FII selling may continue
Offloading by foreign funds in Indian markets could intensify after hotter than expected US inflation numbers
Why FIIs flow remains a critical factor influencing India's market dynamics?
New Delhi: A major catalyst driving the rally in global equity markets has been on the expectations of a rate cut by the Fed, says VK Vijayakumar, Chief Investment Strategist, Geojit Financial Services.
The Fed had indicated possibly three rate cuts in 2024 and markets had discounted up to five rate cuts. This was on expectations that inflation in the US will continue to trend down.
This expectation has received a jolt from the US CPI inflation numbers rising year on year to 3.1 per cent against expectation of 2.9 per cent. This means that the Fed will certainly not cut rates in March and the number of rate cuts in 2024 also will be lower, he said.
The bond market has quickly responded with the US 10-year yield shooting up to 4.31 per cent. The consequence in the Indian market would be heavy selling by FIIs. Banking stocks, which form the largest chunk of FII holding, will be under pressure.