Gold Silver Reports — Fed Chief’s Rate Hike Hints may Spike Volatility in Stock Markets — There can be some profit booking this week and markets could be volatile, say analysts. In her statement on Friday , the US Federal Reserve Chair Janet Yellen said the US economy is in better shape, making a good case for increasing the rates.
As an immediate reaction, the US markets traded volatile and ended slightly lower after the speech. The Dow Jones Industrial Index ended 0.37% lower while the S&P 500 declined 0.23% on Friday .
“This is the next most important global event and will deeply influence the markets if and when the US Fed hikes rates this year,“ said Pankaj Sharma, head of equities at Equirus Securities.“There is no doubt that this event may not be good for emerging markets, including India, and we expect that markets may react negatively on Monday .“
In the absence of any big domestic triggers, analysts said markets will be driven by global cues, which at this point look concerning.According to Sharma, negative in terest rates and sentiments in favour of nationalism are unprecedented and it is difficult to visualise their complete impact on the world and global markets. “The markets could see a correction and some volatility in the short term,“ said Sandeep Nayak, ED, Centrum Broking. “However, the statement should not be viewed as an affirmation of a rate hike because closer to the date, many other economic indicators will have to be taken into account. But the positive trend for the Indian markets remains intact because of strong domestic factors.“
“The market is not attributing a high probability for a liftoff to happen in September,“ said Ajay Bodke, CEO at Prabhudas Lilladher.“However, Yellen broadly agreeing with the hawkish stance of fellow FOMC members indicates that a rate hike towards the fag end of the year is likely. If this view strengthens, risky assets should do well and emerging markets, which were indecisive over the last few sessions, could see a relief rally as the fear of a September rate hike has receded.“
Domestic factors too will play a de cisive role this week as important indicators like India Manufacturing PMI data for August 2016 will be released on Thursday . Auto stocks will also be in focus as companies will report monthly sales data for August the same day . There will also be a fuel price review at the end of the month which will put PSU oil marketing companies in the spotlight. — Neal Bhai Reports