Even though the ‘hawkish pause’ from the Fed was on expected lines, the US markets reacted negatively since the indication from the Fed is that rates will remain ‘higher for longer’. The US GDP growth projection now stands at 2.1% for 2023 and 1.5% for 2024 recovering to 1.8% in 2025. As the Fed chief said, “soft landing is a plausible scenario.” This narrative is likely to help the mother market consolidate around the current levels, supporting other markets, too, without any sharp corrections.
For Nifty the biggest drag will be more FII selling in response to the rising dollar and US bond yields. The dollar index above 105 and the US 10-year bond yield at 4.39 % suggest continued FII selling which has touched Rs 13925 crores so far in September. But DII plus retail buying is likely to support the market on declines.
Domestic consumption stories like automobiles, hotels and real estate are on strong wicket and the capital goods segment has been witnessing buying in recent weeks even when FIIs were sellers in the market.
PSU banks are likely to witness renewed buying on declines since their valuations are attractive and prospects look good.
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