Will Fed be the healer for D-Street bulls or deepen the wounds?

The Budget for FY24 delivered what Dalal Street had largely asked for, but the euphoria around it couldn’t last longer today — thanks to the rout in Adani Group stocks.

The benchmark Nifty 50 ended 0.3% down at 17,616.30 points after testing a high of 17,972.20 points intra-day. This was primarily because of the massive sell-off in Adani Enterprises and Adani Ports and Special Economic Zone, both of which are part of the 50-stock index.

While the BSE Sensex ended 0.3% higher at 5,9708.08 points, it was sharply off the day’s high of 60773.44 points.

Another reason for the market giving up most of the gains was the caution among foreign investors ahead of the US Federal Reserve’s monetary policy action, due later today, and its likely guidance for rates in 2023.
The Federal Reserve officials are likely to further raise interest rates, but by a smaller quantum of 25 basis points.

But Chairman Jerome Powell is likely to keep further hikes on the table given that in the last meeting, most officials had ruled out any rate cuts later in 2023.

Will Fed officials stand by this guidance or turn a bit dovish will be important to watch out for, and this will decide the course of market direction.

“The biggest risk in 2023 will be the US monetary policy and the trajectory of the US dollar. Global markets fear a recession looming for the US economy, while the prolonging Russia-Ukraine war continues to threaten the world economy,” said Mitul Shah - head of research at Reliance Securities.

According to Deepak Jasani of HDFC Securities, while Fed’s policy actions are critical, volatility in the market could be lesser than the one seen today.

“The US Fed meeting outcome is due this evening and could impact the Indian markets on Thursday; however this kind of volatility may not be repeated. Nifty50 continues to face resistance at around 17,760 levels, while support levels have now fallen to 17,353,” said Jasani.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)