Moneycontrol Pro Panorama | Markets set for a reality check from Fed

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The Panorama newsletter is sent to Moneycontrol Pro subscribers on market days. It offers easy access to stories published on Moneycontrol Pro and gives a little extra by setting out a context or an event or trend that investors should keep track of.

The US Fed has had a much more sanguine view on rising inflation than markets, throwing its weight behind growth in the wake of the pandemic. That appeared to have ended with the Fed chair Jerome Powell stating recently that it was time to retire the word transitory when talking about inflation.

This week, the FOMC’s meet could reveal what transitory might be replaced with and more importantly, its revised schedule for tapering of asset purchases and outlook on interest rate hikes. The nervousness has already been baked into markets to an extent and it’s the Fed that’s playing catch-up. But what remains to be seen is how hawkish a turn the Fed is going to take. One cannot rule out a surprise on this front as the Fed may attempt to show it’s in control of the situation.

Last week saw US consumer inflation hit 6.8 percent, the highest in 40 years. This is likely to push the Fed to take swift action to combat inflation, says this Financial Times report (free to read for Pro subscribers), which provides an overview of what one can expect from the FOMC meet and the risks if the Fed presses the brakes too hard.

In the domestic market, the Fed's decision will be viewed against the backdrop of FIIs switching on the sell signs even as domestic investors keep the faith. One sign that domestic investors have it right is the industrial output data for October. While the reported number shows a slowdown compared to September, today’s Chart of the Day shows that’s mainly due to a base effect and it’s actually up 4.9 percent over the preceding month. But how does it compare to its pre-pandemic level? Read here.

Overall, the COVID-19 situation appears to be well under control but new omicron cases are being detected every day although they are insignificant in number. But globally, there are worries that rising COVID cases may lead to restrictions being imposed again that could hurt economic activity. The UK raised its alert levels on Sunday, after a sharp increase in cases of the omicron variant.

Investing insights from our research team

Medplus Health Services: Organised retail shift helps, stock trades at a premium

Aditya Birla Fashion and Retail: Strong Q2; robust long-term outlook

Subros: A proxy play on PV segment growth

What else are we reading today?

'Punchy' valuations of mid-cap IT stocks are lowering the safety margin for investors

The Eastern Window | China creates digital levers to control Pakistan

Lessons for India from the Turkish Lira crisis

Relief for co-op bank depositors comes late

Is cost of maintaining a strategic petroleum reserve justified?

Technical picks: CG Power, IDFC First Bank, City Union Bank and Tata Chemicals (These are published every trading day before markets open)

Ravi Ananthanarayanan

Moneycontrol Pro