The Hindu Business Line : Rate hike in Japan not to impact Indian stock markets

Rate worry
Analysts feel markets may see a correction as interest rates across countries are expected to rise in the next two-three quarters.
Japanese investments in India do not account for a large chunk of the total FII money invested in the country.

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Mumbai Feb. 21 Indian stock markets do not see the Bank of Japan's (BoJ) interest rate hike by 25 basis points to 0.50 per cent today as a reason for any pull out of Japanese funds. The BoJ move was more of a domestic concern as the Japanese economy was growing rapidly, rather than to curb overseas investments, said analysts.

The BSE-30 Sensex closed down 64.89 points or 0.46 per cent at 14,188.49 points; while the NSE S&P CNX Nifty dropped 0.26 per cent to end the day at 4,096.20 points.

Strong Economy

"Markets were expecting this hike and it will not lead to any significant outflow of money as our economy is strong with high growth on the manufacturing side. Hence rewards can be expected through stock-specific and bottom fishing approach," said Mr Kalpesh Parekh, Head-Institutional Sales, Ask Raymond James and Associates.

Foreign Institutional Investors (FIIs) were net sellers for Rs 197.66 crore today, as per the provisional figures on the NSE.

However, analysts feel markets may see a correction as interest rates across countries are expected to rise in the next two-three quarters. "Japanese investments have recently started coming to the Indian equity market. There could be a slowdown in investment but there will not be a decline on a year-on-year basis," said Ms Shahina Mukadam, Head-Research, IDBI Capital Market Services Ltd.

Tempting Exposures

Also, Japanese investments in the country do not account for a large chunk of the total FII money invested in the country, said the research head of a broking house. Indian markets offer tempting exposures for foreign investors, say analysts.

"Our GDP growth rate of 9 per cent will tempt the FIIs to invest in the country. A 25 basis point hike should not make much of a difference to asset allocation," said Mr Lalit Thakkar, Director-Research, Angel Broking.

Analysts said the interest rate hike might impact the regional markets in Japan but may not change the investment pattern in Indian markets. The withdrawal of money will prove to be more expensive for the investors than the hike in interest rates.

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