The US Federal Reserve policy review on interest rates on September 16 and 17 will dictate the course of stock market movement in India this week. All eyes will be on the Fed statement and its future course of action. On July 30, the Fed went according to its plan by cutting its monthly bond purchases by $10 billion to $25 billion.

The market has already discounted the $10 billion cut in bond purchases, but is more concerned about when the Fed is expected to increase interest rates in the US.
The US economy, since the Lehman Brothers crisis, has been standing on its feet due to the support of huge liquidity that has been pumped into the banking system by the Fed. Now is the real test for the US economy and it has to be seen whether, with the tapering, can the US continue to grow. The economic indicators are still giving mixed signals. The markets, however, have discounted that the increase in US interest rates could be around July 2015.

The Reserve Bank of India (RBI) will closely watch the guidance given by the Fed when it announces its monetary policy on September 30. RBI Governor Raghuram Rajan has already shown his concerns on the damage it could cause on the rise in interest rates in the US. Any increase in rates will see a huge outflow of money from emerging markets and that could have a major impact on currency and markets.

Meanwhile, advance tax payment by India Inc on Monday, September 15, will provide a trigger for the equity market, which is now in a consolidating phase after a sharp rally in the past few weeks. The advance tax numbers will also hint on the Q2 (July-September 2014) corporate earnings. Advance taxes are collected in four installments -15 per cent by June 15; 40 per cent by September 15; 75 per cent by December 15 and 100 per cent by March 15.

On Monday, the government will also announce the Wholesale Price Index inflation numbers for August 2014. In July, the WPI was at 5.19 per cent.