How Indian traders should cope with post Fed volatility

The Indian market would have preferred the Federal Reserve hike interest rates and get it out of the way. But now that it decided overnight to not do it, the sword of uncertainty hangs heavy.In an interaction with Latha Venkatesh, CNBC-TV18's Markets Editor Anuj Singhal gave his take on what the Fed's decision means for Indian equities and what strategy Indian traders and investors should adopt for the near and mid term. Excerpts of the interview on CNBC-TV18.Latha: What have you made of the situation and how are Indian markets sitting, are they sitting light, heavy, long, short. What should we expect today?A: There are couple of points. One is that we should distinguish the market reaction today and the market reaction in the slightly medium term. I believe it would have been better for the market if the rate hike was out of the way. In that case, the market would have shifted focus back to its domestic macros. Now the problem is that this lingering uncertainty is going to continue and again it is the same problem: we do not know what is wrong with the global markets if indeed there is a second round of fall.As of now, as we speak today, because F&O expiry is around, a lot of expiry factors are going to play their part and in that the foreign institutional investors (FII) data indicates that maybe the market has hit a bit of a bottom somewhere around 7,800 or thereabouts. But today the market will make a bit of trend move.If the Nifty sustains above 8,000 -- first it has to cross 7,950-8,000 -- and it trades above it, in that case there is a good chance of further short covering, which may effortlessly take the Nifty in the expiry week towards the 8,200 mark. That's the first probability. The second probability is if the first rally is sold into, there is a genuine case of the market seeking lower levels again in expiry week because expiry week will then be all about momentum. The midcap market for the last two or three days is signalling signs of distribution. For example, on Wednesday, a lot of high quality stocks like UPL, Eicher Motors were giving a sense that this market is not yet ready to make a durable bottom and this market has one more round of correction which is left. However, because the Fed has not hiked rate and now everyone will start talking about the Reserve Bank of India (RBI) cutting rates - that may keep the market a bit afloat but if you ask the bulls, they would have been happy if there would have been a rate hike from the Fed. Because that would have meant a bit of a kneejerk reaction on the way down but that would have taken the poison out and the market would have been ready to move. For now you are again back to that unpleasant time, you do not know when the rate hike is going to come because that again is going to keep the market a bit cheerful.Sonia: The note that economists have taken very strangely to is a fact that the Fed mentioned that global volatility will put downward pressure on inflation in the near term and they have never mentioned any word on global volatility or global slowdown in the recent past. Does that give you an indication that perhaps the upside for this market could also be capped, not just for our own market but for global markets as a whole?A: By global, Fed means China and this is the first indication of Fed acknowledging that China is now the biggest trigger for the market and that is why it is more troublesome for the market now more than ever. Every morning you are going to see what is happening in China because that is going to be an important factor and you do not know what is happening in China right now. What the market doesn't like is unknown unknowns and China is an unknown unknown --you do not know what China is going to throw out tomorrow morning or next week. That is one thing that the market does not like and that is one thing that I believe -- and when I spoke to a lot of people, they believe -- that this is going to keep the uncertainty alive in October and the market may well have one more downside towards the middle of October maybe towards 7,500 bottom. To test that once again to see if that bottom is durable or no. Technically, this market is looking a bit weak even if there are rallies; looks like those rallies will be sold into just because the global uncertainty is going to prevail now for some time.