Market reacts to US interest rate hike

The US Federal Reserve raised interest rates by 25 basis points on Wednesday. The Indian equity market reacted to this hike and was down more than 200 points in the morning session on Thursday.

US Fed increased key interest rates from 2.25 to 2.50 per cent. More than the rate hike, the market was looking for directions from the US Federal Reserve chief Jerome Powell's speech. Powell said that projection shows a softening of the economy due to subdued growth and volatility in the financial markets, internationally. He hinted on fewer rate hikes in 2019.

Asserting the independence of the Federal Reserve, Powell said that political considerations have no role to play in the Fed's decisions about monetary policy. He commented that the monetary policy will play a smaller role in boosting the economy in 2019 and that 2018 was the strongest year for the US economy post the 2008 financial crisis. 

The US markets fell sharply with the Dow Jones closing down by 1.49 per cent, Nasdaq was down 2.17 per cent and S&P 500 closed down by 1.54 per cent, on Wednesday.  

The Indian rupee opened lower at 70.68 against the US dollar. With the Fed's hike, it is expected that the RBI will announce a 25 bps cut in its next policy review meeting. 

After opening in red, the market slipped down further at 11:16, the BSE Sensex was at 36,278.62, down by 205.71 points or 0.56 per cent and Nifty50 was at 10,902.00, down by 65.30 points or 0.60 per cent on Thursday. Surprisingly Nifty Mid-cap and Small cap indices were in green, while all sector indices except Pharma were in the red. 

Among the top gainer on BSE Sensex were Yes Bank, Asian Paint, M&M, Sun Pharma, Kotak Bank and L&T and the top loser were Vedanta, Bharti Airtel, Reliance, HDFC, Axis Bank and Wipro.