Road ahead for Indian equities post US Fed rate hike

Now that one of the major financial decisions of 2016 is behind us in terms of US fed rate hike , markets can take cues from local developments and may take direction on their own.

On December 14, US Fed as expected increased the interest rate by 25 bps. Markets globally had already factored in the move and hence may not react violently to the move, however what has dampened the mood for several of the emerging market traders is the signal that the rates may further be increased in 2017 couple of times in the year.

Emerging markets along with Indian markets may not like the futuristic statements made by Janet Yellen on possibility of further interest rate hike in 2017. With the fed meeting conclusion, the probability of interest rate hike in June 2017 has increased substantially.

Asian markets are reacting negatively to the development and SGX Nifty has already shed 100 odd points. Indian markets may start focusing on budget developments and demonetisation effects may start soothing down.

Market participants can expect outflow of capital by FPIs and this may not augur well for Indian markets.

There is an optimism driven rally in US markets and Dow Jones Industrial Average is touching record highs nearing 20k for the first time in the history of markets.