It was just last month that the US Fed had announced a taper of $10 billion from the $85-billion stimulus.
Indian stock market's benchmark index, that is Sensex, is trading at 20,531.59, up 33.34 points.
Yesterday, the Sensex lost more than 280 points in intraday trade, but pared losses in late trade, ending the day with a loss of 149 points.
Here are five reasons why the Indian stock market is not reacting much to QE tapering:
Rupee factor
A large part of the bearishness seen on Indian stock markets last year was attributed to the rupee fall.
The rupee had hit near 69 levels in late August on account of fears that the US would start to taper its $85 billion stimulus.
Experts see the rupee not having any big impact this time around in the face of the QE cut announced late on Wednesday.
"The rupee will weaken on both domestic and external factors; but only gradually. This is because RBI has made some moves and that should actually sort of provide a cushion for the INR. I see the currency stabilising at about 64 for now," Nizam Idris, Managing Director and Head of Strategy, Fixed Income and Currencies, Macquarie, tells ET Now.
"I do not see continuing of the tapering of US bond-buying programme will have any major impact on the Indian currency," says Mohan Shenoi of Kotak Mahindra Bank.
"Having said that I do not think this time around it will have any impact on Indian currency in particular. Of course there's some turmoil in emerging market currencies, particularly Argentina and Turkey. But then this is unlikely to impact the Indian rupee in a significant way," he said.
"In feel the only risk we may be facing is that we have huge inflows from FIIs on the debt segment in January. We got about $3 billion; all of which has gone into treasury bills. Now this is very short-term money which has come in search of returns. So, if this money attempts to go out there could be some pressure," he concludes.
The maximum fall that the experts are expecting on the currency is to 65 levels.
"I certainly am hoping that we do not see 68 or 69; but the rupee could go to 64-65. We are in a range where it is conceivable, depending on what happens in global emerging markets," says Adrian Mowat, Chief EM & Asian Equity Strategist, JPMorgan.
Today, the rupee is trading at 62.47 against the US dollar as of 11:11 am.
Strong economic base
India's current account deficit (CAD) for the current fiscal year is expected to be less than $50 billion, which is less than 2.5% of the GDP. The country's forex reserves stand at about $295 billion.
Experts say Fed tapering is expected to impact countries which are running high fiscal deficits.
Emerging markets have very clear, specific problems in places like Argentina, Venezuela and Turkey, says Jim Walker, Founder & MD, Asianomics.
"The problems in South East Asia are limited to Indonesia. Elsewhere we see sound financials ... So, there are countries that could fall in Asia. I do not think India is one of them. China may be the surprise packet here, but elsewhere among the emerging markets the fundamentals, particularly in Asia, are pretty strong," he said.
Yesterday, economic affairs secretary Arvind Mayaram said: "Worry is for countries like Argentina. They have a problem as their forex reserves are low; at around $29 billion. Also, their current account deficit is extremely high."
"QE cut should not be a worry for the Indian economy as well as the stock markets as our fundamentals are strong," he said.
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