US Fed's policy to intensify FPI sell off on Dalal Street?

 The US Fed has signaled a hawkish stance in the coming years while keeping the policy rates unchanged for now. Find out what the US Fed's policy means for India and where the benchmarks are headed

Dalal Street indices eked out marginal gains yesterday even as the outcome of the US Federal Reserve boosted risk sentiment globally.
Under normal circumstances, a larger taper and three rate hikes of 25bp each in 2022 would have been considered negative from the market perspective.

However, world stocks rose on Thursday as the US Federal Reserve expects inflation to gradually cool off.
This, Fed chair Jerome Powell said, would enable a slower lift-off in the policy rate to 1.6 percent by the end of 2023 and 2.1 percent by the end of 2024.
Yet, as the rates will stay below the level of 2.5 percent, which is considered a neutral level by the Fed, the Fed policy was positive for equities.
Commenting on the outcome, Mohit Ralhan, managing partner, and chief investment officer at TIW Private Equity said the Fed’s commentary on inflation has made the start of the tapering a foregone conclusion. Listen in.
That said, rate hikes by the world’s biggest economy would also mean an outbound flight of capital from emerging markets, including India.
And this may keep Indian equities under pressure in the near term.
On Thursday, too, the Sensex and the Nifty opened nearly a percent higher amid a firm global set-up, but they ended flat amid persistent FPI selling.
Let’s go to Gaurang Shah, senior vice-president at Geojit Financial Services to know the near-term market trajectory.
Mohit Ralhan of TIW PE expresses similar views and says Indian markets have been witnessing a downward pressure in anticipation that the Fed’s policy may lead to a decrease in liquidity.