Ten points explaining what the US Fed said and how it affects India

US interest rates will start rising from March 2022 because inflation in America is at a 40-year high.

The market knew this already. What’s new? The US central bank used the word ‘nimble’...

...instead of ‘gradual’ to describe oncoming rate hikes.

That would mean that the interest rate hikes would be faster...

...than it previously wanted it to be i.e., 3 rate hikes in 2022.

Faster rate hikes in the US will mean that the US dollar..

...will gain faster against other currencies including the rupee.

If the dollar is expected to get stronger, foreign portfolio investors...

...are expected to pull more money out of emerging markets like India.

The risk appetite for investors will go down further and...

...that would affect all risky assets like equities and cryptocurrencies.

Once that became certain, markets started pricing in outflow of investments and...

...the Sensex fell nearly a percent and a half.

A weaker rupee will lead to outflows of dollars in India and cost of crude oil and...

...other imported essentials will go up for Indians.

The price of Brent Crude, which is most of what India imports,...

...has already hit $90 a barrel before cooling off a bit.

However, a weaker rupee is good for exporters who earn in dollars, e.g.,...

...information technology (IT) services companies like TCS, Infosys and Wipro.