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Below is Perspective on yesterday`s US Fed policy rate by Mr. Hemang Jani, Head Equity Strategy, Motilal Oswal Financial Services

“The US Fed hikes the policy rate by 50bps to 4.25-4.5%, as expected. However, the FOMC members' projections revise the peak rate higher to 5-5.25% (up 50bp from Sep projections)

Notwithstanding some initial signs of weakening economy, the FED (rightly) continued to worry about strong labour market. Interestingly, although growth projection was revised down (to 0.5% from 1.2%) for CY23, the unemployment rate revisions were only marginal (4.6% to 4.4%).

Overall, we are more convinced that while a FED pause could come by mid-CY23, a cut is unlikely before CY24 now. This move and stance by Fed could trigger small correction in Indian market which has been outperforming YTD. We dont see a case for deep correction in our markets given the drop in crude and commodity prices and likely margin expansion for many sectors like cement, consumer, auto and speciality chemicals. Nifty should cross, 20,000 mark some  around Budget i.e. Feb 2023.”

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