In the financial quarters of New Delhi, there’s an air of caution as traders and investors prepare for what is expected to be a turbulent session in the Indian stock market this Friday. The turbulence stems from recent inflation data emanating from the United States, which suggests a less accommodative monetary policy than investors had hoped, with U.S. rate cut expectations now pushed beyond June.
The Wall Street retreat has sent ripples across global markets, including a likely impact on Indian equities. The Dow Jones Industrial Average fell by 423 points to 38,461.51, a drop of 1.1 percent. The S&P 500 also suffered, down nearly 1 percent to 5,160.64, and the Nasdaq Composite ended 0.8 percent lower at 16,170.36. This downturn comes in the wake of U.S. March inflation numbers that surpassed analyst expectations, jumping to 3.5 percent year-on-year from 3.2 percent recorded in February.
Banking and market expert, Ajay Bagga, highlighted the potential effects on the Indian market, pointing to the reaction seen in the U.S. markets and Asian markets on Thursday morning. “US inflation coming ahead of estimates led to a fall in the US markets and a rise in US bond yields,” Bagga explained.
Indeed, the anticipation of a rate cut by the Federal Reserve has been dampened by the latest inflation rates, which signify a quickening pace of price increases. Dr. V K Vijaykumar, Chief Investment Strategist at Geojit Financial Services, expressed his concerns over the U.S. inflation print, stating that the 3.5 percent annual figure is poised to limit the Fed’s leeway in rate adjustments. The initial expectation of up to six rate cuts in the current fiscal year has seen a significant revision, with only two or three cuts now seeming feasible.
The Indian stock market has recently been basking in the glow of all-time highs, with both Sensex and Nifty setting new records; Nifty even breached the 22,775.70 mark. The Sensex concluded the day at 75,038.15 points, up 0.47 percent. Other indices – the Nifty Midcap, Nifty Bank, Nifty Next 50, and Nifty Financial Services – all registered gains. The Nifty Midcap 100 Index, in particular, reached a new zenith of 50,443.15 and closed slightly lower at 50,380.40 points.
However, Indian markets are now facing a crucial point, wrestling with the interplay of high valuations and the economic path ahead. Shrikant Chouhan, Executive Vice President and Head of Equity Research at Kotak Securities, foresees initial setbacks due to global market volatility but remains optimistic about a recovery anchored by the robust fundamentals of the Indian economy and its controlled inflation rates.
The holiday on Thursday means that the Indian markets are yet to reflect these recent global developments, setting the stage for a volatile Friday session. Market participants are bracing themselves for potential swings and are likely to look closely at domestic cues and global trends for direction.
In light of these events, investors and traders alike are urged to proceed with caution as the markets react to the external stimulus from U.S. inflation trends. The upcoming trading session in India might indeed bear witness to the adage of “When Wall Street sneezes, the world catches a cold,” with many Indian investors keeping a watchful eye on the evolving situation. The market’s resilience in the coming days could offer insights into the underlying strength of the Indian economy as it navigates through these international headwinds.
