Moneycontrol Pro Panorama | Fed may press harder taper pedal; a worry for markets?

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After Omicron, it is the turn of Jerome Powell to land a punch on the markets. The US Federal Reserve chair told legislators in a Congressional hearing that the pace of reducing bond buying (tapering) can increase from the current $15 billion a month.

“At this point, the economy is very strong and inflationary pressures are higher, and it is therefore appropriate in my view to consider wrapping up the taper of our asset purchases, which we actually announced at the November meeting, perhaps a few months sooner,” said Powell. He expects this issue to come up for discussion in the next Fed meeting.

Powell, who recently secured an extension to his term, also bid goodbye to the word ‘transitory’, the adjective which central bankers have been applying to inflation. High time, since US retail inflation rose to 6.2 percent in October. The FT reported that the implied rates on federal funds futures jumped and markets are now pricing at least two quarter-point rate rises by the end of 2022.

While US markets bled overnight fearing a loss of liquidity, Asian markets have taken this Powell punch in their stride. Most major Asian indices barring Jakarta have risen this morning.

At the day’s close, the Sensex was up 620 points, up 1.1 percent. The bunch of economic data released yesterday should add to investor confidence in India.

July-September quarter GDP numbers showed that the economy was back to pre-COVID levels, even though private consumption lagged. The central government’s fiscal position too is better than in 2019, the last pre-pandemic year. In other words, it has enough fiscal ammunition to spend freely in the rest of 2021-22 and boost growth. Meanwhile, RBI data showed that bank lending to large industries is finally picking up. To top it all, India’s manufacturing PMI for November showed the highest reading in 9 months; its expansion was the fastest in Asia.

The key dangers to this happy story are the emerging risks from the Omicron variant, which among other things, could lead to supply logjams and inflation.

Our research team has written the following notes:

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Incremental growth for Lodha will mainly come from joint development projects: MD & CEO Abhishek Lodha

Go Fashion India: What should investors do, post the stellar listing?

Deep Value Series: Control Print -- Why look at this quality mid-cap?

What else are we reading?

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Solid expansion in manufacturing in November, but why is business confidence falling?

Core sector grows 1 percent in the past three years

Cryptocurrency | What happens when RBI issues a digital currency?

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Picks from our technical analysts

Aurobindo Pharma, Poly Cab, Sobha and BEL (These are published every trading day before markets open)

Ravi Krishnan
Moneycontrol Pro