All Eyes On FOMC Meet

There was less of enthusiasm in the Indian equities after the Diwali celebrations. While ahead of the Diwali the benchmark indices had witnessed a good northward movement of more than 3%, some profit booking occurred in the first session after Diwali. The profit booking in leading stocks took the indices lower where the Sensex closed at 26753 (Down 98 points) and Nifty closed below the psychological 8000 mark. Nifty closed at 7991 (Down 23 points). The profit booking was quite broad based with Mid-cap index witnessing a decline of 0.84% and Small cap also declining 0.19%. If we take a look at the other factors that dampened the mood yesterday was poor financial performance of HUL for the quarter ended September 2014. Even weak European cues also dampened the mood.

Indian equities are likely to remain volatile for next three trading sessions ahead of the F&O expiry this Thursday. This has been a very volatile sort of trading cycle as the sentiments witnessed wide swings. What is going to add more volatility is the Federal Open Market Committee (FOMC) meet today.

There is possibility that the US Federal may completely stops its bond buying program which was started as a stimulus to help the economy revive. With the US economy showing good signs of revival, there were expectations about closure of stimulus in the month of October. What needs to be seen is what stance Fed takes in terms of interest rates. At the time of preceding meet while the overall tone was dovish the undertone was quite hawkish. We are of the opinion that, Fed is unlikely to raise the interest rates this calendar year. However there is possibility of rate being increased in the first quarter of CY15.

While the Indian markets witnessed profit booking ahead of FOMC meet, the US markets also remained range bound and ended on a very flat note. While the Dow closed at 16817 (Up 12.53 points or 0.07%), the S&P closed at 1961 (Down 3 points or 0.15%). On the movement of US markers reports suggested that, despite recent swings in stocks, long-term investors remain largely optimistic on the outlook for US markets for the remainder of the year, citing improving corporate earnings and steady economic growth. Report also added that, so far around 213 companies in the S&P 500 have reported third-quarter earnings, and the index is on track for 5.6% earnings growth from a year ago. That is higher than the 4.5% earnings growth expected before the reporting season began. European markets however remained under pressure with all the leading equity indices like FTSE 100, CAC 40 and DAX declining further.

Asian markets have opened on a cautious note however. Nikkei is trading in red with cuts of around 0.60%. Experts suggest that Asian stocks are trading weak owing to US shares remaining flat after American data from home sales to manufacturing fell short of estimates and investors await a Fed decision on its stimulus program. While Nikkei is trading weak Hang Seng and Shanghai Composite are trading in green with gains of 0.45% and 0.55% respectively. SGX Nifty is also trading in green with gains of around 0.32%.

Ahead of the important US Fed meet there is a possibility that the Indian markets may remain under pressure today. However the opening is expected to be on a positive note. Today there is quarterly results announcement of companies like Lupin, Ranbaxy and ABB. This may keep the investors interested.