Markets turn volatile ahead of Fed announcement

Domestic benchmark equity indices turned volatile as the latest inflation data added to the case for tighter Federal Reserve policy amid coronavirus challenges and lofty equity valuations. In opening trades, Sensex slipped 125 points or 0.22% to 57,991. Similarly, Nifty was quoting at 17,304 declining 20 points or 0.12%.

“In the coming days markets are likely to be impacted more by the message from Fed. If the Fed turns more hawkish and indicates 2 rate hikes in 2022, that would be negative for the markets which had factored in one rate hike and faster tapering of the asset purchases. But the Fed is unlikely to sound hawkish in the context of the uncertainty triggered by Omicron. Markets are likely to consolidate around 17350 Nifty levels. Long-term investors can use dips in the market to buy high-quality financials, IT and cement stocks,” said VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services.

Top gainers & losers

Top gainers & losers on the Sensex.

Sectoral strand

On the sectoral front, the Nifty Metal index was the lone gainer up 0.34%. On the downside, the Nifty IT index lost the most as it plummeted 1.36%, followed by the Nifty Realty index plunging 1.21% and Nifty Pharma slipped 0.92%. Whereas Nifty FMCG, Nifty Auto and Nifty Bank lost anywhere between 0-0.60%.

Broader markets

The broader markets were trading mixed as the BSE MidCap index was flat with a negative bias of 9 points or 0.04% to 25,467. While the BSE SmallCap index was trading at 29,379 higher by 32 points or 0.11%.

The market breadth was positive as 1,677 shares advanced compared to 1,160 declined and 107 remained unchanged.

Global markets

Overseas, Asian stocks are trading mixed on Wednesday as the world waited to hear from the US Federal Reserve on when it would stop buying assets and start raising interest rates.

China released a slew of key economic data on Wednesday. Its industrial output for November was up 3.8% year-on-year, more than the 3.5% increase in October. Data also showed that retail sales in November rose 3.9% year-on-year, less than October’s 4.9% increase.

U.S. stocks fell on Tuesday as some large tech stocks moved lower and new inflation data continued to show a sharp rise in producer prices.

The Fed will conclude its two-day policy meeting on Wednesday later, and central bank Chair Jerome Powell is set to speak at a press conference.

On the Covid front, Pfizer announced that its drug aimed at treating patients with the virus proved effective in a final analysis, including against the new omicron variant. However, the World Health Organization warned on Tuesday that the new variant appeared to be spreading faster than previous versions of the virus.