Hello reader, hope you’re doing well. Following the Sensex reaching unprecedented heights, the pace of the market has decelerated. The overall sentiment in the global markets is no longer strongly bullish. A significant concern that persists is the escalation of interest rates. After the European Central Bank and the Swiss National Bank raised rates by 25 basis points, the Bank of England unexpectedly implemented a 50 basis point rate hike yesterday. The central banks’ prevailing message, which was reiterated by the Federal Reserve in its recent Congressional testimony, is their commitment to curbing inflation and their acknowledgement that there is still a considerable distance to go before achieving the 2% inflation target. Consequently, the markets are gradually factoring in the likelihood of additional rate hikes by the Federal Reserve, potentially totaling two more within this cycle of rate increases. This hawkish rate scenario does not foster the sustainability of the rally beyond the current record levels. In light of these circumstances, investors are advised to exercise caution and concentrate on domestic cyclical sectors such as automobiles, real estate, and capital goods, considering buying opportunities during market declines.
As always, risk management is key, and a proper system in place prevents one from losing out too much, in case of outlier events. Have a good trading day, and may the force be with you!
Disclaimer: this post is for educational purposes only, we are not SEBI registered analysts. Trades mentioned here are not trade recommendations. Equity Investments are subject to 100% market risk, please consult your financial advisor before investing.