Pre-market: Nifty50 likely to open on positive note ahead of Fed outcome

NEW DELHI: Domestic equity benchmarks are likely to open on a cautious note on Wednesday ahead of the outcome of much-awaited two-day Fed policy review, which concludes later in the day.

With no major domestic economic releases due during the day, investors are likely to follow global markets, crude oil prices and the trend in the dollar-rupee exchange rate. The outcome of the Fed rate-setting meeting and Fed chair Janet Yellen's commentary on the rate hike trajectory will determine the near-term behavior of the market.
At 07:45 am, Nifty50 futures on the Singapore Stock Exchange were trading 36.50 points, or 0.47 per cent, higher at 7736.50, indicating a gap-up opening in the domestic market.
Markets globally rallied on recovery in crude prices. The Brent crude on Tuesday settled 1.4 per cent up at $38.45, after falling as low as $36.33 a barrel on Monday. Japanese Nikkei was trading 2.05 per cent higher at 18,947.12. China's Shanghai Composite was up half a per cent at at 3,528.15.
Other Asian indices, including Hong Kong's Hang Seng (up 2 per cent), South Korea's Kospi (up 1.60 per cent) and Taiwan's TWSE (0.97 per cent) were trading higher.
The US market, as suggested by S&P 500 index settled 1.06 per cent higher closed in overnight trade.
"Globally, markets is pricing in close to 80 per cent chance of a Fed rate hike. The hike, I guess, is all set to happen, that is what Deutsche Bank's house view is. But Fed Chair Yellen's commentary would be watched. I guess the commentary would also end up being dovish. What would be more important from our perspective is how the dot plots move. There are two major differences right now between the Fed dot plots and what the market is pricing in," said Harsh Agarwal, Deutsche Bank.
Data available with NSDL showed FPIs have sold equities worth Rs 5,246 crore so far this month.
In an interview to ET Now, ace investor Rakesh Jhunjhunwala said, "To my mind, the market is at a bottom, or we are near a bottom, because expectations are valid. There are not many speculative positions. A lot of the selling has come from the FPIs, but it has been absorbed by the local institutions for the first time. There is a lot of flow into Indian mutual funds, which is only going to accelerate. The only joker in the pack could be, I think, the dollar."
The Nift50 ended a tad above 7,700 mark on Tuesday. Technical experts expect the ongoing recovery to continue going ahead, if the Nifty50 manages to break the 7,725-7,730 region.
"I personally believe a rate increase in the US has already been discounted. I think the announcement, which I expect on Wednesday, is going to come with a statement that the next increase is going to be very nominal. But there appears to be some anxiousness in the US credit markets. This can be really disastrous. So let us look at that angle very carefully. Apart from that, there is no way the Indian market can go down, it is going to go up," Jhunjhunwala added.
"I have talked of 7,730 and I maintained that. My bias would certainly be bullish. But would I buy any stock at any level? The answer is no. I would wait and watch since we have an event (the Fed hike), otherwise the bounceback can extend to 7,730 and once above that, probably 7,800-7,820," said Sandeep Wagle of Power My Wealth.
Mitesh Thacker of miteshthacker.com said while guessing Nifty50 level is a tough call, given the Fed meet, if we start getting past 7,725, then the rally in the Nifty50 may extend to about 7,800-plus levels.