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Markets likely to be under pressure as Fed signals rate hike; PowerGrid in focus

On Wednesday, the BSE Sensex ended at 52,501.98, down 271.07 points or 0.51%. The Nifty was at 15,767.55 down 101.70 points or 0.64%. (Reuters)Premium
On Wednesday, the BSE Sensex ended at 52,501.98, down 271.07 points or 0.51%. The Nifty was at 15,767.55 down 101.70 points or 0.64%. (Reuters)

  • The Federal Reserve began closing the door on its pandemic-driven monetary policy as officials projected an accelerated timetable for interest rate increases, opened talks on how to end crisis-era bond-buying, and said the 15-month-old health emergency was no longer a core constraint on US commerce

NEW DELHI: Markets are likely to be under pressure on Thursday while trends in SGX Nifty suggest a weak opening of Indian benchmark indices. On Wednesday, the BSE Sensex ended at 52,501.98, down 271.07 points or 0.51%. The Nifty was at 15,767.55 down 101.70 points or 0.64%.

The Federal Reserve on Wednesday began closing the door on its pandemic-driven monetary policy as officials projected an accelerated timetable for interest rate increases, opened talks on how to end crisis-era bond-buying, and said the 15-month-old health emergency was no longer a core constraint on US commerce.

Asian markets were mostly lower on Thursday after the US Federal Reserve stunned investors by signalling it might raise interest rates at a much faster pace than assumed, sending yields and the dollar sharply higher.

The dollar boasted its strongest single day gain in 15 months as 10-year US Treasury yields jumped by the most since early March.

The initial fallout in equities was not as bad with S&P 500 futures down just 0.2% in early Asian trade, while Nasdaq futures were off 0.3%. Nikkei futures were also down a modest 0.3%.

Emerging markets might not fare as well as they are particularly vulnerable to the chance of early US rate hikes to contain inflation, which could suck funds out of riskier assets.

The Fed forecasts, or dot plots, showed 13 of the 18 person policy board saw rates rising in 2023 versus only six previously, while seven tipped a first move in 2022. While the plots are not commitments and have a poor track record of predicting rates, the sudden shift was still a shock.

The Fed rubbed salt into the wound by signalling it would now be considering whether to taper its asset purchases meeting by meeting and downgraded the risk from the pandemic given progress in vaccination.

Companies which will announce March quarter results today are PowerGrid Corporation, Tube Investments of India, Natco Pharma, Indostar Capital Finance, Novartis India, Healthcare Global Enterprises, Jammu & Kashmir Bank, DB Corp and Bajaj Hindusthan.

Shriram Transport Finance Co. Ltd (STFC) on Wednesday said it will buy back bonds issued by it in January 2019 for a limit up to 450 crore.

Dr Reddy's Laboratories (DRL) on Wednesday said that the soft launch of Sputnik V covid vaccine in India, which was initiated in Hyderabad, has been scaled up to many cities including Bengaluru, Mumbai, Kolkata, Delhi, Chennai among others.

Meanwhile, other asset class markets moved quickly to price in the risk of earlier action and Fed fund futures shifted to imply a first hike by the end of 2022. Yields on 10-year bonds shot up almost nine basis points to 1.57%.

The dollar smashed up out of recent tight ranges, rising 0.9% overnight against a basket of currencies to 91.387 for its biggest gain since March last year.

The euro was down at five-week lows of $1.1995 having shed 1.1% overnight, the sharpest fall since March 2020. The dollar also surged to 110.69 yen and looked set to test its 2021 peak at 110.96.

The rise in bond yields and the dollar were a double blow for non-yielding gold which was down at $1,817 an ounce after sliding 2.5% overnight.

Oil prices were insulated by the prospect of stronger world demand and still tight supply, with Brent reaching its highest since April 2019 before running into profit taking.

Brent was last off 12 cents at $73.87 a barrel, while US crude lost 65 cents to $71.50.

(Reuters contributed to the story)

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