How do you see the stock markets reacting to the Fed hike on Thursday after the sharp fall in the Nifty on Wednesday?

The reaction to the Fed meet was already seen on Wednesday as the Nifty closed 98 points lower with most of the pressure coming from the financials. Late on Wednesday, the Fed hiked rates by 75 bps and also maintained its hawkish stance till inflation came under control. That was hardly surprising although the tone still sounded quite tough.

The structural weakness in the market was visible with the A/D ratio of 13:36 clearly indicating the pressure on the frontline stocks. Only the defensive FMCG stocks were doing well as defensive bets. The pressure was visible across the banking and the metals space but it was cement stocks that came under maximum pressure, more due to internal reasons.

FPI uncertainty was visible in these investors being rather neutral on Wednesday. Foreign investors were net sellers in equities to the tune of Rs.461 crore as domestic funds and LIC bought stocks worth Rs.539 crore on Wednesday. The overall FPI volumes in gross terms were quite tepid considering the uncertainty of the Fed move.

The US markets reacted negatively to the Fed statement and that is likely to rub off on India on Thursday. On Wednesday, Dow was down 523 points and the NASDAQ was down 205 points after FOMC hiked rates by 75 bps hawkish undertone. Europe markets were largely in the positive but SGX nifty is already 140 points lower in early trades on Thursday.

In terms of view for the markets, it is likely to open gap down on Thursday due to the impact of the Fed hiking rates by 75 basis points and key US markets reacting negatively to the news. The way the Dow and NASDAQ corrected sharply post the Fed statement, it is evident that there is a lot of pressure on the Indian markets. For now, the focus would be to wait for the markets to settle down and absorb monetary cues from the RBI.