What does the latest Fed policy statement mean for Indian markets?

Before we come to the India story, let us look at some interesting aspects of the Fed announcement. Bond yields are higher indicating that inflation could harden. However, the CME Fed Watch does not see a probability of more than 14% for a rate hike till Dec-21. The moral of the story is that even if growth and inflation shoot up, the Fed may take it easy.

For India, RBI does not want too much monetary divergence from the Fed. That is risky. The latest Fed policy gives the much-needed comfort. Fed statement ratifies the RBI stance that rates should be held low and liquidity comfortable till sustainable growth returns. The real good news is that central banks will keep the liquidity taps flowing and that is a positive sentiment for the equity markets, which is still largely flow and liquidity driven.