Indian markets trade flat despite US Fed’s 75-bps rate hike

• The US Fed raised interest rates by 75 basis points taking it to the highest level since 2008.
• After falling slightly lower in early trade, at 10:54 a.m. Sensex was up nine points at 60,915 while Nifty50 was up 1.7 points at 18,084.
• Jerome Powell said that it will continue to raise rates higher if inflation doesn't start to slow. But he also indicated that it may be nearing an inflection point.

Indian markets traded flat after falling marginally in early trade today, tracking a huge fall in global markets. This was after the US Federal Reserve raised interest rates for the fourth straight time by 75 basis points, yesterday.

The hike takes the benchmark lending rate range to 3.75 - 4%, which is the highest since 2008.

After falling slightly lower in early trade, at 10:54 a.m. Sensex was up nine points at 60,915 while Nifty50 was up 1.7 points at 18,084.

Federal Reserve chairman Jerome Powell said that it will continue to raise rates higher if inflation doesn't start to slow. However, he also indicated that it may be nearing an inflection point – that the time to reassess the pace of interest rate hikes is coming.

Analysts expected Indian markets to react sharply.

“Indian markets are likely to open gap down tracking weak global cues as investors react to Fed’s decision on raising interest rates by 75 basis points and on hints by the Fed that interest rate hikes may continue in future, increasing the likelihood of the US economy entering into a recession,” said a report by ICICIdirect Research.

Asian and the US market ended lower reacting to Fed rate hike and on Fed Chair Jerome Powell’s comments. In the US market, Dow Jones Industrial Average index was down 500 points while Nasdaq fell 366 points.

Most Asian markets including Hong Kong, Taiwan, China were trading lower with Australia’s benchmark index falling the most with a 1.77% drop.

“Going by the global cues, domestic equities are likely to see a downward trend in early trades Thursday, after the US Federal Reserve overnight hiked interest rate on expected lines by 75 bps but signalled that its tightening campaign is not over yet. However, investors can heave a sigh of relief after the Fed hinted at a slower pace of rate increases going ahead,” said Prashanth Tapse, research analyst, senior VP (research) at Mehta Equities.

On the domestic front, investors will focus on the RBI’s meeting later in the day that is likely to discuss its response to the government after failing to meet its inflation target for three quarters in a row.

“For local investors, focus will immediately shift to the RBI MPC's unscheduled meeting later today and try to gauge from its explanation to the government on the higher inflation front. Inflation has been consistently above the MPC’s 2-6% target band for three consecutive quarters,” said Tapse.

All indices were trading in the green except that of IT, energy and realty. Heavyweights like ITC, Bajaj Twins, Maruti Suzuki and Hindustan Unilever helped Sensex recover its early morning losses.

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