On Monday, U.S. stocks saw a rally and finished near session highs as investors remained calm about the latest efforts to prevent a potential global banking crisis ahead of this week’s Federal Reserve interest-rate decision. Regulators worldwide have rushed to shore up market confidence and speculation of a slower pace of tightening from major central banks has risen due to recent financial turmoil.
The Federal Reserve is facing a difficult decision at its policy meeting on Tuesday and Wednesday, as it tries to balance its inflation fight against concerns over the stability of the financial system. The Fed is trying to bring down inflation by hiking rates without putting undue pressure on the banking system. Fed-funds futures traders now see a 73.1% chance of a 25-basis-point increase, down from earlier this month’s expectation of a 50-basis-point hike.
The Centre has reduced the windfall gains tax on domestic production of crude petroleum to Rs 3,500 per tonne from Rs 4,400 per tonne. The government has also increased the export duty on diesel slightly to Rs one per litre from Rs 0.50. However, the export levy on both petrol and Aviation Turbine Fuel (ATF) remains at nil. The new rates will be effective from March 21.
On Tuesday, Asian stocks advanced following gains on Wall Street. Although immediate concerns about the strength of the global financial system have dissipated, the mood remains fragile and traders are wondering if U.S. rate hikes might be finished.
On March 20, Nifty snapped a two-day rise and closed in the negative. However, it rebounded sharply from the afternoon lows and formed a bullish hammer on daily charts after forming two dojis, hinting at the possibility of an upward reversal. For an accelerated move in either direction, the 17,146-16,939 band needs to be broken.