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Moneycontrol Pro Panorama | The message for Indian equities from the US Fed dot plot

In today’s edition of Moneycontrol Pro Panorama: Consumer spending an eyesore, Fed policy dynamics for India, RBI’s pulse of the economy, why battery makers are fully charged, a housing finance saga, criminal waste of doses and much more

June 17, 2021 / 03:02 PM IST

Dear Reader,

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 dot plot is a tool used by the US Federal Reserve to signal its outlook on interest rates. In the just ended meeting of the Fed Open Market Committee, it has taken a hawkish turn although nothing is expected to happen this year.

The plot shows that two rate hikes are likely in 2023. Thirteen out of the 18 members expected at least one hike in 2023 versus seven in March. Inflation is clearly beginning to bite. The Fed’s inflation estimate for the year is 3.4 percent, one percentage point higher than what it had projected in March. US treasury yields and the dollar climbed.

What does this mean for Indian equities?

Close

Now, 2023 is still a year and half away. And the dot plot doesn’t have a great record of accuracy. But the inflation numbers are there for all to see.

This hawkish turn and increasing uncertainty about higher inflation are enough to spook the markets. Higher US treasury yields, interest rates and a stronger dollar all don’t augur well for Indian equities.

At the same time, a pace of vaccination that is not as high enough as desired and poor consumer confidence that threatens to dampen the economic recovery threaten to rein in runaway local equities.

For a comprehensive analysis of the impact of the US Fed’s move on Indian equities, click here. For another view on the Fed meeting from the FT (exclusive access for Pro subscribers), click here.

Do check out these investing insights from our research team:

Three factors that add value to LIC Housing Finance

Multiple factors switch it on for battery manufacturers

Lemon Tree Hotels: Poised for a strong recovery

What else are we reading today?

60 million COVID doses gone waste in US: A blot on pharma industry

India’s excess power capacities begin to correct, now wait for demand

RBI report says second wave caused Rs 2 trillion hit to economy and defends quote fests

SEBI's delisting regulation changes are of little help to promoters and investors

Technical picks : Tata Steel, Torrent Power, Dhampur Sugar and Coal India (These are published every trading day before markets open and can be read on the app)

Ravi Krishnan

Moneycontrol Pro
Ravi Krishnan is deputy executive editor at Moneycontrol

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