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"The much-awaited Fed commentary after the Jackson Hole Symposium has indicated that "it would be appropriate to start reducing asset purchases this year." But the Fed chief has hastened to add that there is much ground to cover before rate hikes. So, even though this can be treated as the beginning of normalization of the accommodative policy, the communication is smart enough not only to calm the markets but to enthuse it too. Consequently, the dollar index has slipped to below 93 and the risk-on in US markets has pushed the indices to record highs. This will enthuse the bulls in India too.

However, it is important to temper the exuberance. FIIs are continuously selling equity. And, more importantly, now they have turned buyers in bonds, having bought bonds worth Rs 11557 cr in August. They were sellers in bonds in all the previous seven months in 2021. In August, till 29th, FPIs have bought equity worth Rs 986 cr. But if we exclude the FPI primary market purchases the net figure is selling to the tune of Rs 7184 cr. If this trend continues, it will have implications for markets"

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