ETMarkets’ Investors Guide: Why Fed tapering may not play tantrum with stocks

Welcome to ETMarkets’ Investors Guide, a show about asset classes, market trends, and investment opportunities. This is Sandeep Singh.

The US Federal Reserve has finally decided that it wants to talk about tapering its record $120 billion bond purchases. Back in March 2020, Fed’s bond buying acted as a cushion for the global economy that was getting crushed by the pandemic. As the global economy recovers, it is natural that the Fed would want to tone down its QE party.

In India, though, tapering brings back the nightmares of 2013 when the US Fed’s first indication of reducing QE caused some distress. Will this time be the same? To answer that question and others, we caught up with Rajat Chandak, fund manager at ICICI Prudential AMC.

Welcome to the show, Mr. Chandak.

Q. How, if at all, the US Fed’s two interest rate hike indications in 2023 and discussion over tapering of bond purchases alter the outlook for equities?

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Q. Given that, globally, interest rates may see an upward trajectory in coming years, valuation re-rating may be minimal. In that case, what could be the drivers for the Indian market?

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Q. ICICI Prudential AMC’s equity valuation index is now at levels not seen in two years. Is it a sign that investors should move away from the barbell approach towards a more diversified, flexicap approach?

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Q. Given the high broad-market valuations, are you still finding value in this market? If so, where?

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Thank you, Mr. Chandak, that was indeed a very insightful conversation.

That’s it in this week’s edition of the special weekend podcast. Do come back next Saturday for this weekly special. You can check out our regular podcasts on the equity market twice every week day on ETMarkets.com.