Nifty, Sensex continue to fall after US Fed’s decision; when will this stop?

Rohit Srivastava, Founder of Indiacharts said that the US Fed’s decision will only have a short-term negative impact on the Indian market.

The US Federal Reserve left the benchmark rate unchanged at 5.25-5.50 percent but hinted at a further rate hike at the end of 2023. Post the Fed’s decision, US indices fell up to 1.5 percent with Nasdaq settling 1.53 percent down. Asian markets were broadly trading in the red on September 21, with Japan’s Nikkei 225 sinking 1.26%. Amid negative global cues, Indian markets also opened lower with the Nifty 50 and 30-share Sensex tumbling over half a percent.

Meanwhile, Rohit Srivastava, Founder of Indiacharts said that the US Fed’s decision will only have a short-term negative impact on the Indian market. “Data is already showing inflation cooling off in the US as core CPI decreased to 4.35 percent in August from 4.65 percent. There is no actual reason for the Fed to hike. But they have to keep possible hikes on the table in case of any surprises. So that is why it sounds hawkish. Ideally, if things continue in the direction they are, they may not need to hike,” Srivastava said.

Inflation in the U.S. remains sticky as the U.S. Bureau of Labor Statistics data showed that the annual inflation rate rose in August to 3.7 percent from 3.2 percent while Core CPI, which does not include food and energy, decreased to 4.35 percent in August from 4.65 percent a month earlier. Meanwhile, the unemployment data is also showing an increase, with the number in August rising to 3.8 percent from 3.5 percent a month earlier.

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Short-term impact

According to Srivastava, in the short term Indian markets are looking at interest rates that may remain at the current high level for some time. “So that is having a short-term negative impact on domestic markets, which we may see for 1-3 days but after that, there should be an improvement. VIX has come down reflecting a decline in volatility not only in Indian & US markets but everywhere.”

Ahead of the US Fed’s decision on Wednesday, Indian markets plunged over 1 percent as foreign Institutional investors (FIIs) offloaded equities worth Rs 3,110 crore and domestic institutional investors sold shares worth Rs 573 crore. Meanwhile, in the early morning trade on September 21, the Nifty IT and FMCG sank 1 percent while Nifty PSU Bank jumped over a percent.