In tune with global markets, domestic stock markets are expected to open weak on Thursday as the US Fed reiterated its unflinching focus on inflation over growth.
SGX Nifty at 17,580 (750 am) indicates a 150-point gap down opening for Nifty futures, which on Wednesday closed at 17,731.45. Major equities across the Asia-Pacific region tumbled about 1.5 per cent in early deals on Thursday, as analysts analyse the US Fed's tough stance.
The US Federal Reserve on Wednesday increased the interest rate on expected lines by 0.75 basis points to 3-3.25 per cent. Fed chief Jerome Powell said the US Fed is strongly committed to bringing down inflation to 2 per cent. While recent indications point to moderate growth, the Fed has marked down projections of GDP growth, he said, and added: “Labour market continues to remain out of bounds, with demand exceeding supply.”
‘Hard landing’ for Wall Street
A senior market analyst, said stocks initially tumbled after the Fed remained very much committed to winning the war against inflation. The Fed is not taking any chances with inflation and they are prepared to send this economy into a recession. "Goodbye soft landing, Wall Street prepares for a hard landing," he warned.
Siddhartha Khemka, Head - Retail Research, Motilal Oswal Financial Services Ltd, said: "markets will react to the Fed’s interest rate hike decision... while the 75bps have been factored in, an aggressive commentary or sharper rate hike of 100 bps could lead to higher volatility and pressure on the market."
Also read: Govt ‘in no hurry’ on medium-term inflation target: Sources
Geopolitical tension
According to analysts, besides the US Federal Reserve’s “hawkish” stance, geopolitical tension between Russia and Ukraine is keeping investors on edge. Russian President Putin on Wednesday announced the immediate “partial mobilisation” of Russian citizens and noted they would use “all the means at our disposal,” which raises the risk that nuclear weapons could be used.
Markets will first react to the Fed meet outcome in early trade on Thursday. Besides, the scheduled weekly expiry would add to volatility, said Ajit Mishra, VP - Research, Religare Broking Ltd.
"Amidst all these factors, there are indications ifurther consolidation is on the cards, so we suggest traders stay light and focus on risk management. On the index front, the 17,400-17,500 zone would act as a cushion for Nifty, while a rebound towards the 17,900-18,000 zone may attract selling pressure," he added.