The Sensex is trading in the green today after seeing an over 150-point loss in yesterday's trading as investors calculated the impact of QE taper that would happen beginning January 2014.
The next big cue for the Indian stock market is of course the general elections, but ahead of that America has two more dates that may disrupt sentiment.
January 15 is the day when the US government is expected to go for another shutdown.
After that, we have February 7; when the market yet again faces the debt ceiling bogey.
It may be recalled here that the big moves that the markets saw in the recent past were in tune with what was happening far away in the US.
On October 17, as the news trickled in that the Republicans and the Democrats have agreed to hike the debt ceiling, though they actually didn't do that, they just let the government borrow till some more time till February 7; the stock markets around the world went euphoric.
Conversing it threadbare, on October 1, when the US government began its partial shutdown, the Sensex made stellar gains, giving two hoots to worries over the shutdown. But the gains made by Sensex were because the market had rightly expected a resolution, which happened, with the shutdown ending and the US not defaulting on its debt obligations.
Then, along came the unnerving debt ceiling crisis, and the market got jittery, shedding some weight.
A resolution of the debt crisis saw Sensex shoot up to above 21,000 levels, and soon make record highs.
In effect, the benchmark index made a gain of 1,500 points in the month of October, largely due to the happenings in the US.
Coming back to the impact of the US tapering, the cut in the stimulus has not yet happened, and it remains to be seen how the market reacts when the tapering actually takes effect.
For now, experts see no worries; perhaps the reason why the markets have dismissed the QE taper. "Well, the Fed has very successfully started to end QE. It has got its message across that it is not a dramatic tightening. We have not had that repeat of the market volatility that we saw after Bernanke's remarks in May," says Geoff Lewis, Global Markets Strategist, JPMorgan Asset Management.
In fact, Lewis thinks it's a good thing to have happened. "We think this is a good signal. It signals that the Fed believes that the US recovery is gaining strength ... This has to be a good news for emerging markets," he says.
But what about the FII flows, will they not be impacted?
"We are not going to see a big drain of global liquidity the Fed has assured market that it will keep interest rates low in the foreseeable future," says Lewis.
There's a buzz in the market that the Indian currency may take a hit due to QE taper. But experts are discounting that too. "It is not going to be the repeat of what happened in June and July because the RBI is much better prepared with the $32-billion FCNR deposit, which we have collected. So, we have borrowed from the market to protect our currency," says BP Singh, ED & CIO-Equities, Pramerica Mutual Fund.
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