The year 2016 is the election year for the United States as the 58th quadrennial U.S. Presidential Election is all set to happen in the month of November. The whole world is eager to watch this event. In the last 30 years, we have never seen the FED increasing the interest rates right before the elections, therefore, the Federal Reserve is very unlikely to raise short-term interest rates at its policy meeting this week. However, one can very well expect Federal Bank to be very vocal about the rate hike and could send signals about where borrowing costs are headed in the months and years to come.

1. Will FED Spoil The Bull Run Party For Nifty?
The year 2016 is the election year for the United States
as the 58th quadrennial U.S. Presidential Election is all
set to happen in the month of November. The whole
world is eager to watch this event.
In the last 30 years, we have never seen the FED
increasing the interest rates right before the elections,
therefore, the Federal Reserve is very unlikely to raise
short-term interest rates at its policy meeting this week.
However, one can very well expect Federal Bank to be
very vocal about the rate hike and could send signals about where borrowing costs
are headed in the months and years to come.
What to expect from the FED meets this year?
The FED meets for three more times this year- one being tonight, the second on first
of November and the third time in the middle of December.
The first two dates are held before the Presidential election, which reduces the
probability of any rate hikes.
The most probable date could be in the middle of December , by which the President
would already have been elected and it will be the most appropriate time as the
markets will fully discount the rate hike.
Fed officials are torn between the appropriateness of the rate hike. On one hand we
have official like Eric Rosengren from Boston and John Williams from San Francisco
in favour of the rate hike, on the other hand, we have governor Lael Brainard
pointing to sluggish inflation as a reason to hold off. Internal sources have reasons to
believe that Ms. Yellen may hold rates steady this week however using the statement
or her press conference to raise expectations for a move later this year, may be in
December.
Where are we headed?
As a result of the twin Data, where inflation is at 2 per cent and the jobless rate is
within the Fed’s estimated range (between 4.7 per cent and 5 per cent) for full

2. employment, one can expect to see the Federal Reserve being loud about interest rate
hike in the near future (probably in December), if not immediately.
What will India do?
India is an emerging market. As seen in the past, when FED increased their interest
rate, India reported heavy outflow of funds in the form of equity and debt. Moreover,
as we head towards the end of the financial year, we are likely to see possible
changes in the policies of the Reserve Bank of India. Also, GAAR will come in to
full effect from April 2017, which is expected to put further pressure on the Indian
equities.
According to a recent study, India is one of the expensive markets among the
emerging economies. A Bloomberg report shows Indian benchmark Index Nifty is
trading 18.38 times on a one-year forward trading basis against the MSCI Emerging
Market index that is trading 13 times and the MSCI Asia Pacific Ex-Japan index
trading at 14.12 times.
Money Outflow
Net Foreign Buying in Emerging Asia (Like Korea and Japan)
At present Nifty share price is trading at 8811. Indian markets could be tricky for the
investors. The benchmark index Nifty could see an upper cap of 9000 following S&P
500 which could reach as high as 2190.
Month India Indonesia Korea Japan
May-16 380 -14 86 -2920
Jun-16 555 675 683 -7459
Jul-16 1578 904 3659 1487
Aug-16 1357 978 1058 -4489
Sep-16 400 -240 951 NA
ANNUAL
2016
(YTD)
6237 2638 9044 -49033
Jul-05 -5 -2704 -3597 -2566

3. Disclaimer
The investment advice or guidance provided by way of recommendations, reports or other ways are solely the personal
views of the research team. Users are advised to use the data for the purpose of information and rely on their own judgment
while making investment decision.
Dynamic Equities Pvt. Ltd - SEBI Investment Advisory Reg. No.: INA300002022
Disclosure
Dynamic Equities Pvt. Ltd. is a member of NSE, BSE, MCX SX and a DP with NSDL & CDSL. It is also engaged in Investment
Advisory Services and Portfolio Management Services. Dynamic Commodities Pvt. Ltd., associate company, is a member of
MCX & NCDEX. We declare that our activities were neither suspended nor we have defaulted with any stock exchange
authority with whom we are registered. SEBI, Exchanges and Depositories have conducted the routine inspection and based
on their observations have issued advise letters or levied minor penalty on for certain operational deviations.
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Research Analyst/ his Relative:
 Do not have any financial interest / any actual/beneficial ownership in the subject company.
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 Have not managed or co-managed public offering of securities for the subject company.
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other benefits from the subject company, nor engaged in market making activity for the subject company
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Article Written by
Nabarupa Kanjilal