Fed likely to lift rates on July 26; how can it impact the market, rupee?
Anand Rathi Shares & Stock Brokers. A more hawkish Fed, however, can deal a blow to the market. Shey Jain, CEO and Founder of SAS Online believes the market's reaction to rate hikes can vary as it depends on factors such as the timing and magnitude of the hikes, as well as market expectations leading up to the decision.
"The impact on the Indian market and the rupee can be significant. Firstly, a rate hike by the US Fed can result in capital outflows from emerging markets like India, as investors may seek higher returns in the US. This outflow of capital can exert downward pressure on the Indian stock market.
Secondly, a rate hike can lead to an appreciation of the US dollar against major currencies, including the Indian rupee. A stronger dollar can make imports costlier for India and impact the country's current account deficit. Moreover, if the rupee depreciates against the dollar, it can increase the cost of servicing India's external debt, which is mostly denominated in US dollars," said Jain.
Jateen Trivedi, VP of Research at LKP Securities believes the further rate hikes by the US Federal Reserve will create volatility and uncertainty in global financial markets. This can impact investor sentiment, potentially leading to increased market volatility in India as well. Trivedi said the rupee will see a weak trend on any price rise and will keep taking resistance until there is a final figure on rate pause and the Fed hints of a rate cut.
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