Bulls are watching the US Federal Reserve meeting with some trepidation. A day before the US central bank meeting and F&O expiry, the benchmark equity indices ended the session in the red zone. After starting on a positive note, Sensex tanked 109.79 points, or 0.30%, to close at 36542.27 on Wednesday, while the broader Nifty settled at 11053.80, falling 13.65 points, or 0.12%.

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“Worries over liquidity issues in the NBFC space demoralised investors in domestic markets. The market stayed on a cautious sentiment ahead of the Fed policy outcome and the higher oil price as major Opec producers declined to increase the output. Volatility in the global markets is likely to remain elevated in the short term, given the cancellation of trade talks between the US and China,” Vinod Nair, head of research, Geojit Financial Services wrote in a note.

The Fed is expected to increase interest rates for the third time this year as it publishes forecasts that are expected to bolster expectations for another move in December and a continued pace of gradual tightening in 2019. The Federal Open Market Committee is almost certain to raise rates a quarter point at the end of its two-day meeting on Wednesday to a target range of 2% to 2.25% - the highest level in more than a decade.

The Fed decision will also influence the Reserve Bank of India’s (RBI) next course of action, which will be announcing the bi-monthly monetary policy on October 5.

Among the Sensex pack, Tata Motors, Wipro, ITC, State Bank of India and Maruti Suzuki were the biggest laggards plunging as much as 4.20%.

However, the broader market staged a positive performance and both BSE Midcap and Smallcap inched up by 0.42% and 0.12%, respectively. Sectorally, BSE IT (-1.60%), FMCG (-1.44%), Teck (-1.36%), Auto (-0.99%) and Consumer Discretionary (-0.31%) were biggest losers.

Meanwhile, as per the provisional data, the FIIs sold shares of Rs 809.95 crore on Wednesday while the DIIs bought shares worth Rs 1,555.44 crore on a net basis.

With the Fed widely expected to raise interest rates, financial markets would watch if the two-day policy meeting could mark the formal end of the “accommodative” level of rates the Fed has used to support the US economy since the onset of the 2007-2009 recession.

Source: DNA Money