US Fed unlikely to raise rates, say experts. Indian markets trade higher

The Indian markets have been trading up mainly on the back of an increased probability that the US Federal Reserve which will meet later today, may not raise interest rates.

The Indian markets have been trading up mainly on the back of an increased probability that the US Federal Reserve which will meet later today, may not raise interest rates.

The Indian markets have been trading up mainly on the back of an increased probability that the US Federal Reserve which will meet later today, may not raise interest rates. (PTI)

At 11 AM, the sensex was up 0.4%, while the NSE Nifty was up 0.5%.

International media reports based on a poll of economists say that tepid inflation and weak housing and jobs data imply that the US Fed will not increase rates, a situation that would have led foreign investors – still the mainstay for Indian stock markets – to pull out of the country. This was the reason that most investors had sold on Monday fearing a pull-out by foreign funds.

“I think that fear has more or less receded,” said Mayuresh Joshi, fund manager at Angel Broking. “Now any rate hike probability will happen probably in December or after that. That has given lot of confidence to the markets,” he added.

The US Fed will have to base their decision on an unemployment rate rise of 4.9% with inflation that is still below the central bank’s 2% target. A rise in interest rates is needed to revive the economy and give it the necessary push.

Real action has come from the Bank of Japan which has said that it will continue to buy long term government bonds. HDFC Bank chief economist Abheek Barua lists the US Fed unlikely rate hike and the Bank of Japan’s monetary policy to determine Indian market trends. “...The most likely outcome in our view is the expansion of pool of assets,” he said.