intact, as QE was coming to an end.
“The Fed’s decision to taper QE could hold back global equities in the short term. This has been the experience on previous occasions in the past four years when the Fed scaled back its asset purchase programs or signalled that tapering was imminent. However, we believe the size of any correction should be limited this time,” Evans wrote.
Foreign investors may not have returned to India’s bond markets yet, but have been buying equities and are understood to have bought $365 million of Indian shares on Thursday.
With inflows of more than $19 billion so far in 2013, India has attracted more flows than most peer markets.
Barclays Capital was positive on emerging markets. “EMs are likely to be constructive after the Fed decision. Risk has diminished and it supports our view that 2014 is likely to experience some positive portfolio inflows, albeit more directed to equities than bonds. EM currencies are likely to enjoy a lift from the reduced risk on portfolio outflows,” a Barclays Capital note read.
Manishi Raychaudhuri, Asia-Pacific Strategist, BNP Paribas Securities opined that the US authorities must be fairly certain about the sustainability of the growth recovery. “If they had any doubts the recovery wasn’t sustainable, it’s unlikely the Fed would have embarked on this exercise. As such, I don’t think we need to worry too much about equity market valuations,” Raychaudhuri said in an email response.