We expect a weak start in India amid concerns on monetary tightening worldwide. One needs to be careful amid constant flow of news and heightened market volatility across asset classes. Inflation is threatening to touch double digits though the RBI maintains it won’t hike rates before April. But then the RBI too could surprise if inflation shoots up sharply.
The bears will be pleasantly surprised as investors find themselves in a season of surprises. After China’s unexpected second hike in the reserve ratio last week, the Fed has increased the discount rate by 25 basis points. The US central bank said the move reflects improvements in the US economy and does not reflect a change in policy.
Late last week, Fed chief Ben Bernanke had indicated a move was coming, but no many anticipated any action between meetings. The dollar is up while gold prices have slipped further. Crude oil too is also up. The Fed move came after Wall Street trading, where US stocks gained in a volatile session. European shares advanced but Asian markets are mixed. China market remains shut.
