The stock market could post profits

Mumbai: India’s stock market could open weak on Monday after the US market fell more than 3% on Friday after US Federal Reserve chief Jerome Powell signaled sustained interest rate hikes to control inflation.
Markets are now pricing in a third 75 basis point interest rate hike by the Federal Reserve at its September meeting.

Fed Chairman Powell said on Friday that the central bank would use its tools “forcefully” to attack inflation, which is still near its highest level in more than 40 years.
In his annual policy address from Jackson Hole, Wyoming, Powell said higher interest rates are likely to persist “for some time.” The historical record strongly cautions against premature policy easing.

After the Federal Reserve pledged to keep interest rates higher to fight inflation at the expense of economic growth, the Dow fell 3%, its biggest one-day drop since May. The S&P 500 fell 3.4% while the Nasdaq fell 3.9%. The 10-year bond yield also closed higher at 3.034% from Thursday’s 3.023%.

“The US Fed’s statements after the Jackson Hole symposium signaled the central bank’s strong commitment to controlling inflation rather than growth. Like the world’s major central banks, Fed Chairman Jerome Powell said inflation is likely to stay higher for a longer period and therefore necessitate an aggressive stance. This should be negative for stock markets. The impact was clearly visible in US markets which fell more than 3%. Indian markets are also expected to react negatively on Monday with rising volatility over the next few days. said Siddhartha Khemka, Head of Retail Research, Motilal Oswal Financial Services.

“Relaxing in the rate of investment, spending and hiring will be the unfortunate cost of reducing inflation. The RBI has made clear (its intention) to achieve its medium-term inflation target of 4% over the next two years over the next few weeks would be on how central banks prepare to fight (inflation) in the short term RBI rate-setting panel should opt for a slower pace of hikes and raise the repo rate by 25 basis points in September expect profits,” said Mitul Shah, head of research at Reliance Securities.