the 60,000 level for the first time, in Mumbai, India, September 24, 2021. REUTERS/Francis Mascarenhas/File Photo | Photo Credit: FRANCIS MASCARENHAS

Stock markets are nervous as US Federal Reserve chairman Jerome Powell is not giving up on his stance of aggressive rate hikes this year.

The two-day rally in global stock markets was halted on Friday after Powell stated that taming inflation through a 50-basis-point rate hike, was on the table in May. The Sensex fell 1.23 per cent or 714 points to close at 57,197. The broader index Nifty declined by 1.27 per cent or 220 points to close at 17,171.

This week, foreign portfolio investors continued their relentless selling spree. On Friday, FPIs sold stocks worth Rs. 2,461 crore in the cash segment, provisional figures showed. In April so far, FPIs have sold stocks worth Rs. 29,206 crore as per exchange data. FPIs have sold index futures worth Rs. 5,688 crore and stock futures worth Rs. 7,367 crore in April, according to exchange data.

Global markets

Experts say that traders are still trying to digest Powell’s comments on the likelihood of a larger-than-usual rate hike in May.

In the US, the Dow Jones was down 1.36 per cent, Nasdaq fell by 0.61 per cent and S&P 500 was trading lower by 1.19 per cent in an hour after opening.

In Europe, the indices fell between 1 and 2 per cent. However, Powell has stated thatfront-loading hikes may benefit and could set the stage for later cuts if the economy appears to be faltering. Fears of rate hikes have been back due to the sharp rise in inflation.

Analysts in India are of the view that there is not a long bear market in sight and the jitters may continue till inflation cools down.

“Hence, investors should focus on stock selection and risk management. Picking value stocks will give more money to investors than day trading in the current scenario. In terms of price to earnings (PE), Nifty is trading around 18.7 on a one year forward basis. It clearly indicates a bottom at the current levels for the market and there is not much of a fall left,” said Kishor Ostwal, MD, CNI Global Research.

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