Post Market views - March 17, 2022 - Reliance Securities

Mr Mitul Shah, Head Of Research at Reliance Securities.

Domestic markets closed higher following global cues as U.S Fed raised interest rates on the expected lines, by 25 bps. Moreover, markets also drew confidence from Fed chief Powel's claim that the American economy is resilient to handle contractionary monetary policy. Nifty gain 1.84%. Nifty MidCap and Nifty SmallCap were up by 1.4% and 1.2% respectively. All sectoral indices ended in green except Nifty IT (-0.2%). Nifty Reality increased the most at 3.1% followed by Nifty Fin Service (+2.8%) and Nifty Auto (+2.2%).

The Fed raised interest rates by 25 bps as markets had anticipated earlier. The Dow Jones rose 1.5%. The S&P 500 gain 2.2% while the Nasdaq jumped 3.8%, marking its best percentage gain since November 2020. The 10-year yield settled for a gain of 3 basis points to 2.19%. Fed also signalled that there will be six more interest rate hikes in 2022, while also aiming to reduce Fed's massive balance sheet. However, the Fed policy announcement notified that commodity shocks due to the Russia-Ukraine conflict may further aggravate price pressures and economic risks. Moreover, the U.S president Biden signed $13.6bn into law, in military and humanitarian aid for Ukraine, with the U.S. and its allies sending more advanced anti-aircraft systems.

The electoral wins will reassure markets about the central leadership maintaining a stable policy outlook. Even so, the Russia-Ukraine conflict and inflationary pressures are assessing the market sentiment. The key event for this week is US Federal Reserve rake hike decision. The current elevated inflation warrants policy action. However, the Russia-Ukraine war is stoking economic uncertainty. It has to be seen if the US Fed and Bank of England will stick to their monetary policy tightening and rate hike plans.

Source : Equity Bulls

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