Dalal Street faces a double whammy of Fed rate hike

The US Federal Reserve's anticipated interest rate increase on Thursday may exacerbate the concerns of investors, adding to the turbulence in global markets. The benchmark 10-year US Treasury yield crossed the 5% mark for the first time since 2023 amid growing expectations that the Federal Reserve will continue to raise interest rates for an extended period, driven by surging oil prices and inflationary pressures.

The central bank is expected to announce its decision at the conclusion of the Federal Open Market Committee meeting today. Market analysts caution that higher bond yields can negatively impact equity markets, while a weaker US dollar and tighter liquidity may further affect investor sentiment and capital flows. Despite this, India's economic growth has remained robust, and the evolving global interest-rate and liquidity environment calls for a cautious approach from investors.