InvestorQ : How do you think the US rate hike will impact Indian equity and bond markets, as and when they happen?
Anjana Aiyar made post

How do you think the US rate hike will impact Indian equity and bond markets, as and when they happen?

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Khushi Patel answered.
2 months ago
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There are two worries for India from what the US Fed has been saying. Firstly, there is the taper. Now, the taper will impact liquidity flows into Indian markets and take some of the speculative sheen away. That may not change things too much fundamentally. The second worry is on rates. RBI cannot increase rates in sympathy with the US Fed as it is still in negative growth due to 2.0. But low real rates would mean big outflows from FPIs.

To sum up the situation, all that would still be positive for India. Here I why. Fed is clear that the rate hike will be growth driven. Here, benefits of business and profit growth will out-weigh the rate hike impact. In the past, rate hikes driven by growth have actually been positive for Indian economy over 2-3 years. Secondly, this time, RBI may opt to diverge its monetary policy from the US to boost growth. Either ways, there is not much to worry.
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