US Fed meeting, and will the markets see a sell-off again?

Besides the results of index heavyweights – Reliance Industries, Infosys, Kotak Bank and ICICI Bank – that will impact market sentiment on Monday, all eyes will be on the outcome of the two-day long meeting of the US Federal Reserve that will end on July 27.

Analysts expect the US central bank to get aggressive in its endeavour to tame the galloping inflation that hit 9.1 per cent in June – the highest reading since 1981. 

Most analysts expect a hike between 75 to 100 basis points by the US central bank on Wednesday.

Christopher Woods of Jefferies, for instance, believes, “The announcement of the June CPI data point will likely lead to the Fed announcing another 75-basis point rate hike on July 27.” 

Phillip Marey of Rabobank International, on the other hand, says, “It would now be a shock if the Fed did not hike rates by 100bp in July” - Philip Marey, Senior US Strategist, Rabobank International 

Earlier in June, the US Fed had hiked interest rates by 75 bps, the biggest hike in 28 years, in a move to cap this flying inflation.

So, to what extent are the Indian markets pricing this steep hike? Should you brace for another sell-off around the event?

Remember, rising inflation and steep rate hikes amid geopolitical concerns have already dented market sentiment across the globe. 

The S&P 500 is down over 20 per cent year-to-date. The DJIA and the NASDAQ, too, have slipped 13 per cent and 28 per cent during this period.

Back home, S&P BSE Sensex and Nifty50 have dropped around 6 per cent each.

Devang Mehta, Head Equity Advisory, Centrum Wealth, says markets are factoring in 75 - 100 bps US Fed rate hike. He expect markets to remain choppy around the outcome. Valuation support at around 15,500 – 15,800 (Nifty). 

Over the next couple of days, the markets will digest the US Fed action, react to June quarter results of India Inc and remain choppy ahead of the expiry of futures and contracts for the July series.