US rate hike fear, earnings in focus

MUMBAI: Sentiment on Dalal Street is likely to be cautious this week as foreign portfolio investors have stepped up selling amid heightened fears of a rate hike by the US Federal Reserve in December and stretched valuations of Indian equities.

Corporate earnings will be keenly watched, with six Nifty companies — UltraTech Cement, Reliance Industries, YES Bank, ACC, HCL Technologies and Wipro — set to report their September quarter results.

“If the Fed hikes rates, it will lead to more outflows from emerging markets like India,” said Nischal Maheshwari, head-institutional equities at Edelweiss Securities.

FPIs have been net sellers of Indian shares in three out of the last five trading sessions and their net long positions in the index futures have come down by 60% from the September high.

In the holiday shortened week ended Friday, they sold shares worth `2,280 crores. Besides, the Fed rate hike concern, global factors such as the US elections and European banking crisis will keep the sentiment on edge, market strategists said. However, they do not expect the correction to be deep particularly because retail inflation is at a 13-month low, keeping hopes of a rate cut by the RBI going ahead alive.

“There has been exhaustion in terms of ETF flows on the EMs side on expectations of a Fed hike. Pressure will continue in the the October series,” said Navneet Daga, head-derivatives, IIFL. “Near term events may give corrections but these concerns will provide good opportunity to invest,” said Raamdeo Agrawal, Joint MD, Motilal Oswal.