The Federal Open Market Committee (FOMC) meeting at which the
Federal Reserve is expected to hike interest rates by 50 basis points begins
Tuesday. The two-day meeting, which concludes on Wednesday, will be followed by
a monetary policy speech by Chair Jerome Powell and later a press conference.
When announcing interest rates, the Fed will also provide guidance on
inflation, GDP growth and unemployment figures. The Federal Reserve hiked
interest rates by 75 basis points on Nov. 2 to keep the federal funds rate in a
target range of 3.75% to 4%. This hike was the fourth consecutive rate hike by
the US Federal Reserve, taking effective rate hikes to 375 basis points in 2022.
This week there will be a flood of macroeconomic data that will decide the
direction of the Indian stock market. Market participants will be eyeing the
Industrial Production Index (IIP) and Consumer Price Index (CPI) data, which
are due to be released on December 12. On December 14th, traders will be
following the Wholesale Price Index (WPI) data. In addition, data on the
balance of trade (exports and imports) and sales of passenger cars will be
released on December 15. Also on December 16 data on deposit growth, bank
lending growth and foreign exchange reserves will be released. The US S&P
500 Index posted its bottom return in five weeks, while the small-cap Russell
2000 Index had its worst week since late September. Investors are waiting to
hear what Chairman Powell has to say about the inflationary environment next
Wednesday (December 14) as the two-day Federal Open Market Committee (FOMC)
meeting concludes. Markets closed lower last week as the DJIA fell 2.8%, the
S&P 500 fell 3.4% and the Nasdaq Composite fell 4.0%. Weak Chinese
trade data dampened optimism over China's reopening. Its exports fell more than
forecast by 8.7% yoy in November, marking the sharpest monthly drop in exports
since February 2020. All eyes will be on the Federal Reserve as it wraps up a
two-day FOMC meeting and issues verdict on the pace and magnitude of interest
rates. Global equity markets have fallen on near-term resistance and we advise
traders to remain vigilant on their long positions. Nifty is likely to find
immediate support near the 18400-18350 levels where put options were written. A
move below 18350 can take Nifty further down to previous swing lows of 18133.
Markets will turn bullish if Nifty manages to convincingly surpass 18665-18729.
On the global front, all eyes will be on the US Federal Reserve's (FOMC) FOMC
meeting, scheduled for December 13-14, to decide the magnitude of the next rate
hike. Also, investors will be keeping an eye on little economic data from the
United States (US), starting with consumer inflation expectations on November
12th, followed by the monthly budget statement, core inflation rate, CPI,
Redbook, on December 13th, the Change in API Crude Oil Inventories and Export
& Import Prices on December 14th, Retail Sales, Industrial Production,
Corporate Inventories on December 15th and Baker Hughes Total Rig Count on
December 16th. Investors will also be following the 48th GST Council
meeting, chaired by Union Finance Minister Nirmala Sitharaman, which will take
place on December 17 in a virtual format. Meanwhile, a meeting of the G20
Council Development Working Group will be held in Mumbai from December 13-16.
In the primary market, the Rs 552 crore initial public offering (IPO) of car
dealership chain Landmark Cars will open for public subscription on December 13
and close on December 15. This week is crucial for global equity markets as
markets will eagerly await comment from the Fed on the 14th and from the ECB
and BoE on the 15th. However, the tone for central bank comment will be set by
the US CPI data due on the 13th. If the CPI data confirms a bearish trend, the
Fed may reiterate its earlier comment of slowing rate hikes, which the market
interprets as a move away from the hawkish stance. On the contrary, if the CPI
data reflects stubborn inflation the Fed will have no choice but to remain
hawkish. This will have a negative impact on the stock markets. The continued
rally in PSU bank stocks suggests interest in large-scale buying in this
segment. This segment, under-owned for nearly a decade, is now bouncing back
with improving fundamentals and attractive valuations, even after the recent
price rally.
