Markets likely to stay positive despite Fed rate hike
Mumbai: The Indian markets are likely to stay positive on Thursday following firm global cues after the US Federal Reserve hiked benchmark interest rates by 25 basis points for the second time in three months.
“Indian markets are well placed to absorb US Fed rate hike. Gradual approach in future increases augurs well for emerging markets,” tweeted Shaktikanta Das, secretary, Department of Economic Affairs in the ministry of finance.
The US central bank’s lower-than-expected hawkish stance also drove US markets to close higher. Post hike, the interest rates are at a target range of 0.75% to 1% signalling growth in the US economy.
The Singapore Stock Exchange (SGX) Nifty also indicated a gap up opening or higher opening of Indian markets as Fed rate hike was already factored in.
The markets have been strong, making record high on last Tuesday, post Bharatiya Janata Party’s (BJP) emphatic victory in Uttar Pradesh.
Analysts think that interest rate hikes won’t impact India much. Vinod Nair, head of research, Geojit Financial Services, said that interest rates hikes only mean that the economy has improved which is a positive for the markets. “It will benefit other emerging markets, especially Brazil, Russia and Gulf countries. However, in the short term India may underperform emerging markets.”
Meanwhile, the dollar index slipped against a basket of major currencies. The yen was stronger at 113.3 compared to previous close. Oil prices climbed for the first time in a week. The International Energy Agency (IEA) also suggested that the Organization of Petroleum Exporting countries output cuts could create a crude deficit in the first half of 2017, Reuters reported.
Remya Nair contributed to this story