A woman speaks on her phone as she walks past the Bombay Stock Exchange building in Mumbai.Reuters

With the benchmark indices witnessing heavy sell-off in the past few trading sessions ahead of the US central bank meeting this week, where it is expected to raise interest rates for the first time in nearly a decade, analysts expect such a move to bring a relief for the domestic stock markets instead of inducing further volatility.

Both the BSE S&P Sensex and Nifty stock indices are currently trading at a three-month low amid concerns over huge outflows led by imminent interest rate in the US. The rupee is also trading at a two-year low of over 67 against the US dollar, as investors remain jittery over massive outflows from the domestic markets once the US Federal Reserve tightens policy rates.

Although it is almost certain that the US central bank will hike lending rates at its two-day meeting on 15-16 December, the bank is expected to take the gradual approach on additional tightening in the next 12 months.

As a result, equity markets may start showing less volatility once the US Fed takes the rate increase decision at this week's meeting.

"We may see a 'buy on news' kind of scenario once we are done with the US Federal Reserve meeting. At least that one uncertainty would be out of the way, which will be a relief for markets," Dipan Mehta, Member BSE & NSE, said in an interview with ET Now.

The sell-off seen in the market in the run-up to the US Fed meeting has been led largely by foreign institutional investors (FIIs). So far this month, overseas investors have sold stocks worth nearly Rs 5,000 crore, besides shares worth over Rs 7,000 crore last month.

The incessant sell-off is also expected to come to a halt once the US central banks finalises a rate increase.

"I would not bet on Goods and Services Tax (GST) as a major trigger point for the market, but the Fed decision will certainly make a difference because at least the relentless FII selling we are seeing over the past few weeks might just come under control, and that would make a big difference," said Mehta.

After falling by over 2% last week, the benchmark indices rebounded on Monday showing the markets have already priced in the eventuality. While the Sensex gained 105 points or 0.42% to end at 25,150 points, the 50-share Nifty ended at 7,650 points, up 39 points or 0.52%.

Analysts recommend investors to take advantage of the weakness in the markets and buy stocks from a long-term perspective.

"The domestic factors are giving lot of comfort. India is likely to grow at 8% over the next 1-2 years. 2016 will be great year to make money in quality stocks," NDTV Profit quoted G Chokkalingam, founder of Equinomics Research & Advisory.

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