The upcoming Fed meet decision of possible interest rate hike has been widely anticipated. Foreign Institutional Investors (FII) have already been taking out their investment from Indian stock markets which is also a strong reason for continual stock market crashes.
An indication of the rate hike by US Federal Reserve may invoke a series of rate hikes.
A streak of hikes in interest rates in U.S. will increase the borrowing cost for carrying trade resulting in a reduction of risk-adjusted return for U.S.
In the case of Indian currency & inflation scenario if U.S. rate hike occurs it may likely depreciate INR resulting in boosting of exports.
Depreciated rupee will squeeze on inflation as India is a major importer of crude oil.
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