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New Delhi: Indian stocks edged lower on Thursday morning in line with weaker global cues after the US Federal Reserve raised yet another policy rate in a fight against high inflation. However, a steep decline was avoided as investors had already discounted possible rate hikes by the US Federal Reserve.
At 9.33 am, the Sensex was trading down 152.82 points, or 0.26 percent, at 59,303.96, while the Nifty was down 46.40 points, or 0.26 percent, at 17,671.95. “The big question from an Indian market perspective is whether India’s performance will continue in the current global risk environment. “Investors can be optimistic but cautious as India’s valuations are high,” said VK Vijayakumar, chief investment strategist at Geojit Financial Services.
“Financials, capital goods, select autos, telecom and construction-related stocks can be bought on the dip,” Vijayakumar said. Meanwhile, the Indian currency rupee once again crossed the psychologically important 80 level against the US dollar at 80.44 against the previous day’s close of 79.97.
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This sharp depreciation was due to the ongoing strength of the US dollar index. The key policy rate in the US was raised by 75 basis points to 3.0-3.25 percent – the third consecutive increase by the same amount.
The U.S. Federal Reserve seeks to achieve maximum employment and inflation at a rate of 2 percent over the long term and expects ongoing increases in the target range to be appropriate. In reaction to the rate hike move, US stocks ended the day down nearly 2 percent.
US consumer inflation eased to 8.3 percent from 8.5 percent in August, but remained above the 2 percent target in July. Raising interest rates is a monetary policy tool that generally helps to suppress demand in the economy, thereby helping to reduce the rate of inflation.
The US Fed statement added that the committee’s forward-looking assessments will consider a wide range of information, including readings on public health, labor market conditions, inflationary pressures and expectations, and financial and other international developments.
“Price stability is the responsibility of the Federal Reserve and serves as the bedrock of our economy. Without price stability, the economy will not work for anyone. In particular, without price stability, we will not achieve a sustained period of strong labor market conditions that will benefit everyone,” US Federal Reserve Chairman Jerome Powell said in a recent monetary policy statement. said in his opening statement after the policy review meeting.
Powell said the Fed is “deliberately moving our policy stance to a level that is sufficiently restrained to get inflation back to 2 percent.” “We are very mindful of the risks of higher inflation on both sides of our mandate, and we remain committed to returning inflation to our 2 percent objective,” Powell said later in his opening statement.
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Regarding slowing the pace of rate hikes, the president said: “At some point, when the stance of monetary policy tightens further, it may be appropriate to slow the pace of increases while we assess how our overall policy adjustments affect the economy and inflation.”
Restoring price stability will require maintaining a restrictive policy stance for some time, he said, adding that the historical record strongly warns against premature policy easing.
The post US Fed’s interest rate hike moves Indian stocks down; Rupee hits fresh low.