US Fed Rate hike will have very small impact on India

The Indian market saw a significant decline in today’s trading session after US Federal Reserve minutes boosted the case for higher US interest rates. The Indian stocks along with the rupee fell sharply today. The Sensex dipped over 400 points while the rupee inched toward 67 per dollar. Nifty share price dropped to a day low of 8541 approximately so far, from a previous closing of 8708.80 for 10th October 2016, Monday.

The rupee witnessed the biggest decline in almost two weeks. It weakened 0.4 per cent, the most since 29th September, to 66.7650 per dollar. The yield on sovereign bonds due September 2026 moved up one basis point to 6.72 per cent, according to the trading system of Reserve Bank of India.

Higher US rates would further boost the country’s divergence with policy approaches in economies like Japan and Europe, and might damp flows to emerging markets including India. In the year 2016, global funds have bought US$ 7.8 billion of Indian shares this year, more than twice the amount of US$ 3.3 billion they invested in the year 2015, data compiled by Bloomberg show. These inflows have helped Indian equities rebound 21 per cent from a low reached in the month of February, 2016.

Meanwhile in the domestic market, the investors are also looking forward to the upcoming Q2FY17 results which are to begin on today (Thursday) with Tata Consultancy Services Ltd., the largest software exporter Asia. The results are to be reported after the market hours. TCS share price retreated 1.6 per cent. Nearest rival to TCS is Infosys Ltd. Infosys share price climbed to a seven-week high. The company is due to report its quarterly figures before trading begins on Friday.

According to some market analysts, a blockbuster earnings season this quarter is out of expectation. It will be in line with expectations. Earnings over the next two quarters will be better as the impact of a good monsoon, the increase in government staff salaries as well as spending on infrastructure will come into play.

The government is due to announce the retail inflation data after market hours on Thursday. The rate dropped to 4.6 per cent in September from 5.1 per cent a month earlier, according to the median estimate of 33 economists in a Bloomberg survey.

The Sensex is valued at 16.4 times projected 12-month earnings, while the MSCI Emerging Markets Index trades at a multiple of 12.3, as showed by the data compiled by Bloomberg show.