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Quote on Morning market 29 August  2022 By Dr. V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services

"Markets expected Powell to remain hawkish at Jackson Hole but the ultra-hawkish tone of the Fed chief's message and his warnings that Fed's policy will "cause some pain to households and businesses"  and this is "the unfortunate costs of reducing inflation" were not expected and factored-in by the markets. The 17% rally in S&P 500 from mid June to mid August was mainly driven by expectation that with declining inflation Fed would pivot towards lower interest rates by early 2023. This expectation has been belied by Powell's message that rates will go up and remain there for 'sometime'.
The sharp rise in the Dollar index above 109 and the 10-year bond yield spiking to 3.1 % are negative for capital flows to EMs like India. FPIs are unlikely to continue buying in India in this scenario.
The 'buy on dips' texture of the market is unlikely to hold. Investors should not rush in to buy the dips now. Better wait for the dust to settle."

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