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Commodities….……Run out?

Yes its right! Major commodities like Gold, Silver, Copper &
Crude oil are at high risk as their glorious run may end if Fed
hikes key interest rates. Investors & speculators will withdraw
their positions from risky commodities if Fed provides them an
opportunity to increase their portfolio in the green back. Gold
will lose its sheen to get back to its primary bearish trend while the
current relief rally seen in crude oil after a disastrous run in 2015,
may also take a U-turn. Industrial metals like copper will see their
worst phase since a slake demand in China is already pressurizing the
key metal. BUT what happens if the Fed leaves interest rates
unchanged? In this scenario too, commodities will be a loser in long run
since Fed, in that case will just postpone the hike and not cancel it. So
within next quarter, Fed will most probably take the step. Leaving interest
rate unchanged may propel a small rally in bullion BUT is not likely to impact
crude oil as the fuel of the fuels will eye on much bigger event like OPEC
meeting due on the same day as Fed.

Equities…....Caught behind?

Equity markets in US, Europe & China will see a major
fund withdrawal if the US Fed hikes interest rates in its
upcoming meet. If it doesn’t, then markets will get some more
time to concentrate on core fundamentals so that they can
prepare themselves against a certain hike this year. Indian
markets are however on a far better note and are looking
prepared against a sell-off if rates are hiked. A sound recovery &
growth coupled with strong leadership are some of the factors that
the world has begun to view India as a savior. So, Indian investors
have nothing to worry in case of a Fed rate hike. Any reaction sell-off
will be temporary and can be used for entry in the market. In case rate
hike is postponed, it will only add to the strength.

‘Brexit’…….……A Free Hit?

Referendum on 23rd June, 2016 in Britain over its exit from
European Union is viewed as a major event after US Fed
meeting concludes on 15th June, 2016. However, the half
baked theories surrounding the much hyped event have left
investors in a tizzy. Even if Britain decides to exit from EU, it will
take two years to initiate the step and apart from Europe, the
event will not have any major negative impact on other economies.
Economies depended on European countries also don’t have to
worry as the impact will not prompt European companies to
withdraw their investments. Actually, the event is likely to provide
good mileage to speculators. Post Fed meeting and OPEC meeting, the
outcome of Brexit will become more clear.

10 ARIHANT CAPITAL ¡ JUNE 2016