The Indian market is observing a bearish trend for the last 8 days, and even today the same trend seems to be continuing. Today nifty was trading down 2.10% and Sensex down 2.15%.
Today the market is almost 2% down, the main reason for this is the recent meeting of the US Fed. The central bank of the US is the Federal Reserve System (also known as the Fed).
Fed likely to hike rates in March
US Fed Chairman Mr. Jerome Powell gave some commentary on January 26 after the Fed’s monitory policy statement and there is a fear of sentiment in the investor and broader market about the same.
The US fed has still not increased the benchmark interest rate. But Mr. Jerome Powell said that there could be a tightening of the monitory policy going forward.
Mr. Powell said the US Fed could raise interest rates due to multi-decade high inflation. Apart from this, investors believe that the Federal Reserve can raise the interest rate by 4 times in 2022.
According to investment bank Nomura, the Fed may increase the interest rate by 50 basis points in its upcoming March meeting.
For this reason, FPIs (foreign portfolio investors) and FIIs (foreign institutional investors) are also withdrawing their capital from emerging markets like India.
FIIs (Foreign Institutional Investors)
From October 2021 till now, the foreign investor has almost withdrawn 1 lakh crore rupees from Indian domestic equity. The United State of America plays a huge role in the global capital market.
A major capital in the equity market comes through the US and if the capital inflow from there is reduced then its direct impact falls on India and other emerging markets. And there the liquidity decreases.