Page 9 - 1411_Value Plus june 2016

WILL THE FED

BOWL ANOTHER

G GLY?

Just before 5-6 months, it was pretty normal for the US Fed to
attract attention of the world economy on its much talked about
meetings since the focus then was largely on one question-will the
Fed raise interest rates after almost a decade? The ice had been
broken in December last year BUT the tone of discussions
between the so called experts who couldn’t save themselves from
the Fed attraction, has suddenly turned cacophonous. Reason?
Let us elaborate it through an example. When a world class
batsman like Virat Kohli scores a match winning century in a
knock out stage of the tournament after a dry spell in few
matches, everyone expects him to continue with the electrifying
form. In such a scenario, every tom, dick & harry turns out to be
an expert which exactly is happening with the US Fed’s next
meeting scheduled to conclude on 15th June, 2016. Expectations
are high for another rate hike. Opinions are in the air. In this
situation of ‘wheels within wheels’, let us analyze the possible
impact purely for the knowledge of layman.

Currency market…….
Stumped?

If the Fed hikes key interest rate in US, Dollar index
may get a strong boost and we may see it trading back
above 100 in a stretch of a quarter. BUT, the expected
rally will not have a major impact on INR. Since
fundamental of our economy is strong and we have just
seen India posting the fastest quarterly growth in last five
years, strength in Dollar index will not affect INR in
mid-term. However, there may be a slight volatility for couple
of sessions after any such announcement. As far as other major
currencies like Euro, GBP & Yen are concerned; INR will have an
edge on them if interest rates are hiked by US Fed. In case if rates
are left unchanged, we may see INR aggressively dominating
others since it has a strong track record when it comes to growth in
last two years which clearly indicates a continuation of rising demand
for crude oil.

9 ARIHANT CAPITAL ¡ JUNE 2016