FOMC Meeting: The Next ‘Big’ Event Before 22 September Expiry!

  • Stock Market Analysis

The two-day FOMC meeting by the US Fed will kick off today which would be the next big event for the global markets including India. Ahead of the meeting, the US markets are roaring strong with the Dow Jones gaining around 200 points in yesterday’s session. Most market participants expect a 75 bps rate hike, while some are also betting on a whole 1 percentage rate hike. 

The rate hike is not just certain but a minimum of 75 bps is a sure-shot call from the US Fed. The central bank has already made 2 consecutive 75 bps rate hikes in the last two meetings which already showed the Fed’s aggressive stance on bringing down inflation and correcting its mistake of estimating rising inflation as only ‘transitionary’. The 3rd consecutive 75-bps hike (which is almost certain) would throw the US economy closer than ever towards recession. In fact, the US has already recorded two consecutive quarters of GDP contraction, technically termed a recession. 

However, the market might not react negatively to a 75 bps hike. That’s because there’s also a possibility of a 100 bps hike, therefore in a relative sense if a 100 bps hike happens, it would be the real trigger for a sell-off in the equity markets. Also, a 75 bps hike is probably already been discounted by the market, leaving a little surprise for investors. 

The meeting would conclude on 21 September 2022, around 11:30 PM IST, therefore the effect of the rate hike would be reflected in the Indian markets on 22 September 2022, that is on the weekly expiry day of the benchmark indices.

The Nifty has remained volatile over the last few sessions. Huge gap ups and gap downs followed by intraday recoveries have made it tough even for seasoned traders to keep up with the direction. The volatility is definitely quite high and not for novice traders. On top of that, a major event is coming up in the next couple of days. As per the spot levels, 18,000 is still holding to be a stiff resistance but could be breached amid the rate hike decision. On the downside, 17,450 is looking good support for the current weekly expiry. The range is quite big for the next two days to account for heightened volatility. 

The current market environment is best suited for mean reversion trading as opposed to trend-following. It means buying on dips and selling on rallies is working better in this market rather than buying/selling on breakouts/breakdowns.

Drop an image here or Supported formats: *.jpg, *.png, *.gif up to 5mb

Error: File type not supported

Drop an image here or

100
  • Prabhat Jha @Prabhat Jha
    Gap down . 17300-17400
    Like 4
  • Girish Kumar @Girish Kumar
    thank you, Aayush ji.
    Like 0
  • AKSHAY RASTOGI @AKSHAY RASTOGI
    i think in place of 100 bps you wrote 1 bps
    Like 1
    • Vishnubhatla Subrahmanyam @Vishnubhatla Subrahmanyam
      @AKSHAY RASTOGI Kindly read once again. It is not 1 bps, he wrote 1 percent means 100 bps only
      Like 1
    • Drop an image here or Supported formats: *.jpg, *.png, *.gif up to 5mb

      Error: File type not supported

      Drop an image here or

      100
  • AKSHAY RASTOGI @AKSHAY RASTOGI
    i think in place of 100 bps you wrote 1 bps
    Like 0
    • Aayush Khanna/Investing.com @Aayush Khanna/Investing.com
      Thanks Akshay. Yes I meant 100 bps.
      Like 0
    • Drop an image here or Supported formats: *.jpg, *.png, *.gif up to 5mb

      Error: File type not supported

      Drop an image here or

      100
  • Avinash Kulkarni @Avinash Kulkarni
    Would you please throw some light on why ADANIENT is rising without slightest retracement in increasing interest rate environment inspite of high debt and it's high servicing costs due to increasing interest rates
    Like 1
  • Nachiket Raut @Nachiket Raut
    I THINK 1% RATE HIKE IS POSSIBLE AS RESULTS ARE BADLY AFFECTING INFLATION COMPARED WITH PREVIOUS 2MONTHS REPORT.
    Like 2
  • Nachiket Raut @Nachiket Raut
    I THINK 1% RATE HIKE IS POSSIBLE AS RESULTS ARE BADLY AFFECTING INFLATION COMPARED WITH PREVIOUS 2MONTHS REPORT.
    Like 1
  • JAMES HOPPER @JAMES HOPPER
    0.5% COULD BE SUPRISE
    Like 1
  • Abhishek Saddi @Abhishek Saddi
    Dow Jones to see sub 30000 levels within this week
    Like 0
    • Abhishek Saddi @Abhishek Saddi
      as mentioned yesterday, Dow Jones to see sub 30000 levels within this week. Today's low 29994.87 ..... more lower levels to follow in the coming weeks....potentially going for 2020 January levels and below
      Like 0
    • Drop an image here or Supported formats: *.jpg, *.png, *.gif up to 5mb

      Error: File type not supported

      Drop an image here or

      100
  • raman kanwal @raman kanwal
    Is rate hike of 1.25 is possible
    Like 8

Related Articles