Good Time To Stay Out Of Indian Markets As Yellen Hints At Interest Rate Hike

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Those who invested money at the start of the year in Indian stock markets are a disappointed lot. The Sensex, which ended Jan 1, 2015 at 27,507 points is a good 1600 points lower today at 25,960 points.

As we head into the last month of the year, there's no question of the Sensex hitting that level again this year. Interestingly, while in the last few years, you found places like IT and pharma as great defensive bets, that bastion has also collapsed.

Good Time To Stay Out Of Indian Markets As Yellen Hints At Interest Rate Hike
Pharma stocks have fallen as companies are increasingly getting warning letters from the US FDA and IT companies have been performing poorly. Banking stocks are saddled with NPAs and FMCG stocks are the ones that are probably better off.

The real worry for the markets is really two things. The first is that the Modi premium is fast fading. As we right, the Panchayat elections in Gujarat a BJP bastion has gone to the Congress, which means rural Gujarat is not happy. This comes on the back of drubbing for the NDA in Delhi and Bihar. To now push the economic reforms agenda will become increasingly difficult and populist measures may have to be resorted to.

The second big worry is that interest rates in the US would most likely rise in Dec. The US Fed officials would meet on Dec 16 and Dec 17, wherein it is highly likely that the Fed would raise interest rates for the first time since June 2006.

Foreign Portfolio Investors, which are the biggest set of investors in the markets today, might sell Indian stocks if that were to happen.

While, they have already sold Indian shares in anticipation of the action, there could be some more selling when the event actually takes place.

And, if they believe that the pace of interest rate hike could be faster, expect some more selling pressure.

It is quite possible that you may get the Sensex below 25,000 levels by the end of the year. Hence, if you are planning to invest now, it would be best to wait for the markets do dip some more.

GoodReturns.in

Read more about: sensex, nifty
Story first published: Thursday, December 3, 2015, 10:30 [IST]
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