3/11/2015

BankersAdda:UpsurgeinFedRate..!!

UpsurgeinFedRate..!!
The possible Federal interest rate hike
has created an environment of
uncertainty in the Indian economy and
emerging markets are more concerned
aboutthisasitcanleadtowithdrawalof
FIISleadingtoeconomiccrunch.Dueto
criticality of this issue for Indian
economy as well, analyze the impact of
federal rate hike on emerging
economies.It is expected that the Fed
will start to increase interest rate any
timebeforethesecondhalfof2015.FIIflowsaredrivenbyinterestratesmovement
in the US and other developed economies and asset price movements in these
economiesalsoimpactglobalflows.Thereisnodoubtthatifthereisaselloffin
global equities, India will not be spared. The economic situation in India has
changedalotsincetheformationofnewGovernmentledbyMr.NarendraModi.
Thegovernmenthastakenconsiderableeffortstocontrolcurrencymovementand
increase foreign reserves in order to revive the economy, as a result of which
investors are now more focused on government steps and the impact of
international events has reduced significantly there by reducing the volatility
indexofIndianequitymarket.
Thestockmarketson9thMarch,,witnessedamassivesellingpressureinlinewith
themeltdowninglobalstockmarketsfollowingflowofencouragingjobdatafrom
theU.S.
The benchmark stock indices plunged sharply as foreign instructional investors
(FIIs)pressedforsale.Theywereinamoodtoreducetheirexposureinemerging
markets such as India and divert money to the U.S. bond market following a
possibleincreaseininterestratebytheU.S.FederalReserveshortly.Asaresult,
the BSE Sensex crashed 604 points or 2.05% to close below the psychological
markof29000at28845points.ThebroaderNSENiftyIndexclosewithalossof
181pointsor2.03%at8756.75
IMPACTOFUPSURGE
Selling was witnessed across the board. Metal and IT stocks bore the maximum
brunt. However, the course of the market will depend on the passage of several
importantbillspendingforapprovalinParliament.
Rupeedown39paise
Following the selloff in the equity
market, the rupee came under pressure
andclosedatRs.62.55toadollaragainst
itspreviouscloseofRs.62.16perdollar,
down 39 paise. The rupee is under
pressureforlasttwotradingsessionsand
it is because of FIIs are booking profit
andsuckingoutliquidity.Therupeewilltradeintherangeof62.80and61.80this
month,saidPramitBrahmbatt,CEO,VeracityFinancialServices.
BondMarket
ThepossibilityofaratehikebytheUSFedoverthenextfewmonthsweighedon
data:text/htmlcharset=utf8,%3Ch3%20class%3D%22posttitle%20entrytitle%22%20style%3D%22margin%3A%200.75em%200px%200px%3B%20posi

1/2

3/11/2015

BankersAdda:UpsurgeinFedRate..!!

theIndiaGovernmentSecuritiesmarket.
The benchmark 8.40% GSec maturing in
2024 slipped to Rs.104.33 from Rs. 104.56
Yield on this security rose to 7.74 per cent
from the 7.71 previously. Bond yields and
pricesmoveintheoppositedirections.
The markets logged their biggest drop in
overthetwomonthsonfearsasearlierthan
expected rate hike by the U.S. will hit
inflows. It was a sea of red in the domestic
markets.Nearly1,900sharesontheBSEfell
whilelessthan1,000managedtorise.
Banking,power,capitalgoods,realty,metal,
IT,oilaswellasgas,autiandFMCGshares
reported sharp losses. Only pharma stocks
managed to buck the extremely negative
trend on bourses. Furthermore, weakness in
therupeeweighedonthesentiments.
Globalstocksdip,butWallStreetgains
StocksinmajormarketsfellonMondayasinvestorsbettheFederalReservewill
raiseinterestratessoonerthanpreviouslyexpected,whileU.S.andeurozonebond
prices rose as the European Central bank started its bondbuying
program.Europeansharesweredown,trackingmovesinAsia.Dealnewsandshare
buybackshelpedWallStreetopenhigheraftertwoweeksoflosses,withtheS&P
500 about 2% below its record high set last week. The Dow Jones industrial
average rose 105.55 points, or 0.59% to 17,962.33 and the Nasdaq Composite
added142points,or0.03%to4,928.79.
AlargerpullbackisstilllikelyonWallStreet,accordingtoaMondaynoteform
BrianReynolds,chiefmarketstrategistatRosenblattSecuritiesinNewYork.The
panEuropean FTSEuroFirst 300 index was last down 0.4% and Tokyos Nikkei
closed0.95%lower.

data:text/htmlcharset=utf8,%3Ch3%20class%3D%22posttitle%20entrytitle%22%20style%3D%22margin%3A%200.75em%200px%200px%3B%20posi

2/2