NEW DELHI: After being directionless in the last few weeks, the trajectory of India’s heartbeat index Nifty would depend on two major known events in the near term – Union Budget and Fed meeting outcome – besides the ongoing earnings season. Coincidentally, both events are on the same day on February 1, making it a long and tiring day for both bulls and bears.
While Finance Minister Nirmala Sitharaman is likely to present the Budget at 11 am in the Parliament, US Federal Reserve Chair Jerome Powell would announce the outcome of the two-day meeting of the world’s most powerful central bank’s rate setting committee at midnight.
With many policy decisions, including those related to the GST, being taken outside of the Budget day presentation, many market watchers do not see any major impact unless there are some unexpected announcements. On the other hand, in light of the global nature of inflation and interest rate policies, Powell’s words could have a bigger impact.
Budget Impact
Since 2013, Sensex performance in the pre-Budget fortnight has been mixed with the index trading in green six out of 12 times.
In the first Fed meeting of 2023, Powell is widely expected to slow down the pace of interest rate hikes. CME FedWatch Tool shows a 91% probability of a 25 basis point rate hike in the two-day Jan 31-Feb 1 meeting.
“We have seen a deceleration in inflation and thus, the interest rate cycle may be seen peaking out. From that perspective, I believe that the Fed can do a 25 -35 bps hike. But instead of the hikes, I believe the commentary has become more important for the ongoing and future hikes. The commentary will set the stage for the market environment, which can greatly impact global markets,” Jain said.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)