Chance for fresh buying

Post Federal Reserve meeting unravels long-term investment options

After climbing 258 points in the previous week, the benchmark index, Sensex, notched yet another identical gain of 260 points in the truncated week. The major influence that took the markets up was that of a possibility of the GST bill getting through in the winter session of the Parliament that commenced on Thursday.

After witnessing initial two losing sessions on Monday and Tuesday, respectively by 49 points and 44 points, tracking weak global cues, the markets on Thursday soared by as many as 183 points when they reopened after a day's holiday of Wednesday followed by yet another 170 points rise on Friday, where the ruling party is short of numbers.

The overall gains remained capped on an increased possibility of a "third world war" after Turkey shot down a Russian jet fighter plane near Syrian border. The uncertainty prevailing over whether the Reserve Bank would slash interest rates or not in its forthcoming monetary policy review meeting scheduled for December 2, this time, was yet another concern that kept the prospective buyers from getting aggressive.

The next and immediate uncertainty that would still continue to hover would be that of the Federal Reserve, the US's apex bank's meeting scheduled for December 15 and 16, in which it is most likely to raise interest rate for the first time in nearly nine long years of near zero interest rate regime.

The Indian stock markets have passed litmus tests in the last three weeks and succeeded in being winner at the end. It was France's terrorist attack nearly three weeks ago that shattered down the global stock markets including those in India. But the Indian markets, after initial momentary fall, on Monday following the Paris attack, closed higher than the previous day's closing.

In the last week also, a holiday and expiry of derivative trade could have sent the bourses down especially when the Parliament session commenced and fate of the GST bill still remained uncertain. But, the markets continued to ascend, though, at a slow pace, and thereby proved as being positive in trend.

The events that are likely to happen in the next few weeks are more crucial and would turn out to be more effective pointers for the markets. The Prime Minister has sought support from the leading opposition party in the Rajya Sabha, the Congress, for passing the most crucial GST bill but the fate will still remain uncertain until the bill actually gets through. The parliamentary affairs committee is scheduled to submit its report on December 5.

By the time, the most important Federal Reserve's board meeting will have come closer and it is most likely to hike interest rate by at least a percentage point or so, to begin with. Although the possibility of such a hike has already been factored in prices well before its happening, not only in the Indian stock markets but also in most other emerging markets, an immediate jerk is most likely on such news.

Therefore, the markets are most likely to remain subdued till the outcome of the Fed's meeting is known. In case it comes out with a hike in interest rate as is being gauged by most of the market gurus that would provide a golden buying opportunity to long-term investors.

The Union budgets are generally expected to be positive ahead of their actual announcements, are also known to inject "pre-budget buoyancy" in the markets almost every year and there is nothing that could prevent the markets from witnessing a pre-budget rally this time too, post Fed's meeting.

Since the markets have withered Friday's shocker in the Chinese stocks, they could be considered to have turned bullish by undercurrents. So, the long-term investors should get ready for buying good quality stocks post Federal Reserve's board meeting whose outcome will be known sometime after December 16.