US Fed's stance offers opportunity to invest in quality businesses: Analysts
New Delhi, June 18
The US Federal Reserve's decision to maintain rates unchanged for a fourth consecutive meeting was widely expected, but the updated projections reinforce a 'higher-for-longer' interest rate environment, analysts said on Thursday.
The division among policymakers, with half still anticipating at least one more rate hike this year, along with elevated inflation forecasts and slower GDP growth, reflects the Fed's ongoing focus on controlling price pressures even if it moderates economic growth.
For global equities, the message is somewhat hawkish as expectations of an early rate-cut cycle are pushed further away, said Rajesh Palviya, Head of Research, Axis Direct.
"For Indian equities, the fundamental investment case remains solid, supported by resilient domestic macroeconomic indicators, healthy corporate earnings, sustained SIP inflows, and government-led capex," Palviya added.
However, near-term market trends could be influenced by FII flows and currency movements, as global liquidity remains tight. Overall, any volatility stemming from the Fed's stance should be viewed as an opportunity to invest in quality businesses with a medium to long-term perspective, said analysts.
At the conclusion of the Fed's two-day meeting, the first under new Chairman Kevin Warsh, the central bank left the target rate at 3.50-3.75 per cent.
US markets fell on Wednesday and Treasury yields surged after the Federal Reserve, as widely expected, left interest rates unchanged but indicated at least one quarter-point hike could be needed later this year to rein in inflation.
Major tech bellwethers led the losses, with Microsoft, Meta Platforms, Alphabet and Amazon all closing in the red.
"After the sharp decline on Fed-driven rate-hike concerns, US stock futures are trading higher on renewed hopes that a US-Iran peace deal may soon be signed and reopen the strategically important Strait of Hormuz," said Nandish Shah, Deputy Vice President, HDFC Securities.
— IANS
Reader Comments
While I agree domestic factors are strong, we can't ignore FII outflows. If US yields stay high, foreign money will keep leaving our markets. The 'buy on dips' advice is fine, but retail investors should be cautious, not reckless. We've seen too many get burnt in 2022.
Quality businesses? That's the key point. Our IT stocks may suffer near-term due to US slowdown, but pharma and FMCG are solid bets. Indian economy is a bright spot globally, and with capex push by government, we'll weather this better than others. Just avoid over-leveraging.
As someone who follows both US and Indian markets, the Fed's hawkish stance is concerning. But I've been impressed by India's resilience. The SIP culture and domestic institutional buying provide a cushion that many other emerging markets don't have. Long-term investors will benefit.
Honestly, this 'higher for longer' narrative is getting old. The Fed keeps projecting rate hikes but then doesn't deliver. Meanwhile, our mutual fund folios keep growing month after month. Indian household savings are finding their way into markets, and that's a structural positive. Let the FIIs worry about their own yields! 😊
The US-Iran peace deal angle is interesting. If Strait of Hormuz reopens, oil prices could ease significantly — that's a direct positive for India's CAD and inflation. So maybe the Fed's hawkishness is actually less of a worry for us than geopolitical developments. Always look at the bigger picture.
We welcome thoughtful discussions from our readers. Please keep comments respectful and on-topic.