The US Federal Reserve on Wednesday lifted its key interest rate from 1.5 percent to 1.75 percent, the highest level since 2008. This is the also first major decision by the US central bank under its new Chairman Jerome H. Powell.
The rate hike was widely expected as the U.S. economy continues to strengthen and stock markets remain near record highs. The Fed also significantly boosted its forecast for U.S. growth this year and next.
Higher interest rates in the US generally lead to outflow of foreign funds from emerging markets, including India, considered to be riskier assets.
Indian bourses are expected to be subdued and adopt a wait and watch policy. It will take cues from how the far east Asian markets such as Singapore and Hong Kong react to this development.
Apart from rate hike the US trade war treats against China and its displeasure over India’s customs duty structure will also have an impact on the way foreign investors allocate funds into emerging markets, including India.