New Delhi, India – The Indian stock market is witnessing its most substantial monthly decline since January, primarily attributed to the escalating U.S. Treasury yields and the repercussions of the Middle East conflict. This dual economic challenge has set off a series of events impacting net importers such as India and causing global investors to reconsider their investments.
A sudden surge in oil prices, triggered by the intensification of the Middle East conflict, has significantly affected the Indian market. Moreover, the hawkish stance of the U.S. Federal Reserve, which has been holding interest rates at elevated levels for an extended period, has led to U.S. Treasury yields reaching multi-year highs, making American assets more attractive to international investors. Consequently, foreign investors have divested a substantial ₹228.50 billion ($2.74 billion) worth of Indian stocks in October, marking the largest monthly sell-off since the beginning of this year.
The U.S. Federal Reserve is expected to uphold its current interest rates following its policy decision on Wednesday, with market analysts closely monitoring comments from Chairman Jerome Powell. The persistent maintenance of high rates may continue to affect the Information Technology (IT) sector, which is already grappling with reduced spending from its U.S. and European clients, contributing to a 0.6% loss in the IT index.
Marcellus Investment Managers have observed that the Indian market is factoring in the impact of the elevated U.S. interest rates, as macroeconomic data supports the Federal Reserve’s hawkish monetary policy. Ongoing foreign divestment from Indian shares due to the attractive U.S. yields might result in market consolidation.
Market sentiment is further influenced by the Bank of Japan’s adjustment of its bond yield control policy, the downturn in Asian markets, and a post-earnings rally from SBI Life, which has emerged as the top gainer in the Nifty index.
