Markets end flat after rising on BoJ stimulus

MUMBAI: Indian stock markets ended flat on Wednesday after early morning gains as investors remained indecisive in anticipation of the US Federal Reserve keepings

MUMBAI: Indian stock markets ended flat on Wednesday after early morning gains as investors remained indecisive in anticipation of the US Federal Reserve keepings its key rate unchanged.

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Earlier in the day global sentiment was lifted after the Bank of Japan (BOJ) overhauled its policy framework and recommitted itself to more policy easing in the coming weeks. The BSE ended down 16 points and the NSE’s Nifty rose by a single point.

With concerns growing in recent days that the BOJ along with other major central banks is reaching the limits of its massive stimulus programme, the latest volley of measures is likely to support risk appetite in the short term. Though the Fed is not expected to raise rates, investors will comb the US central bank’s statement for any clues on the timing of the next rate hike.

In a bid to reassure nervous markets, the BOJ maintained its 0.1% negative rate but it dropped its explicit target of printing 80 trillion yen ($788 billion) annually. Analysts feel it is tacit admission that easy money policies are becoming unsustainable. The Central Bank will also target higher than 2% inflation rate.

“Today’s (Wednesday’s) announcements (by the Bank of Japan) mark a new chapter in central banking regime,” said Nikhil Gupta, economist with Motilal Oswal Financial Services. “This will certainly make other central bankers, whose economies are also struggling, especially Eurozone, consider such options.”

Tapering of easy money policies being followed in the US, Europe and Japan may lead to outflow of foreign investments in countries like India.

In addition to the US Fed and BoJ monetary policies, Indian markets will also be affected by domestic factors including the retail inflation, which was down to 5.05% in August.

“We believe India’s interest rate cycle will largely depend on inflation and its stated monetary policy objectives rather than on external events and foreign inflows,” said Sanjeev Prasad of Kotak Institutional Securities.

(With Reuters inputs)