Indian markets cheered the much anticipated Fed rate hike. The Sensex was up by more than 300 points.
As expected, the Federal Reserve hiked the target range for federal funds by 0.25%. This is the first hike after seven years of accommodative policy adopted by U.S. The hike came in the wake on expanding economic activity, increased household spending, job gains and declining unemployment in U.S, said The Federal Open Market Committee release.
The Federal Open Market Committee had slashed the rate to zero on December 16, 2008.
Market participants had already anticipated this rate hike.
We asked fund managers as to what will be the impact of this rate hike on debt and equity markets.
Here’s what they have to say.
Maneesh Dangi, Co-CIO, Birla Sun Life Mutual Fund says “Unlike taper, the Fed rate hike was on the expected lines. When we know something is going to happen, the risk subsides. Market was well prepared for this event.”
Ashish Ranawade, CIO, Union KBC Mutual Fund seconds the view. “The markets had already priced in the Fed rate hike. In fact, the Sensex bounced back by over 300 points. It won’t affect our markets very drastically.”
Dwijendra Srivastava, Chief Investment Officer – Debt, Sundaram Mutual Fund says “The fixed income market will remain volatile depending on the domestic data. The Indian fixed income market has not seen very huge outflows. Investors with a higher risk appetite can invest in duration funds (short term or long term) depending on their time horizon in a staggered manner. Those with lower risk appetite can invest in ultra-short term and liquid funds.
Murthy Nagarajan, Head – Fixed Income, Quantum AMC says that investors in bond funds can expect decent returns next year. “We expect debt markets to be volatile next year but investors in bond funds may be rewarded due to the higher accrual available in the Indian bond markets. Indian bonds have one of the highest yields in the investment grade countries in which FIIs can invest. This along with scope for cutting rates next year may give decent returns to investors in bond funds.
