End Of QE - Emerging Markets Welcome The Move

Indian Benchmark share indices ended over one-month highs on Wednesday led by auto and metal shares ahead of the October derivatives expiry and ahead of the outcome of the two-day US Fed meet. The 30-share Sensex ended 217 points higher at 27,098 and the 50-share Nifty gained 63 points to close at 8,090.I n the broader markets, BSE Midcap index ended 0.5%higher and the BSE Smallcap index edged higher by 0.6%.Meanwhile, the Indian rupee was trading higher at Rs 61.30 compared to previous close of Rs 61.32 ahead of the Fed meet outcome.

As we move ahead today it is expected to be a volatile day for the Indian equities on account of F&O expiry. What is expected to add to the volatility is, mixed global cues. A lot of global market moves were dependent on what Fed announced at the FOMC meet. As expected, US Fed ended its monthly bond buying completely. The US stocks closed with slight losses on yesterday, off their lows of the session, after the Federal Reserve ended its monthly bond-buying program as it expressed confidence in the country's economic prospects. Just to quantify, The Dow fell 31.6 points, or 0.19 %, to 16,974.15, the S&P 500 lost 2.84 points, or 0.14 %, to 1,982.21 and the Nasdaq Composite dropped 15.07 points, or 0.33 %, to 4,549.23. We are of the opinion that the Fed statement was quite hawkish in its stance and CY15.  

Bloomberg suggested that, the US Fed cited job gains in its decision to wind up the unprecedented bond-buying program, which has suppressed U.S. yields and fueled capital inflows into emerging-market assets. Officials retained a commitment to keep key interest rates low for a “considerable time.” An update on third-quarter U.S. gross domestic product is due today, and euro-area confidence data is scheduled before inflation tomorrow, when the Bank of Japan will report on monetary policy.

While the US markets ended with some minimal losses the Asian indices are witnessing positive move. The Nikkei is trading with gains of more than half a percentage gains. Nikkei is trading at 15636 (Up 83 points). Hang Seng however is trading with some losses of 0.22%. Shanghai Composite however is trading with gains of 0.20%. SGX Nifty is trading with loss of 13 points (0.16%). We feel, emerging markets have welcomed the move by Fed.

As regards the markets, we expect the Indian equity indices to open on the negative note. However being an expiry session there is likely to high amount of volatility in the markets. Stock specific movement is expected to be order of the day.