All eyes are on this month’s Federal Open Market Committee meeting on 17-18 December where the US central bank may consider reducing its bond-buying program. Expectations that the Fed might start to taper its stimulus program have been a concern for the world since May. Earlier this year, terror over the unwinding of the Fed’s bond-buying program hit emerging markets hard, especially India and Indonesia, which have large account deficits. Indian stocks plummeted 13 percent from May to late August on taper concerns.
How will India Market react to Fed taper
Let see the fundamentals of India Economy.
- The Indian economy grew at 4.8% well below 5% but more than market expectation.
- Manufacturing expanded in November for the first time in four months.
- India also reported a dramatic reduction in its current account deficit to $5.2 billion for the July through to September period, or 1.2 percent of GDP, down from $21.8 billion — or 5 percent — in the same period last year.
- HSBC PMI data has been also showing green shoots.
- The Reserve Bank of India (RBI) has taken steps to curb non-essential imports like gold. India has also benefited from stabilization in its currency, which has helped encourage foreign investors to return to the market.
Overseas investors have purchased a net $17.45 billion of Indian equities this year, the most in Asia after Japan.
So as seen from above points it shows the fundamentals of Indian economy are improving but we are still not out of woods so probability of an Year-end stock sell off on tapering fears remains at large.